U.S. House of Representatives 

Committee on Oversight and Government Reform 

Darrell Issa (CA-49), Ranking Member 

Is ACORN Intentionally Structured As a 

Criminal Enterprise? 

Staff Report 

U.S. House of Representatives 

111th Congress 

Committee on Oversight and Government Reform 

July 23, 2009 
Page 2 of 99 

Table of Contents

I. EXECUTIVE SUMMARY....................................................................................................................... 3

II. FINDINGS ............................................................................................................................................... 6

III. THE ACORN HANGS FROM MANY BRANCHES......................................................................... 7

A. VOTER REGISTRATION FRAUD............................................................................................................... 7 

B. EMBEZZLEMENT..................................................................................................................................... 8 

C. ORGANIZATIONAL MISMANAGEMENT.................................................................................................... 9 

D. POLITICAL ACTIVITY ........................................................................................................................... 10 

IV. ACORN USES ITS COMPLEX ORGANIZATIONAL STRUCTURE TO FACILITATE 

FRAUDULENT AND ILLEGAL ACTS.................................................................................................. 11

A. ACORN FAILS TO FULFILL ITS CORPORATE DUTIES........................................................................... 15 

1. ACORN Breached Its Fiduciary Duties by Covering up Dale Rathke’s Embezzlement ................. 16

a) ACORN Violated ERISA..................................................................................................... 23 

b) ACORN Breached Its Duty of Care ..................................................................................... 29 

c) The Embezzlement Is An “Excess Benefit” Transaction Prohibited By The IRS ................ 30 

2. ACORN Breached Its Corporate Duties by Failing to Abide by its Bylaws.................................... 31

3. ACORN’s Financial and Structural Mismanagement Has Led to Its Failure to Uphold Its 

Corporate Duties ................................................................................................................................ 34

a) ACORN Lacks Quality Control in Hiring and Supervision of Employees........................... 44 

B. ACORN AND ITS AFFILIATES ARE NOT IN COMPLIANCE WITH THE IRS ............................................ 47 

1. Congress, In Regulating Nonprofits, Intended Nonprofits As Not-For-Politics ............................. 48

2. ACORN And Its Affiliates Violate Their Restrictions as Nonprofits ............................................... 48

3. ACORN And Its Affiliates Engage In Substantial Lobbying Activities............................................ 52

V. CONCLUSION ...................................................................................................................................... 73

VI. APPENDIX 1: ACORN COUNCIL ................................................................................................... 74

VII. APPENDIX 2: RICO ANALYSIS..................................................................................................... 82

VIII. APPENDIX 3: UPDATED AND NEW INFORMATION............................................................. 89

A. ACORN’S TAX STATUS AND POLITICAL ACTIVITIES ............................................................................ 89 

1. ACORN and its web of affiliates have slipped under the legal radars of the FEC and the IRS...... 89

2. Senior ACORN employees lobby the Federal Government on ACORN’s behalf yet ACORN has 

failed to register as a lobbying organization under the Lobbying Disclosure Act.............................. 92

B. CLARIFICATIONS CONCERNING ACORN’S INSIDERS ........................................................................... 97 

C. CLARIFICATIONS CONCERNING THE RICO ANALYSIS........................................................................... 98 

# 
Page 3 of 99 

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. 
Page 4 of 99 

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 federallyfunded 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.” 
Page 5 of 99 

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. 
Page 6 of 99 

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. 
Page 7 of 99 

 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 non501(c)(3) work. Ignoring ACORN’s nonprofit protections reveals the same 

individuals made strategic decisions about which regions do 501(c)(3) versus non501(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. 

III. The ACORN Hangs from Many Branches 

 The Association of Community Organizations for Reform Now (“ACORN”) was 

founded by Wade Rathke in 1970 in Little Rock, Arkansas.1 Since that time, ACORN 

has grown large. It now has hundreds of affiliates in 41 states and registered 1.3 million 

people to vote in the 2008 election.2

 ACORN has gained a reputation in the news because of assertions that it 

committed voter registration fraud, embezzled funds, mismanaged its operations and 

engaged in political activity. 

