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Saturday, June 20, 2009

The Inside Story of ACORN 8

There is an old saying, "it's not the crime but the cover up". Martha Stewart is a good example. Her initial crime would have likely lead to a somewhat hefty fine had she admitted to it. Because she attempted to cover it up, she wound up going to jail.

The story of the formation of ACORN 8 can be summed up by a new saying, "it's the crime AND the cover up".

In May of 2008, it was first revealed to the board of ACORN that nearly a decade earlier Dale Rathke had embezzled about one million dollars from Citizens Consulting Inc., the financial services arm of ACORN, and Wade Rathke, the long time CEO of ACORN, along with 8 other lieutenants, had covered it up. As such, at the next board meeting, Karen Inman, board member from Minnesota, brought a motion to remove Dale Rathke from the organization as well as remove Wade Rathke from his post as CEO. The motion was seconded by about twenty other board members and motion eventually passed later in the meeting.

Because of the seriousness of the crimes, ACORN also decided to form an investigative committee. The committee was given the duty of investigating the embezzlement and anything related to it, so that such criminality would never happen again. The committee would consist of Ms. Inman, who would focus on legal issues. Marcel Reid , board member from Washington D.C., would focus on the organizational structure of ACORN. Meanwhile, Carol Hemingway would focus on financial issues.

For the next two months, the three ladies began investigating ACORN in order to make sure that any systemic and structural problems were removed. They found all sorts of anecdotal evidence that the organization was involved in much more criminality than simply the embezzlement. For instance, in an email, ACORN's attorney, Steve Bachmann. indicated to Inman that ACORN had been involved in ERISA violations. Bachmann indicated that ACORN employee pension funds were mismananged. Inman also found instances of lesser embezzlement. (between $6000 and $9000) She found instances in which affiliates that were 501 (C)3's were mingling their funds with those that were of other tax structures. (that's a tax violation because 501 (C)3's enjoy special tax protection that other organizations do not) Often, when people within ACORN would reveal past criminality, that admission would be followed by this quote "but that doesn't happen anymore". (which is interestingly enough what Mike Jones, Comptroller of CCI told Inman about the events that lead to another piece of criminality discovered outside this investigation)

Meanwhile, Marcel Reid found evidence that CCI, Citizen's Consulting Inc., was much more than merely the accounting and financial services arm of ACORN. She found evidence that CCI was the financial weigh station of all ACORN funds. Any monies, be it from charities or even government grants, would wind up at CCI first and then be transferred to anyone of several hundred ACORN affiliates. Reid even found evidence of co mingling and misuse of funds. There was again anecdotal evidence that earmarked monies weren't winding up where they were supposed to go. In other words, the government might give millions to fund health care projects in poor neighborhoods but it would wind up funding a media campaign.

What was missing was the financial evidence that would tie all of this together. That evidence lied in the financial statements of ACORN. In fact, Inman believed that a full forensic accounting audit would be necessary to get to the bottom of things. So, Ms. Inman decided to approach Liz Wolff, the Research Director of ACORN to request viewing the books.. When she came to see Wolff, Inman found her door closed. Minutes later, the door opened and walked out Wade Rathke, the same Wade Rathke that was supposedly removed from ACORN only months earlier. After meeting with Inman, Wolff refused to allow her to see ACORN's. books.

At roughly the same time, the board was also made aware that ACORN was about $2 million behind in state and federal taxes. Weeks later, both Karen Inman and Marcel Reid were witnessed to a meeting between the new CEO of ACORN, Bertha Lewis, Maude Hurd, who headed the ACORN board, and Alton Bennett of ACORN Housing. Lewis told the group that she had secured both a loan and a grant from Forest City, a loan of $1.5 million and a grant of $500,000. She wanted their approval to accept the deal. Ms. Hurd expressed reservations because the terms of the loan stated that if it ever fell behind the rate would jump to 18%. To which Bennett pronounced, "if your struggling to pay in any given month, ACORN Housing will make the payment." Hurd ultimately denied the request to allow the loan and instead ordered Lewis to gain approval of the entire board in order to approve the loan. (I chronicle the details of this loan and the backstory of what maybe a quid pro quo here)

Inman and Reid met privately following this exchange. They were very concerned by what they witnessed and they decided to immediately seek a temporary restraining order against destruction of any financial records related to the embezzlement, any communication between Wade and Dale Rathke regarding the embezzlement, and any other records related to the embezzlement. They eventually won this TRO and their lawyer indicated to them that the judge indicated that as BOARD MEMBERS THEY HAD A RIGHT TO SEE ACORN'S BOOKS.

The TRO would cost all sorts of money to maintain, however, and so if Reid and Inman wanted to see the books they would need to get a writ of mandamus. The writ was signed by eight board members, Reid, Inman, Adriana Jones, Fannie Brown, Robert Smith, Ivonne Strattford, and Stephanie Cannady.

Now, things became very contentious between these eight and the rest of ACORN. So, in early October, a negotiating committee was created between these eight and three other members of the board of ACORN. Reid, Inman, and Mobley represented the eight and the rest of ACORN was represented by three other board members including Frank Beatty of Las Vegas and Sonia Merchant of Massachusetts. The two sides met for the better part of a full day. They attempted to hash out their differences. After the meeting, Karen Inman, at least, felt as though real progress was made and she felt that things were heading in the right direction. Instead about two weeks later, they were all removed from the board of ACORN. Since they were no longer on the board, the judges interpretation of the law no longer applied either.

