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Tuesday, June 2, 2009

The Management Council of Wade Rathke

Starting sometime in 1999, Dale Rathke began embezzling money from Citizen's Consulting Incorporated. As we have since learned, CCI is a sort of weigh station for all monies that enters ACORN (Association of Community Organizers for Reform Now) and all its affiliates. Sometime within the next few years, Dale's brother Wade discovered the embezzlement. Wade Rathke was the head of all of ACORN at the time. Rather than telling the proper channels of ACORN, Rathke only spoke to a small group of top lieutenants. This group, known as the management council, decided to cover up the embezzlement. Several years later, and conveniently just after the statute of limitations ran out on the crime, the embezzlement was discovered.

After the embezzlement was discovered, several charities and other philanthropies became concerned that their own funds were part of the funds that were embezzled. One of ACORN's most important funding charities was the Catholic Campaign for Human Development (CCHD). They had until just a couple years ago been counted on to give grants to ACORN that amounted to about a million dollars yearly. The following is parts of an email exchange between John Kest, the head of the New York branch of ACORN and Ralph McCloud of CCHD that occurred in July of 2008. (about a month earlier Wade Rathke and his brother Dale were removed from ACORN as a result of the embezzlement...though Wade was able to keep positions at several of ACORN's affiliates)

16. Who are the people who did not disclose the fraud over the last eight years ago? Do they have roles with ACORN now?

The following people were on the management council eight years ago, and were made aware of the embezzlement:
Steve Kest
Jon Kest
Madeline Talbott
Keith Kelleher
Mike Shea
Zach Polett
Helene O’Brien
Amy Schur
Liz Wolff
Beth Butler

The following people are
still working for ACORN:
Steve Kest: National Executive Director
Jon Kest: NY ACORN Head Organizer
Helene O’Brien: National Field Director
Beth Butler, Southern Regional Director
Zack Polett?

In addition, the following people are working for affiliated organizations: Mike Shea: Executive Director, ACORN Housing Corporation Liz Wolff: Special Projects, CCI

First, it's important to note that by this point Bertha Lewis had been named CEO of ACORN. Yet, the head of CCHD was emailing Steve Kest of the New York branch for answers. I have said twice that multiple insiders have told me that they believe that it is Steve and his brother John that are actually running ACORN now, even though technically they run the New York branch. Well, inherently, the head of CCHD agrees because they come to Steve Kest and not to Bertha Lewis for answers to things related to the embezzlement.

Second, it's also important to note that Bertha Lewis wasn't one of the people that was initially let into the inner circle that knew about the embezzlement of Dale Rathke. This group, which Kest referred to as the management council, was in fact the top deputies to then CEO Wade Rathke.

To the outsider, this group may seem random. The Kest's ran the New York office of ACORN. Madeline Talbott ran the Chicago office of ACORN. Mike Shea ran ACORN Housing. Zach Polett was the political director of ACORN. Helene O'Brien was the H.R. Director of ACORN. Beth Butler, Wade Rathke's wife, was the regional director of the Southern Region of the United States. Zach Polett is the political director of ACORN.

So, as you can see, the power structure within ACORN is not straightforward but rather organic. It might even seem random to the outside observer. Yet, the power structure is also a window into the fascinating mind of Wade Rathke who created it all. Much like ACORN, and its hundreds of affiliates, the power structure of ACORN, the power structure of ACORN is random to almost everyone but Rathke himself, who created it.

For instance, the Kest brothers gained power because the New York office is powerful. It brings in significant funds, funders, and members. Zach Polett because the political activities of ACORN have grown expanded and now have significant influence in localities, states, and even nationally. Michael Shea has grown in power because ACORN Housing Inc. is one of the most succesful affiliates in the ACORN universe. The list goes on and on.

What's even more interesting is the ethnicity and background of each of the members. All but Talbot are white. All come from either a middle class background or even a wealthy upbringing. In fact, the Rathke's come from a very well to do New Orleans family themselves. ACORN is after all an organization that caters to the poor and to African Americans mostly. All the foot soldiers are made up of poor folks and almost exclusively African Americans. Yet, the entire power structure is made up of white upper and middle class folks. This creates a plantation mentality where rich whites tell the poor blacks how to better themselves. It's certainly not an image that ACORN wants to project. It's one reason why Bertha Lewis and not Steve Kest is the one on television. Yet, the group presenting itself as the last bastion for the poor, is actually run by wealthy white folks.

Epilogue: Here is a copy of the full email of which I transcribed only a portion of in the story. That way no one can accuse me of taking it out of context and also so that anyone interested can read the entire email.

Mr. Steven Kest :

Thank you for responding to our request to meet. The meeting will be July 24 at 10:00 AM at the United States Conference of Catholic Bishops Office at 3211 4th St. NE.