A. Voter Registration Fraud 

One-third of the 1.3 million voter registration cards turned in by ACORN in 2008 

were invalid.3 ACORN has been investigated for voter registration fraud in Nevada, 

Connecticut, Missouri, Ohio and North Carolina.4 ACORN has faced a series of alleged 

inadequacies and indictable offenses: In 1998, an Arkansas ACORN employee was 

arrested for falsifying voter registration forms.5 In 1999, Philadelphia authorities found 

 

1

 Claire Suddath, A Brief History of ACORN, TIME, Oct. 14, 2008, available at 

http://www.time.com/time/politics/article/0,8599,1849867,00.html (last visited May 11, 2009). 2 Id. 3

 John Fund, An Acorn Whistleblower Testifies in Court, WALL STREET J., Oct. 30, 2008, available at 

http://online.wsj.com/article/SB122533169940482893.html (last visited May 11, 2009). 4

 Lara Jakes Jordan, Officials: FBI investigates ACORN for voter fraud, AP, Oct. 16, 2008, available at

http://www.breitbart.com/article.php?id=D93RNJOG2&show_article=1 (last visited May 7, 2009). 5

 Suddath, supra note 1. 
Page 8 of 99 

hundreds of fraudulent registration forms by ACORN.6 In October 2008, ACORN’s 

Nevada offices were raided by federal agents.7 In May 2009, Nevada officials charged 

ACORN, its regional director, and its Las Vegas field director with voter registration 

fraud.8 Several days later, seven ACORN employees were charged in Pittsburgh for 

voter registration fraud.9 

The Wall Street Journal, quoting Nevada Attorney General Catherine Cortez 

Masto, reported “Acorn’s [sic] training manuals ‘clearly detail, condone and . . . require 

illegal acts,’ such as requiring its workers to meet strict voter-registration targets to keep 

their jobs.”10 Fred Voigt, Philadelphia’s deputy election commissioner, claimed ACORN 

“submitted at least 1,500 fraudulent registrations last fall.”11 According to Lake County 

Elections Board administrator Ruthann Hoagland, ACORN submitted at least 2,100 

fraudulent registrations in Indiana.12 According to the Wall Street Journal, prosecutors 

fined ACORN and entered into a deal requiring ACORN to either increase its oversight 

or risk criminal prosecution after several Washington state-based ACORN employees 

were convicted of voter registration fraud in 2007.13 During the 2008 election, ACORN 

was investigated in fourteen other states.14 In June 2009, judge Richard Zoller, after 

holding an ACORN employee liable for election law violations, stated, “[s]omebody has 

to go after ACORN[.]”15

B. Embezzlement 

According to a July 9, 2008 article in the New York Times, Dale Rathke, the 

brother of ACORN’s founder, Wade Rathke, “embezzled nearly $1 million from Acorn 

[sic] and affiliated charitable organizations in 1999 and 2000.”16 The Times reported 

Dale Rathke embezzled $948,607.50, “carried as a loan on the books of Citizens 

Consulting Inc. [“CCI”], which provides bookkeeping, accounting and other financial 

 

6 Id. 7 Id. 8

 John Fund, More Acorn Voter Fraud Comes to Light: Congressional Democrats still want the group to be 

eligible for federal money, WALL STREET J. May 9, 2009, available at 

http://online.wsj.com/article/SB124182750646102435.html (last visited May 11, 2009). 9 Id. See also Joe Mandak, 7 Pa. ACORN workers facing voter-form charges, AP, May 7, 2009, available 

at: http://www.breitbart.com/article.php?id=D981H0JG3&show_article=1 (last visited July 7, 2009). 10 Id. 11 Fred Voigt, Economic Hard Times; Voter Registration Scandal; Global Economy Rescue; Campaign 

Trail Update; Water Charity; Resale Shop Comeback, CNN NEWS TRANSCRIPT, Oct. 15, 2008, available at 

http://transcripts.cnn.com/TRANSCRIPTS/0810/15/cnr.01.html (last visited May 11, 2009). 12 Ruthann Hoagland, Economic Hard Times; Voter Registration Scandal; Global Economy Rescue; 

Campaign Trail Update; Water Charity; Resale Shop Comeback, CNN NEWS TRANSCRIPT, October 12, 

