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ACORN’s Pension Shell Games

You'd think ACORN was a labor union, considering the trouble it's in for dipping into its workers' retirement funds.

By 10.7.09

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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."

"Forgiveness of the debt caused by the embezzlement may harm the participants and beneficiaries of the current ACORN health care and pension plans," he says. "If the money was not paid back it may put at risk the funding necessary for ACORN retirees or the healthcare of ACORN employees."

The report from Republican investigators on the House Oversight and Government Reform Committee about corruption within ACORN -- including the embezzlement and cover-up saga -- was blunt.

Those staffers 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 described ACORN as "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 ACORN network's abusive interlocking directorates are deliberately organized to help ACORN 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."

Of the pension fund improprieties, committee investigators "concluded that ACORN plundered employee benefits and violated fiduciary responsibilities under ERISA by relieving corporate debts through prohibited loans to a related party."

The investigators added:

Moreover, ACORN affiliates lack independent control of their own assets and maintain shoddy accounting practices that serve to hide ACORN's secret and illegal use of monies. ACORN conspired to conceal information concerning prohibited transactions from its board in violation of its corporate charter. ACORN's termination of board members who sought to uncover its illegal activities perpetuates a cover-up at the expense of adherence to its own bylaws."

Americans are paying attention. They want answers to these questions but it is unclear when or if Congress and the Obama administration, which has strong ties to ACORN, will act.

As I wrote previously, longtime ACORN operative Patrick Gaspard now holds the title of White House political affairs director, one of the titles Karl Rove held in President Bush's White House. Evidence shows that years before he joined the Obama administration, Gaspard was ACORN boss Bertha Lewis's political director in New York. Of all the entries in Lewis's rolodex, the entry for Gaspard is the most extensive. Erick Erickson and Moe Lane have also done a good job connecting the dots between Gaspard, ACORN, and President Obama.

When I unveiled the memo last week I referred to it as the Holy Grail of ACORN research. I was not exaggerating. It is to date the most significant smoking gun of a document to emerge from the developing ACORN scandal.

I should note here that I neglected to mention in the article unveiling the memo that its authenticity was confirmed by ACORN insiders. The only irregularities related to it are the incorrect fax time stamps and the missing page. I have no idea why the missing page isn't there. Perhaps it will turn up. I never had it. As for the fax time stamps, many people don't keep the date and time current on their fax machines. Presumably that's what happened in this case.

I haven't heard a peep from either ACORN or Kingsley's law firm, Harmon, Curran, Spielberg Eisenberg LLP, disputing the authenticity of this memo that was referenced and excerpted -- but not published in full -- by the New York Times last fall. (The Kingsley memo is available as a PDF file at BigGovernment.com.)

That speaks volumes.

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About the Author

Matthew Vadum is an award-winning investigative journalist at a conservative watchdog group in Washington, D.C. Vadum is also author of Subversion Inc: How Obama's ACORN Red Shirts are Still Terrorizing and Ripping Off American Taxpayers.