We will arrange for travel and overnight accommodations for one night. Please provide the names of those who will attend and their travel origins to Yolanda Taylor Burwell at 202-541-3185 or ytaylor-burwell@ . In order to expedite the travel please submit by close of business Tuesday July 15. As discussed, we are interested in meeting with members of staff leadership, board leadership, audit and finance staff.

To maximize our time together, please respond to the questions below and submit responses by close of business Monday, July 21.

1. Please elaborate on how you are certain that no USCCB/ CCHD money was embezzled?

Grants made by CCHD to support projects of local ACORN chapters during 1999 and 2000 were deposited into the main AISJ account first (coded as a liability owed to ACORN), and then checks were written and deposited in a CCHD segregated account for each project.

No funds were taken from the local CCHD accounts to pay for the unauthorized credit card bills. This has been confirmed by ACORN and AISJ’s outside auditors, who identified each account from which funds were taken without authorization.

As demonstrated on the attached spreadsheet, each check deposited into the AISJ account which was noted as a CCHD payment (in those years noted as CHD) was correctly written out to a corresponding CHD account in ACORN.

The spreadsheet shows all of the deposits into the AISJ coded to CHD in 1999 and 2000 and the corresponding check written out of that account to the appropriate segregated account in ACORN.
There are separate sections for 1999 and 2000. At the top of the 1999 list there are two checks that were written out for which the corresponding deposits were made at the end of 1998.

However, at the end of the spreadsheet is a deposit into AISJ totaling $17,500 which is made up of two checks for $8,750 each. Unlike all the other CCHD deposits, there are no corresponding checks written to local CCHD accounts against these funds, leading us to believe that these funds may have been misappropriated. We are not entirely sure that these two checks were in fact CCHD grants: they are not coded as such. However, the sums are typical of CCHD quarterly checks, and we are now in the process of going through our stored records to try to find the paper deposit slips from 1999 to determine definitively if these were or were not CCHD checks.
In summary: we have confirmed that during the time frame when the embezzlement was taking place, $920,125 in CCHD funds were correctly deposited into AISJ and then paid out to the correct local ACORN project accounts, and therefore were untouched by the embezzlement. We are still doing the necessary research to determine if two checks totaling $17,500 may have been misappropriated.

If in fact this $17,500 turns out to have been misappropriated, it will be repaid to the proper account(s) now that all funds have been restored.

(Please note that checks other than CCHD’s were also deposited into this account, so deposit slips not listed on the spreadsheet correspond to non-CCHD deposits.)

We have also attached a list of ACORN’s segregated CCHD accounts. The list shows the accounts that were active in 1999 and 2000 and then has another list showing current CCHD accounts.. If CCHD does not fund a particular project for some time, that account may be closed and therefore not show on the current list.

2. Are you aware of any money from USCCB / CCHD misspent in other ways?

No, we are not aware that any money from USCCB / CCHD was misspent, other than as specified as above.

Were any of the embezzled funds used for political activities which the Catholic Church could not and would not engage in?

No. The embezzled funds were used for personal, non-authorized uses.

4. Is the IRS investigating the leadership of ACORN for other mismanagement or possible tax evasion or tax fraud?

The IRS is not investigating ACORN for tax evasion or tax fraud. Partly due to Katrina , ACORN did fall behind in paying withholding taxes to the IRS and we are working with them to develop an appropriate repayment plan to pay this off.

5. Is Citizens Consulting Inc. owned by ACORN?

No. Citizens Consulting, Inc. is an independent organization. It is a non-profit corporation with no special tax status run by a self-perpetuating board. Both AISJ and ACORN have contracts with CCI to do their accounting work and corporate record keeping.

6. Are there any inter-locking directors, officers or staff between Citizens Consulting Inc and ACORN?

CCI has two staff members who are assistant officers of ACORN with authority to act on behalf of ACORN solely on administrative matters. (For example: opening up bank accounts at the direction of ACORN management.) This is standard corporate practice.

Paul Satriano, the national Treasurer for ACORN, is a new board member of CCI.

7. Please explain Wade Rathke ’s current role at ACORN? He stepped down as ACORN's chief organizer but remains chief organizer for Acorn International LLC? Please explain the difference:

By action of the ACORN Board on June 3 and then on June 20, Wade Rathke has no current role with ACORN. He is no longer Chief Organizer, and he is no longer employed in any capacity by ACORN. ACORN International (actually Inc, not LLC) is a separate corporation that works solely with ACORN affiliates outside the US , in Peru , Argentina , Mexico , the Dominican Republic , Canada , and India . Its board is made up of representatives from those non-US organizations. (ACORN US is represented on the board by Maude Hurd .) As of today, the Board of ACORN International continues to employ Wade as its chief organizer. However, representatives from the ACORN Board will be meeting with Wade later this month and will be asking him to step down from this role.

As well, Wade Rathke has (and never had) any role with AISJ.

