Rep. Issa Concludes ACORN Is a Racket

The Association of Community Organizations for Reform Now, or ACORN, deservedly has received enormous amounts of bad press over the past couple years. The New Orleans-based nonprofit network of radical activists, with hundreds of affiliates in more than 40 states, has been at the center of investigations into voter registration fraud, unauthorized use of taxpayer funds for lobbying and other forms of partisan politics, phony tax filings, and an embezzlement scandal that cost its founder and chief organizer his job a little over a year ago. Now a key Republican in the U.S. House of Representatives has weighed in, releasing last week the results of a full-length probe by committee staffers. The report concludes that ACORN fits the definition of a criminal enterprise under the Racketeer Influenced and Corruption Organizations Act (RICO). That’s especially ominous in light of the group’s imminent huge boost in federal subsidies in the Obama era.

On Thursday, July 23, Rep. Darrell Issa, R-Calif. (in photo), Ranking Minority Member of the House Committee on Oversight and Government Reform, released an 88-page report, “Is ACORN Intentionally Structured as a Criminal Enterprise?” The answer to this question: affirmative. Issa pulled no punches. “It is outrageous that ACORN will be rewarded for its criminal acts by taxpayer money in the stimulus and is being asked to help with the U.S. census,” he remarked at a news conference. “This report shines a light on clear criminal conduct and it is abundantly clear that they (ACORN and its affiliates) cannot and should not be trusted with taxpayer dollars.” Issa amplified his view as a guest on Fox News Channel’s Glenn Beck Show, denouncing the group’s “pattern of loose financial accounting and no firewalls.”

ACORN’s extensive taxpayer subsidies alone merit a high degree of scrutiny. Over the last 15 years, the federal government has provided $53 million to this organization and its complex network of affiliates. And this money pales before what’s coming down the pike. As the committee report notes, ACORN is eligible to receive up to $8.5 billion in federal stimulus funds in the coming fiscal year, especially through programs of the U.S. Department of Housing and Urban Development. In other words, it’s not hard to see why many of the group’s critics see ACORN as an adjunct of the Obama administration. President Obama, after all, himself began as a community organizer.

Yet even if ACORN had never received a penny of government money, it should be investigated anyway. That’s because in organizational structure and operating style, ACORN strongly resembles a racketeering enterprise. The opening three paragraphs of the report’s executive summary set the tone:

The Association of Community Organizations for Reform Now (ACORN) has repeatedly and deliberately engaged in systemic fraud. Both structurally and operationally, ACORN hides behind a paper wall of nonprofit corporate protections to conceal a criminal conspiracy on the part of its directors, to launder federal money in order to pursue a partisan political agenda and to manipulate the American electorate.

Emerging accounts of widespread deceit and corruption raise the need for a criminal investigation of ACORN. By intentionally blurring the legal distinctions between 361 tax-exempt and non-exempt entities, ACORN diverts taxpayer and tax-exempt monies into partisan political activities. Since 1994, more than $53 million in federal funds have been pumped into ACORN, and under the Obama administration, ACORN stands to receive a whopping $8.5 billion in available stimulus funds.

Operationally, ACORN is a shell game played in 120 cities, 43 states and the District of Columbia through a complex structure designed to conceal illegal activities, to use taxpayer and tax-exempt dollars for partisan political purposes, and to distract investigators. Structurally, ACORN is a chess game in which senior management is shielded from accountability by multiple layers of volunteers and compensated employees who serve as pawns to take the fall for every bad act.

The report presents five general areas under which the Association of Community Organizations for Reform Now could be prosecuted under existing federal RICO statutes. National Legal and Policy Center has published several stories on these very issues, especially in Union Corruption Update, since ACORN is the sponsor of Locals 100 and 880 of the Service Employees International Union (SEIU).

