I. Executive Summary

We should be unfaithful to ourselves if we should ever lose sight of the danger to our liberties if anything partial or extraneous should infect the purity of our free, fair, virtuous, and independent elections.

President John Adams, Inaugural Address, 1797

The Association of Community Organizations for Reform Now (ACORN) has repeatedly and deliberately engaged in systemic fraud.  Both structurally and operationally, 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.

Emerging accounts of widespread deceit and corruption raise the need for a criminal investigation of ACORN.  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.  Since 1994, more than $53 million in federal funds have been pumped into ACORN, and under the Obama administration, ACORN stands to receive a whopping $8.5 billion in available stimulus funds.

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.  Structurally, ACORN 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 that follows presents evidence obtained from former ACORN insiders that completes the picture of a criminal enterprise.

First, ACORN has evaded taxes, obstructed justice, engaged in self dealing, and aided and abetted a cover-up of embezzlement by Dale Rathke, the brother of ACORN founder Wade Rathke.

Committee investigators have established that a violation of corporate duties led to gross abuses of tax laws and other federal regulations.  According to documents obtained from insiders, ACORN was made aware of its lax management structure but chose to ignore the problems and continue a cover-up of criminal activity.   By refusing to report Dale Rathke’s embezzlement of $948,607.50 as an excess benefit transaction, ACORN appears to have violated the Internal Revenue Code.  ACORN’s cover-up of the embezzlement for more than eight years would also constitute obstruction of justice.

Second, ACORN has committed investment fraud, deprived the public of its right to honest services, and engaged in a racketeering enterprise affecting interstate commerce.

Committee investigators have documented ACORN’s use of charitable contributions against donor intent, typified by ACORN’s secret transfer of donor funds to recover losses due to embezzlement.  Moreover, ACORN comingles the accounts of federally-funded affiliates with politically-active affiliates and lacks sufficient oversight to safeguard taxpayer and donor interests, even though it receives millions of federal dollars.

ACORN’s purposeful lack of quality control translates into the employment of convicted felons and other suspect persons.  Through a strategy of providing financial incentives to employees who meet voter registration quotas, ACORN conducts voter drives that routinely produce fraudulent registrations.  In fact, ACORN’s employment practices have the intentional effect of encouraging voter registration fraud while linking criminal culpability to the lowest-level employees rather than the directors who contrive the illegal schemes.

To date, nearly 70 ACORN employees have been convicted in 12 states for voter registration fraud, though no federal charges have been filed against ACORN’s directors.  In fact, Pennsylvania judge Richard Zoller – after holding a low-level ACORN employee liable for election law violations – noted that “somebody has to go after ACORN.”

Third, ACORN has committed a conspiracy to defraud the United States by using taxpayer funds for partisan political activities.

Committee investigators have unearthed documentation that ACORN and its affiliates conducted meticulous research that fed aggressive campaign initiatives designed to elect Democratic candidates in targeted races.  ACORN forged both formal and informal connections with former Illinois Governor Rod Blagojevich, Ohio Senator Sherrod Brown and President Barack Obama, among others.  Each of these campaigns received financial and personnel resource contributions from ACORN and its affiliates as part of a scheme to use taxpayer monies to support a partisan political agenda.  These actions are a clear violation of numerous tax and election laws.

Documents contained in this report reveal ACORN’s political agenda.  ACORN’s 2005-2007 Strategic Plan states that “just as important as . . . mobilizing existing progressive voters, ACORN and similar groups actually create new progressive voters.”  In the same document, ACORN acknowledges that its “issue campaigns play the dual role . . . of attracting new members, and educating or politicizing existing members.”  One particular issue where ACORN claims success is “fighting key elements of the national Republican program.”

In other documents, ACORN affiliates take credit for the election of former-Illinois Governor Rod Blagojevich.  In the 2006 year-end report of ACORN affiliate Service Employees International Union (SEIU) Local 880, efforts to elect Blagojevich and advance partisan political agendas are called “flawless.”

Labor organizations, unions, and other tax-exempt entities stretched Chicago-style political manipulation and back room schemes beyond Illinois to other state-wide and national campaign efforts.  In the State of Ohio , where ACORN directors drafted a political plan contained in this report, overt partisan goals are enumerated.  The ACORN Ohio Political Plan states:

ACORN will target three competitive Ohio congressional districts as well as a half dozen state rep seats nested within the districts. Our electoral work will mobilize and educate voters [and] our paid professional canvass will execute tightly managed Voter ID and GOTV canvasses moving our core constituency of base and swing voters to the polls to vote for the candidates who most closely align with a progressive Working Families Agenda.