8. What is the difference between ACORN and New York Acorn, currently headed by Bertha Lewis?

New York ACORN is a chapter of ACORN. ACORN itself is one single corporation.

9. How does state ACORN organizations fund / support the national ACORN organization?

State and local ACORN offices pay a small percentage of their expenditures to cover a number of core expenses.
The fees are as follows:
4.55% goes to Citizens Consulting for account, audit and corporate services.

0.47% goes to cover the salaries of ACORN executive director Steve Kest and for the salary of AISJ executive director Carolyn Carr .
0.79% goes to cover a portion of the communication department budget which creates and maintains our website as well works with local offices on press work.
0.23% goes into a fund to provide some funds for the expenses of the interim chief organizer and the Interim Management Committee.

10. Does ACORN have audited financial statements and are they made public?

ACORN does have audited financial statements, but as a private non-profit corporation they are not as a rule made public. Audited financial statements are of course given to the Board, and are made available to ACORN members. In addition, some state governments require ACORN to make public its audits, and of course ACORN complies with these requests. This is not true the board had seen a aduit for many years

AISJ also has audited financial statements. As a 501c3 organization, AISJ’s tax returns are of course public. Audited financial statements are of course given to the AISJ Board. In addition, some state governments require the filing of the audit with various registration and charitable filings, and of course AISJ complies with these requests.

11. Who are ACORN's auditors?

ACORN’s auditor is the firm Duplantier, Hrapmann, Hogan and Maher, the largest independent auditing firm in New Orleans . ACORN, and AISJ, have used this firm since 1994, and have continued to do so as a result of periodic competitive bids. We have attached information about this firm.

12. What public reports does ACORN file with the Federal or state governments? Are they public?

ACORN files a regular corporate income tax return (Form 1120) with the federal government. As ACORN is not a 501c3, this tax return is not public information. We are registered to do business in 43 state and the District of Columbia , In all states where we do business we file all required registration and tax filings. This is not true we owe states filings?

13. Who is the donor who will make up the $738,000 that has still not been repaid?

Actually, there is not a “donor”. Instead, an individual purchased the promissory note that we have with Dale Rathke for the principle balance outstanding. As a condition of this sale, we are bound by a confidentiality agreement, and can not disclose the name of the purchaser.

14. If ACORN has had an auditor in the past what does Bertha Lewis mean in New York Times article when she was quoted as saying "we are putting financial auditors in place"?

We have had an outside auditor (the Duplantier firm) conduct an audit of ACORN’s books every year. But in order to reassure our Board and funders that our financial controls are adequate, we are hiring an additional outside auditing firm to review our current financial controls. This firm is Mesirow Financial Consulting; information on them is attached.

15. Are any board members going to resign?

We are not aware of any who are planning to resign.

16. Who are the people who did not disclose the fraud over the last eight years ago? Do they have roles with ACORN now?

The following people were on the management council eight years ago, and were made aware of the embezzlement:
Steve Kest
Jon Kest
Madeline Talbott
Keith Kelleher
Mike Shea
Zach Polett

Helene O’Brien
Amy Schur
Liz Wolff
Beth Butler

The following people are still working for ACORN:
Steve Kest: National Executive Director
Jon Kest: NY ACORN Head Organizer
Helene O’Brien: National Field Director
Beth Butler, Southern Regional Director
Zack Polett?

In addition, the following people are working for affiliated organizations:
Mike Shea: Executive Director, ACORN Housing Corporation
Liz Wolff: Special Projects, CCI

17. Has any current ACORN board member or staff benefit from any of the inappropriate spending?

Liz Wolff (who at the time was ACORN’s western regional director, and is currently working for CCI), was a personal friend of Dale Rathke’s in 1999-2000, and she and several of her family members were treated by Dale to meals, some ground transportation, and tickets to plays. Once Liz found out about the embezzlement, she estimated how much money had been spent on her and her family, and paid back $4,000, which was well in excess of her estimate – so that there was no doubt that she had not benefited from Dale ’s actions. No other staff or board members were shown to have benefited from the theft.

Attending the meeting will be members of CCHD subcommittee, CCHD, legal, and finance staff of the United States Conference of Bishops. We have also engaged an external audit firm to assist in this effort.


Anonymous said...

Has the death of george wiley ever been truly looked into ??????? Wow how nice of the brothers Rathke to take over.

Beth Butler is only Wade's common law wife. She doesn't take to kindly to marriage. When I worked for one of the organizations she actually tried to talk me out of getting married, saying it was only a piece of paper for a man to control you.

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Non Partisan Bystander said...

There is of course the thing you left out - That Rathke's paid the whole amount embezzled back. Of course his brother should have gone to prison, no doubt about that but there is the purported claim that the money was paid back out of pocket by the Rathke family. And that the head Rathke voluntarily stepped down. I wouldn't ever see a right winger do that. And that is unfortunate that that is the popular consensus about the behavior of the right. You should encourage it to change.

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