2008, available at http://edition.cnn.com/TRANSCRIPTS/0810/12/sm.02.html (last visited May 11, 2009). 13 John Fund, Whose Ox Is Gored, WALL STREET J., July 30, 2007, available at 

http://www.opinionjournal.com/diary/?id=110010400 (last visited July 8, 2009). 14 Id. 15 Walter F. Roche Jr., ‘Go after ACORN,’ judge says , PITT TRIBUNE-REVIEW, June 30, 2009, available at

http://www.pittsburghlive.com/x/pittsburghtrib/news/s_631577.html (last visited July 1, 2009). 16 Stephanie Strom, Funds Misappropriated at 2 Nonprofit Groups, N.Y. TIMES, Jul. 9, 2008, available at

http://www.nytimes.com/2008/07/09/us/09embezzle.html (last visited May 7, 2009). 
Page 9 of 99 

management services to Acorn [sic] and many of its affiliated entities.”17 ACORN 

“chose to treat the embezzlement of nearly $1 million eight years ago as an internal 

matter and did not even notify its board.”18 According to an October 10, 2008 New York 

Times report, ACORN “had failed to disclose the theft for eight years.”19 Dale Rathke 

remained on ACORN’s payroll until June 2008, when news broke of his wrongdoing.20 

C. Organizational Mismanagement 

National Public Radio (“NPR”) stated “ACORN has dozens of subsidiaries” and 

“[s]ome get federal funds.”21 NPR reported “ACORN moves money around among the 

subsidiaries” and ACORN’s mismanagement “essentially gives them a cloak that 

prevents people from seeing really how they're spending money that comes, in some 

cases, from the taxpayers, in other cases, comes from members of their organization who 

pay dues.”22 In response to Dale Rathke’s embezzlement, ACORN’s “executives decided 

to keep the information from almost all of the group’s board members and not to alert law 

enforcement.”23 According to the New York Times, Maude Hurd, the president of 

ACORN, thought concealing the embezzlement and “deal[ing] with it in-house” was 

“best at the time.”24 The “in-house” remedy included firing two ACORN board members 

for investigating Dale Rathke’s embezzlement and its concealment.25 

According to the New York Times, former board members Marcel Reid and Karen 

Inman sought “a court order to force [ACORN] to hand over financial documents” in 

addition to “seeking to sever . . . continuing ties between Acorn [sic] and its founder, 

Wade Rathke” who they contend “continues to direct the staff and expenditures” even 

though he resigned.26 The paper reported ACORN is being sued for preventing Reid and 

Inman from fulfilling their fiduciary responsibilities as board members. In the complaint, 

the plaintiffs stated, “money is being spent improperly and that important documents are 

being destroyed.”27 According to the complaint, Wade Rathke’s continued relationship 

 

17 Id. 18 Id. 19 Stephanie Strom, On Obama, Acorn and Voter Registration, N.Y. TIMES, Oct. 10, 2008, available at 

http://www.nytimes.com/2008/10/11/us/politics/11acorn.html (last visited May 7, 2009). 20 Suddath, supra note 1. 21 Peter Overby, ACORN Has Long Been In Republicans' Cross Hairs, NAT’L PUB. RADIO, Oct. 15, 2008, 

available at http://www.npr.org/templates/story/story.php?storyId=95696267 (last visited May 8, 2009). 22 Id. (quoting Tim Miller, director of the Employment Policies Institute). 23 Stephanie Strom, Funds Misappropriated at 2 Nonprofit Groups, N.Y. TIMES, Jul. 9, 2008, available at

http://www.nytimes.com/2008/07/09/us/09embezzle.html (last visited May 7, 2009). 24 Id. See Nicholas Confessore, Perspectives on the Atlantic Yards Development Through the Prism of 

Race, Nov. 12, 2006, available at http://www.nytimes.com/2006/11/12/nyregion/12yards.html (last visited 

May 8, 2009); But see Stephanie Strom, Head of Foundation Bailed Out Nonprofit Group After Its Funds 

Were Embezzled, N.Y. TIMES, Aug. 17, 2008, available at 

http://www.nytimes.com/2008/08/17/us/17acorn.html (last visited May 11, 2009). 25 Drew Griffin and Kathleen Johnston, ACORN fires two who were probing embezzlement allegations, 

CNN, Nov. 13, 2008, http://www.cnn.com/2008/POLITICS/11/13/acorn.investigation/index.html (last 

visited July 7, 2009). 

