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Special Report

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"This just confirms the need for an examination of the organization's affiliates," said Crenshaw, who is also chairperson of the legal affairs committee of ACORN 8, a group of former ACORN members co-founded by Reid that is calling for a forensic audit of ACORN.

ACORN was warned by its own lawyer Elizabeth Kingsley of Harmon, Curran, Spielberg & Eisenberg last year that its lack of internal firewalls and its chaotic organizational structure were likely to land ACORN in hot water. Kingsley's letter to her client was excerpted last month in a report by Republican investigators on the House Oversight and Government Reform Committee.

The investigators found that CCI should have paid an excise tax on any lobbying expenditures it made, but noted that evidence indicates the spending was never reported to the IRS.

The investigators also found that 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." They argued that ACORN should be stripped of its jealously guarded tax-exempt status because it illegally spends taxpayer dollars on partisan activities, commits "systemic fraud," and violates racketeering and election laws.

"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," the report said. Structurally, it 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 examines the ACORN network's abusive interlocking directorates, and claims that the group deliberately organized itself to escape legal and public scrutiny. "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."

ACORN uses interlocking directorates, which refers to individuals serving as directors on multiple corporate boards, in order to subject its network of affiliates to centralized control from the top. Having interlocking directorates may be widespread and lawful, but the practice raises questions about the quality and independence of board decision-making.

While the ACORN network claims to be a "family" of organizations, embodying the ethos of community organizing, which stresses local action and decentralized authority, it is run by senior officials who treat its national board as a rubber stamp.

It's worth noting that all three lobbying disclosure forms were signed digitally by Donna L. Pharr, who is listed as CCI's assistant treasurer. The services of the ubiquitous Pharr, herself a walking, talking example of interlocking directorates, are in demand all throughout the ACORN empire. She's on the board of dozens of ACORN affiliates including ACORN Housing Corp. and the American Institute for Social Justice Inc. Pharr is also deputy treasurer of Minnesota ACORN Political Action Committee and is listed in a Michigan Bureau of Elections filing as the contact person for Communities Voting Together, a 527 pressure group.

CCI itself has a long and checkered past.

In 1996 the federal Department of Labor sued CCI. The next year a federal court ordered CCI to cough up $10,000 in back wages.

CCI currently owes at least $400,117 in back taxes to the IRS, Arkansas, District of Columbia, Indiana, Louisiana, and Maryland, according to the Nexis tax liens database. This figure excludes the $442,533 in tax liens that the IRS has rescinded over the past five years after they were presumably paid. Tax liens are only issued by creditor tax agencies after a tax debt has become seriously delinquent. The ACORN network has had millions of dollars in tax liens filed against it since 1989.

Last year Wade Rathke was dumped as chief organizer of the group he founded after ACORN's national board learned that he failed to notify police when he discovered in 2000 that his brother Dale, who was a senior official at CCI, had embezzled $948,000 from the group.

Wade Rathke engineered a cover-up for his brother and allowed him to leave the payroll of CCI to work as his $38,000 a year "assistant" at ACORN headquarters. The missing money was disguised as a loan to an officer on the books of CCI.

Despite being expelled from ACORN, Wade Rathke remains involved with at least five ACORN affiliates. Rathke recently changed the name of ACORN's international consultancy, ACORN International, to Community Organizations International. Both ACORN and Rathke maintain that COI is no longer an affiliate in the ACORN network.

Rathke also remains chief organizer of the New Orleans-based Local 100 of SEIU, another ACORN affiliate he founded. He does not appear to have stepped down as president and director of Affiliated Media Foundation Movement (AM/FM), an ACORN affiliate that produces news segments for eight alternative radio stations. He is also publisher and editor-in-chief of Social Policy magazine, a quarterly journal published jointly by two ACORN affiliates (ACORN Institute and American Institute for Social Justice).

And Rathke's family members remain employed by ACORN. His common law wife, Beth Butler, and his son and daughter still work for ACORN. Butler is ACORN's regional director for the Southeast U.S.

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