First, argues the House committee report, ACORN management has engaged in various cover-ups. Investigators pored over documents revealing that the nonprofit network has evaded taxes, obstructed justice, engaged in self-dealing, and abetted the embezzlement of nearly $950,000 in funds a decade ago by then-CFO Dale Rathke, brother of founder-chief organizer Wade Rathke. ACORN executives during 1999-2000, when the alleged offenses took place, were fully aware Dale Rathke had stolen the money and reported it as a business transaction to another organization, Citizens Consulting, Inc. That CCI shares the same address as ACORN headquarters – 1024 Elysian Fields Avenue in New Orleans – alone should be a tipoff something was crooked. Such are the consequences of a lack of internal controls.

Second, states the report, ACORN has run a racketeering enterprise affecting interstate commerce. The organization has used charitable donations to recover embezzlement-related losses; commingled accounts of legally separate affiliates; and intentionally used voter registration drives to sign up ineligible or fictitious voters. As for that last one, nearly 70 ACORN low-level employees have been convicted thus far in a dozen states for voter registration fraud, even though none of ACORN’s officials or directors have been indicted. Over one-third of the 1.3 million voter registration cards turned in by ACORN in 2008 were invalid.

Third, ACORN has been engaged in a conspiracy to defraud the United States government by using taxpayer funds for overtly political activities. Committee investigators discovered documents revealing ACORN and certain affiliates to have used funds from federally-subsidized accounts to elect Democratic candidates in close races around the country. Recipients of ACORN expenditures include the political campaigns of President Barack Obama, Ohio Senator Sherrod Brown and former Illinois Governor Rod Blagojevich. In some cases, such as that of Blagojevich, leaders of ACORN affiliates openly took credit for victory. And far from being isolated examples, these were part of a systematic ACORN program to sway the election process through “Chicago-style political manipulation and back-room schemes.”

Fourth, committee investigators have substantial evidence that ACORN filed false documentation to government agencies such as the IRS and the Department of Labor. Many of these bogus reports relate to the attempt by SEIU Local 100, whose main organizer is Wade Rathke, to conceal his brother’s embezzlement. Additionally, ACORN violated overtime and record-keeping provisions of the Fair Labor Standards Act so it could continue to exploit low-income workers – ironic, since ACORN came into being back in 1970 in part to combat labor exploitation.

Fifth, said the committee, ACORN “plundered employee benefits and violated fiduciary responsibilities” spelled out in the Employee Retirement Income Security Act (ERISA). The group relieved corporate debts through banned loans to a related party. ACORN leaders concealed information about prohibited financial transactions from its board in violation of its charter. In other words, certain ACORN officials knowingly have enriched themselves at the expense of intended beneficiaries.

ACORN has spun itself off into hundreds of organizations as a way to maintain a veil of secrecy. The most effective way to lift off that veil is investigation and prosecution through federal RICO legislation. The House Oversight Committee believes that ACORN’s offenses, taken as a whole, constitute a pattern of racketeering. Citing the Eighth Circuit Court’s decision in HOK Sport Inc. v. FC Des Moines L.C., the committee argued that ACORN’s corporate structure is a shell that serves no legitimate business purpose and whose primarily purpose is to perpetuate fraud. “Once the corporate veil is pierced,” the report said, “officers and directors can be found liable as alter egos of the nonprofit corporation.”

ACORN already has been the target of FBI and various state investigations. But RICO may hold the key to dismantling and reforming the nonprofit behemoth. Reform won’t be easy. Top members of the Democrat-controlled House and Senate are subject to high pressure from the Obama administration in the event they seek to go forward. Even longtime ACORN supporter House Judiciary Committee Chairman John Conyers, D-Mich., who this past March surprised many by calling for additional hearings on ACORN, since has backed off. And the Obama White House can lead hard on the FBI, the IRS, the Federal Election Commission and other federal agencies as well. Obama began his career in Chicago, immersing himself in the art of transforming economic desires into political grievances. He may not formally have been a member of ACORN, but he knows their language. Fortunately, though in a different way, so do certain members and staffers of the House Committee on Oversight and Government Reform.