Moreover, documents provided by former ACORN employees and contained in this report demonstrate the degree to which ACORN and ACORN affiliates organized to elect President Barack Obama in 2008.

Fourth, ACORN has submitted false filings to the Internal Revenue Service (IRS) and the Department of Labor, in addition to violating the Fair Labor Standards Act (FLSA).

Committee investigators have tracked ACORN’s numerous failures to comply with federal laws that required the payment of excise taxes on excess benefits to Dale Rathke.  SEIU Local 100 – under the direction of ACORN founder Wade Rathke – filed bogus reports with the Labor Department in order to conceal embezzlement.  ACORN violated the overtime and record-keeping provisions of FLSA.  All of these fraudulent acts would constitute a violation of 18 U.S.C. § 1001 by presenting false documents to the United States government.

Fifth, ACORN falsified and concealed facts concerning an illegal transaction between related parties in violation of the Employee Retirement Income Security Act of 1974 (ERISA).

Committee investigators have concluded that ACORN plundered employee benefits and violated fiduciary responsibilities under ERISA by relieving corporate debts through prohibited loans to a related party.  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.

The evidence contained in this report proves that ACORN’s stated purpose to promote grassroots civic participation has been perverted through fraudulent and illegal acts. The weight of evidence against ACORN and its affiliates is astounding.  This syndicate of tax-exempt organizations has coordinated and implemented a nation-wide strategy of tax fraud, racketeering, money-laundering and manipulating the American electorate.

Scrutiny is essential to lift a dark cloud of suspicion from nonprofit community organizations; to bring to justice the responsible parties who have heretofore been shielded from prosecution by ACORN’s obscure organizational structure; to protect the American system of democratic self-government from manipulation and disruption; and to free our political climate from the choke of corruption that threatens to strangle free and fair elections.

II. Findings

Piercing ACORN’s corporate veil in order to determine which individuals own or control the organization is a necessary step for preventing waste, fraud and abuse of federal funds in the hands of corporate control.

When ACORN commits bad acts, the individuals who are harmed are the low to moderate income workers whom ACORN was founded to protect.

Dale Rathke’s embezzlement and ACORN’s subsequent cover-up are violations of ACORN’s corporate duties and constitute fraud.  The identities and roles of those involved must be disclosed. 

ACORN failed to observe its corporate articles by loaning money without proper legal documentation, by ignoring its duties under the corporate bylaws, by misusing corporate funds, and by terminating its members without honoring the process setup in its Articles of Incorporation.  ACORN has not complied with IRS filing requirements or ERISA.

ACORN’s inadequate management structure nurtured a breakdown of corporate integrity, encouraged improper political walls, fostered violations of the tax code, cultivated the illegal use of federal funds and supported an inadequate response to corporate embezzlement.  ACORN accepts federal grant funds yet lacks any whistleblower policy, fails to comply with IRS laws and lacks an ongoing relationship with duly qualified legal counsel.  Project Vote lacks hiring standards and routinely employs convicted felons.  The executive directors of several ACORN affiliates lack sufficient control of their own funds, ACORN affiliates lack independent boards that they can report to, and directors wear hats that jeopardize their ability to act solely in the interests of their organizations.  ACORN is responsible for Project Vote’s fraudulent registrations because ACORN authorizes the selection of members engaged in voter registration. 

An essential aspect of Project Vote, CCI, Citizens Services Inc. (“CSI”), Communities Voting Together (“CVT”), and other ACORN affiliated 501(c)(3)s is to promote desirable governmental policies consistent with its objectives through legislation.

ACORN and its affiliates cannot delineate their 501(c)(3) work from their non-501(c)(3) work. Ignoring ACORN’s nonprofit protections reveals the same individuals made strategic decisions about which regions do 501(c)(3) versus non-501(c)(3) voter registration work.

Lobbying is a substantial part of what ACORN does.  It has endorsed Senator Sherrod Brown (D-OH), Representative Albert Wynn (D-MD), and Representative Donna Edwards (D-MD).  ACORN keeps donor records from the Clinton , Kerry and Obama campaigns with the intent to engage in prohibited communications.  ACORN receives federal funding yet engages in improper lobbying.  ACORN and its nonprofit affiliates do not have separate accounts.  Neither ACORN nor any of its affiliates have properly reported their political activities to the IRS.  These harms fly under the legal radar because the IRS rarely checks for compliance. The “no substantial part” test is rarely enforced and the accounts of ACORN and its affiliates are illegally commingled.