ACORN dirty laundry to be aired in court

Wade Rathke stories: here
Related: "ACORN embezzlement case delayed for Barack"
• "ACORN crime covered-up by Drummond Pike"
More ACORN stories: hereWade Rathke stories: here

Shameful story reflects poorly on Barack Obama, so media blackout is expected

Since Hurricane Katrina, the Association of Community Organizations for Reform Now has fought to make sure that displaced New Orleanians can vote, return home, tell their stories and have a place to live.

Now ACORN, the venerable 38-year-old social justice organization, faces the fight of its life over an embezzlement scandal and leadership crisis that hits Orleans Parish Civil District Court today at 9 a.m.

In late May, the group's board was shocked to learn that the brother of ACORN founder Wade Rathke had stolen nearly $1 million from the organization and its affiliates eight years ago.

"It was like a bomb. Things just went bonkers," said Bertha Lewis, director of the group's New York office, who has taken over Rathke's duties on an interim basis. "Nothing like that had ever happened before."

The news has attracted national scrutiny of ACORN, which was founded in Arkansas in 1970 and maintains a strong political presence in New York, New Orleans and Washington. In fact, early versions of the Wall Street bailout under consideration by Congress called for the routing of some profits from the sale of troubled assets to activist groups like ACORN. That provision emerged as an early sticking point in the plan's passage, in part because of the current scandal.

The imbroglio dates to 1999 and 2000, when the nonprofit was calling for local increases in the minimum wage and trying to unionize hospitality workers in New Orleans. Dale Rathke, the founder's brother, was serving as comptroller through a related organization called Citizens Consulting Inc., and Lewis said he abused his authority by using the group's credit cards to buy things that were unrelated to its work.

A co-worker alerted Wade Rathke, who consulted with a few of ACORN's national leaders. When the group's longtime accountants at the New Orleans firm Duplantier, Hrapmann Hogan & Maher conducted an audit and found that $948,507 had been stolen, the Rathke family set up a formal repayment schedule. Dale Rathke was removed as comptroller at CCI, but he stayed on as a consultant at ACORN.

Lewis said the 51-member board did not know about the apparent theft until an ACORN financial supporter heard about it this spring and raised questions about whether its contributions had been misappropriated.

National board members were furious at the disclosure, and they have asked for a full airing of how the money was stolen and why it was kept secret from group for so long.

Dale Rathke resigned in early June. Wade Rathke also resigned from his position as chief organizer but remains with an affiliated group, New Orleans-based ACORN International, which does human rights work overseas.

The Rathke family repaid about $214,000 starting in 2001 through a loan taken out by CCI, and a California donor, Drummond Pike, recently stepped in and repaid the remaining debt.

A phone call to Dale Rathke's home on Wednesday was not returned. Wade Rathke was traveling in Indonesia with his new international duties. He has not been accused of mishandling money, but board members have questioned his handling of the matter.

Wade Rathke told board members in June that he did not try to cover up his brother's misdeeds. He asserted that he and other managers thought the repayment plan represented the best course of action because it would keep the incident out of the press, where it could provide fodder for political opponents at a time when ACORN had much work to accomplish, according to minutes of the meeting, which were available at Orleans Parish Civil District Court.

Rathke's wife, Beth Butler, executive director of ACORN New Orleans, disputed the account of some board members that the family kept the embezzlement hush-hush. She said ACORN's national executive committee and regional leaders knew what was going on, and its national executives took steps make sure CCI modernized its accounting controls.

But the group's management continues to fracture over the issue.

In August, two members of an ACORN interim management committee -- Washington, D.C., board member Marcel Reid and Minnesota board member Karen Inman -- filed suit in New Orleans seeking access to financial records and to remove Rathke from all ACORN-affiliated groups. They said a June 20 board resolution directed Rathke to step aside from any activities having to do with ACORN.

Rathke's wife said his new employer, ACORN International, is a separate group with separate offices.

"It is an issue with a certain group of people," she said. "Wade continues his work."

Lewis, of the New York office, said Reid and Inman did not have the authority to bring the suit, and she expects it to be dismissed. James Gray II, an attorney for Reid and Inman, did not respond to requests for an interview. Judge Michael G. Bagneris will consider restraining order and dismissal requests today.

The management fights have flared as ACORN has come into its prime in New Orleans. While its campaign in the 1990s to unionize hospitality workers was unsuccessful and the Supreme Court overturned its 2002 living-wage referendum in New Orleans, the group rose to the challenges posed by Katrina.

The nonprofit chartered buses to bring people back to the city to vote in the 2006 mayoral election, and it has continued to re-register more than 10,000 people who dropped off the voting rolls after Katrina. When long lines formed for emergency food stamps after Hurricane Gustav, ACORN took advantage of the opportunity to register people to vote.

ACORN volunteers clad in their trademark red shirts have gutted 6,000 houses in the New Orleans area and now are rebuilding 200 homes. The group made sure the water in the Lower 9th Ward was certified as drinkable after Katrina so people could get trailers hooked up in their front yards and start working on their houses. It continues to provide income tax help for the nettlesome financial issues raised by the storm, and the group's longtime lead paint abatement efforts have stepped up with the rebuilding.

ACORN organizers such as Vanessa Gueringer and Tanya Harris -- Harris appeared in Spike Lee's documentary "When the Levees Broke," -- have become prominent voices for the needs of lower-income residents in the recovery. In the coming weeks, ACORN plans to keep tabs on whether rebuilding dollars are being spent equitably around the city.

Bill Quigley, a Loyola law professor who often advocates for the poor, said it's tragic to see the city's premier social justice organization facing internal challenges at a time when it is performing such vital work.

"They've taken a real leadership role," Quigley said. "Social justice organizing is very, very difficult work to do in the best of times. It (the scandal) could have adverse consequences for the organization and, because it is so active in the city, for all of us in New Orleans."

Lewis said no financial supporters have dropped out so far. Some have their funding on hold to see what comes of the board's investigations and reform efforts. ACORN did receive an important vote of confidence from the foundation that originally raised red flags about the issues this spring. That group, the Needmor Fund of Toledo, Ohio, has released the hold on its funding, Lewis said.

Lewis said ACORN is trying to use the incident as an opportunity to overhaul its operations and make sure it's on solid footing in the future. While one corporate law firm analyzes ACORN's legal exposure from the events of eight years ago, another is helping to chart a new organizational structure. A new accounting firm is scrutinizing its books and making sure it has proper accounting controls in place. ACORN also is setting up new rules on nepotism.

"We're moving ahead; we're changing systems," Lewis said. "The whole point is, this is an opportunity for us, after 38 years, to look at ourselves. This is the opportunity where you can make the sort of structural and institutional changes that you can make. We have got to be transparent, we have got to be open. We are too big an organization not to be on top of everything."


1 comment:

angelinjones said...

Two members of an ACORN interim management committee -- Washington, D.C., board member Marcel Reid and Minnesota board member Karen Inman -- filed suit in New Orleans seeking access to financial records and to remove Rathke from all ACORN-affiliated groups.
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