26 Stephanie Strom, Lawsuit Adds to Turmoil for Community Group, N.Y. TIMES, Sept. 10, 2008, available 

at http://www.nytimes.com/2008/09/10/us/10acorn.html (last visited May 11, 2009). 27 Id. 
Page 10 of 99 

with ACORN, despite his being fired, “impede[d] the ability of the interim management 

committee to perform its function.”28

ACORN passed a resolution in 2008, after the embezzlement was revealed, 

creating a special investigative board, led by Marcel Reid and Karen Inman, whose 

purpose was to determine how ACORN could be improved so embezzlement-like 

situations could be avoided in the future.29 Reid and Inman sued ACORN to protect the 

integrity of this board.30

According to the Wall Street Journal, ACORN’s “quality-control efforts were 

‘minimal or nonexistent’ and largely window dressing.”31 According to ACORN 

organizers quoted in the Journal, ACORN lacks quality control “on purpose” and it has a 

“longstanding practice to blame bogus registrations on lower-level employees who then 

often face criminal charges.”32 The Journal reported ACORN employees are told “to 

engage in deceptive fund-raising tactics.”33 

D. Political Activity 

It is undisputed that ACORN engages in politically partisan activity.34 The Wall 

Street Journal reported ACORN had direct involvement with the Obama campaign.35

According to John Fund of the Journal, Citizens Consulting, Inc., which controls 

ACORN’s finances, was paid $832,000 by the Obama campaign for get-out-the-vote 

efforts.36 Nonprofits participating in partisan activity are barred from receiving federal 

funds, yet ACORN has received $53 million in federal funds since 1994 and could 

receive up to $8.5 billion more.37 In March 2009, ACORN became a national partner 

with the U.S. Census Bureau to assist with the recruitment of 1.4 million workers needed 

to go door-to-door to count every person in the United States.38 The Wall Street Journal

reported ACORN was selected to assist the U.S. Census Bureau in “reaching out to 

minority communities and recruiting census enumerators for the count next year.”39 

 

28 Id. 29 Id. 30 Id. 31 John Fund, supra note 3. 32 Id. 33 Id. 34 See e.g. Glenn Beck, Investigating ACORN, FOX NEWS, May 8, 2009, available at 

http://www.foxnews.com/story/0,2933,519520,00.html (last visited May 8, 2009). 35 Fund, supra note 3. 36 Id. 37 Kevin Mooney, ACORN got $53 million in federal funds since 94, now eligible for up to $8 billion more, 

WASH EXAMINER, May 6, 2009, available at

http://www.washingtonexaminer.com/opinion/columns/special-editorial-reports/ACORN-got-53-millionin-federal-funds-since-94-now-eligible-for-up-to-8-billion-more-44406217.html (last visited May 8, 2009). 38 Cristina Corbin, ACORN to Play Role in 2010 Census, FOXNEWS.COM, Mar. 18, 2009, available at

http://www.foxnews.com/politics/2009/03/17/lawmakers-concerned-role-acorn-census/ (last visited May 

15, 2009). 

39 Fund, supra note 8. 
Page 11 of 99 

In a March 19, 2009 hearing, House Judiciary Committee Chairman John Conyers 

called for an investigation of ACORN: 

Well since we are at a hearing on ACORN is there anybody to hear 

from ACORN that can testify? May I ask respectfully that the 

Chairman consider such a hearing so we can get to the bottom of 

this. . . . [T]his is a member of the bar here who got a successful 

partial injunction against ACORN and we have our distinguished 

colleague on the committee here, he’s asserted that people, they 

fraudulently vote in every county in the state – that’s a pretty 

serious matter, I would just like the Chairman who is a fierce 

supporter of constitutional rights, civil rights and human rights to 

take this matter up. I think this would be something that would be 

worth our time.40

Three months later, Representative Conyers “backed off his plan to investigate purported 

wrongdoing by . . . ACORN” because “[t]he powers that be decided against it.”41 A 

provision inserted by Representative Michele Bachmann (R-MN) into the proposed 

Mortgage Reform and Anti-Predatory Lending Act blocked organizations indicted for 

voter registration fraud from receiving housing counseling grants and legal assistance 

grants and was unanimously approved by a voice vote in the House.42 But soon after the 

Financial Services Committee, led by Representative Barney Frank (D-MA), approved 

the stipulation, Frank claimed he made a mistake and planned to take out the “antiACORN provision” from the Act.43 

IV. ACORN Uses Its Complex Organizational Structure to 

Facilitate Fraudulent and Illegal Acts. 