ACORN 8 was officially born. It's since grown and includes many more members than eight. The group is now determined to bring all of ACORN's criminality to light. Carol Hemingway, the individual in charge of investigating the financial portion of ACORN, the part that was missing in putting the pieces together (at least from the perspective of Karen Inman), is now the Treasurer of ACORN.

Whenever, either Reid and Inman, the most prominent members of ACORN 8, are interviewed people like Glenn Beck often dwell on their courage and heroism. I, for one, think that is beside the point. ACORN itself would love nothing more than to have Inman and Reid's heroism be the story. That would make this a human interest story. It isn't a human interest story. The story is very simple. The CEO's brother embezzled a million dollars from the organization. The CEO covered it up. Marcel Reid and Karen Inman were elected to investigate the matter and everything related to it. That's what they did. That was their fiduciary duty. That was their job. There's nothing heroic about doing your job. They did their job. In fact, they did it too well. As such, ACORN removed them from their board positions. You can draw your own conclusions but as my favorite Latin phrase goes, Res Ipsa Loquitor (the facts speak for themselves)

I, however, have a unique perspective to judge these lady's heorism and courage. That's because I have had the privilege of chronicling the stories of whistleblowers all over the country. Kevin Kuritzky brought to light crimes at Atlanta's Grady Hospital and his life has been ruined because of it. Dr. Blake Moore reported on a nurse at his hospital, Williamsburg Regional Hospital, that was acting as an "angel of mercy" and eventually the entire state of South Carolina did all they could to ruin his life. Jim Singer reported on serious malfeasance within Pennsylvania's Department of Child Welfare and he lost his license to practice psychology for more than two decades. Gerard Beloin reported on corruption in roofing contracts at his local high school, Goffstown High School, and he now lives in fear of his life. Dennis Lennox exposed corruption in the hiring of a prestigious Fellow at Central Michigan University and he was nearly expelled from school. Dr. Shirley Pigott attempted to expose corruption at the Texas Medical Board and she's since lost her license to practice medicine. In fact, the main reason I admire Sarah Palin is she was once a whistleblower. Blowing the whistle on corruption in any organization means that you are up against the establishment, a force more powerful than you. There are in fact very few acts more courageous than becoming a whistleblower. For that, these ladies deserve our respect, but their courage shouldn't be what this story is about. The criminality that forced them to become whistleblowers is what this story must be about.


Anonymous said...

Well, I'm not sure that the Martha Stewart analogy is appropriate. She actually went to jail for lying, not under oath, about something that wasn't even a crime. In other words, her experience established that if you lie to a government employee about anything whatsoever, at any time, they can and will put you in jail if you irritate them or if they can generate reams of positive publicity by doing so.

Martha apparently qualified under both criteria.

mike volpe said...

First of all, what she did was insider trading. Second, lying to government investigators obstructs justice. These folks are investigating crimes. If they are lied to, their investigation becomes that much harder. To minimize what she did is absurd, and frankly beside the point.

The analogy is perfectly accurate and your moral relativism is something that I disagree with wholeheartedly. No one is perfect and she made a mistake and she paid for it. Now, it's over. She did her time and she certainly doesn't need to be demonized but let's not pretend as though she did nothing wrong.

navyvet48 said...

Can I cross post this at in its entirety. Leave me a message. I am supporting the ACORN 8 and working with Marcel. You tell the story so well. Better than I can....I think it will work well as an introduction to the cease and desist letter from ACORN to Marcel and Karen.

I like the comparison to Martha Stewart. It is quite apt.

Anonymous said...

If you like whistleblowers, you'd like my story:
In 2003, I reported 6 felonies committed by a doctor at the Christus-Spohn Memorial Hospital Facility to the administration. They did nothing. Eight months later, this same doctor, at the same facility, did an unnecessary surgery on a woman and, through his own negligence and stupidity, caused the woman's death. I reported this to the administration. They, once again, did nothing. I was advised by my attorney to report these events to the authorities, as possessing the knowledge of a felony and not reporting it is itself a felony. To date, the hospital has paid a little over 9 million dollars in fines and lawsuit settlements. In retaliation for my reporting these things and not being a 'team player', they put me under a sham 'peer reveiw' action. As I was the only podiatrist on staff at the hospital with ankle privileges, I had no 'peer' allowed into the operating room with me and, therefore, had no instrument in place to comply with the 'peer review' action. A year later, when my privileges came up for renewal, they stated that I hadn't complied with the 'peer review' action, kicked me off staff and reported it to the NPDB (National Practitioner Database), where it sits until the day I die and keeps me from getting on staff at any other hospital. This has destroyed my life and my career. Not many know this, but there are state and federal laws preventing discovery on hospital peer review committees, preventing almost any lawsuit from going forward. The only exception I'm aware of in the state of Texas is Poliner vs. Southwest Healthcare. That's it. The epilogue? The doctor who committed the 6 felonies and killed the woman.....still has privileges at the hospital, although his lawsuit settlement to the husband was 1 million dollars.

Dr. David Secord