The American Spectator

Breaking News

ACORN's Pension Shell Games

By Matthew Vadum on 10.7.09 @ 6:07AM

ACORN appears to have been involved in improper use of pension funds and this lawbreaking may yet land some of its officials in serious legal difficulties.

That's according to F. Vincent Vernuccio, formerly a special assistant at the U.S. Department of Labor (and an American Spectator contributor) and editor of EFCAUpdate.org.

Vernuccio reviewed what I've called the Kingsley memo, an internal ACORN legal memo from June 19, 2008, in which ACORN lawyer Elizabeth Kingsley gives her client a stern warning to shape up or face grave legal consequences. "If you do not make some hard choices now and ensure they are carried out, they almost certainly will be made for you," she wrote. [Italics in original.]

ACORN didn't listen. It let the problems fester. In the following months when honest national board members such as Marcel Reid and Karen Inman tried to do something about ACORN's corruption and demanded to see critical paperwork, current chief organizer Bertha Lewis showed them the door and denounced them as traitors to the ACORN cause.

Except for one page, the memo in question bears lawyerly caveats at the top: "Sensitive Report -- Do Not Distribute Beyond Initial Recipient List."

The memo discussed ACORN's long-running cover-up of the circa 2000 $948,000 embezzlement perpetrated by ACORN employee Dale Rathke, brother of ACORN founder Wade Rathke. It appears pension funds may have been dipped into or moved around as a result of the embezzlement. This is a huge no-no. Pension funds are governed by strict rules. You don't normally borrow from them, move them around, or tinker with them in any way. Without such strong legal protections, workers' life savings might be at risk.

Vernuccio explained to me that the memo refers to several organizations and plans. They are: ACORN, the ACORN Fund, Citizens Consulting Inc. (CCI), Council Benefit Association (CBA), Council Health Plan (CHP), and the ACORN Beneficial Association (ABA).

CBA appears to be a pension plan and CHP appears to be a health plan, according to Vernuccio. Both are covered by ERISA, which stands for the Employee Retirement Income Security Act of 1974. ERISA is a federal law that sets minimum standards for retirement and health benefit plans in the private sector. ERISA does not require any employer to establish a plan. It only requires that those who establish plans meet certain minimum standards.

The memo questions whether the ACORN Fund is covered by ERISA and claims the ABA is not, Vernuccio said. It calls ABA a discretionary plan that was not intended "to be a true pension plan covered by the ERISA law."

Then the financial shell game begins.

According to the memo, some of the embezzled funds were taken from ABA using ACORN's American Express card. This displacement of funding led to the creation of a complex repayment system in which Dale Rathke owed ACORN, and ACORN in turn, owed ABA, which, for its part, wrote off part of the money.

Dale Rathke also owed CCI, an ACORN affiliate that has been called the financial nerve center of the ACORN network, and CCI owed ACORN which in turn owed the ACORN Fund. Then ACORN was somehow taken out of the picture and CCI owed the money directly to ACORN Fund.

The memo says it appeared that the money was not paid back to the ACORN Fund to cover the loss of the embezzlement to the employee healthcare fund. ACORN Fund may have advanced a large amount of money to ACORN. The memo also states if ACORN Fund is covered by ERISA then this may be considered a prohibited loan to a related party.

In other words, somewhere in there unethical and possibly illegal nepotism and self-dealing took place.

Vernuccio cautiously states that not everything is clear-cut so "further investigation of these issues is necessary to come to concrete conclusions." He adds that the forgiveness of debt between ACORN and entities which provide healthcare and pensions for employees identified in the memo is "troubling."

Letter to the Editor