FINDING: 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. 

FINDING: When ACORN commits bad acts, the individuals who are harmed 

are the low to moderate income workers whom ACORN was 

founded to protect. 

 

40 Lessons Learned From the 2008 Election, Hearing Before the H. Comm. on the Judiciary, 111th Cong. 

(2009) (statement of Representative John Conyers, Chairman). 41 S.A. Miller, Conyers Backs Off Probe of ACORN, WASH. TIMES, June 26, 2009, available at: 

http://washingtontimes.com/news/2009/jun/26/conyers-backs-off-probe-of-acornpractices/?feat=home_headlines&page=2 (last visited June 22, 2009); see also Kevin Mooney, Rep. 

Conyers Reverses Stance on ACORN Investigation, WASH EXAMINER, May 6, 2009, available at 

http://www.washingtonexaminer.com/opinion/blogs/Examiner-Opinion-Zone/Rep-Conyers-ReversesStance-on-ACORN-Investigation--44485482.html (last visited May 11, 2009). 42 Id. 43 Id. 
Page 12 of 99 

The Association of Community Organizations for Reform Now (“ACORN”) is a 

Louisiana incorporated 501(c)(4) nonprofit corporation for organizing a constituency of 

low- to moderate-income people across the United States.44 ACORN is registered to do 

business in 43 states and the District of Columbia.45 ACORN has over 1200 

neighborhood chapters in 104 cities.46 ACORN’s nonprofit corporate status grants it the 

privilege of limited liability by creating a distinction between the corporate entity of 

ACORN and the individuals who control its acts. 

ACORN loses its tax-exempt privileges if it abuses its corporate privileges and 

disregards corporate formalities.47 By ignoring ACORN’s legal distinctions (“piercing 

the corporate veil”) investigative bodies may ignore the corporate form of a nonprofit 

corporation for purposes of preventing fraudulent behavior.48 Under Louisiana law, 

officers or directors, the organization, compensated employees and volunteers accused of 

acting willfully or wantonly are not protected against lawsuits.49 

Piercing the veil of a nonprofit corporation 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.50 The Eighth Circuit is 

instructive in these matters and in HOK Sport, Inc. v. FC Des Moines, L.C., the court 

held, “[d]isregarding an entity’s corporate form by piercing the corporate veil is 

appropriate if ‘the corporation is a mere shell, serving no legitimate business purpose, 

and used primarily as an intermediary to perpetuate fraud or promote injustice.’”51 Once 

the corporate veil is pierced, officers and directors can be found liable as alter egos of the 

nonprofit corporation.52 

Piercing the corporate veil is a tool for knocking down the corporate walls used to 

shield those responsible for bad acts. By ignoring ACORN’s otherwise opaque corporate 

structure and nonprofit legal protections, it is possible to determine how ACORN’s 

leadership committed bad acts.53 Some ACORN affiliates lobby, yet they are required to 

 

44 ACORN WEBSITE, available at http://www.acorn.org/index.php?id=12378 (last visited May 4, 2009). 45 Ralph McCloud CCHD (Nov. 11, 2008) (ACORN 004785) at 5. 

46 ACORN Grant Request to the Democracy Alliance at 2 (Mar. 24, 2006) (ACORN_004338). 

47 HOK Sport, Inc. v. FC Des Moines, L.C., 495 F.3d 927 (8th Cir. 2007). In HOK Sport, Inc., the 

defendant’s finances were not kept separate from the finances of other entities, which were controlled by 

the defendant. The Court held that “Although The Menace and Kum & Go are corporate entities that are 

nominally separate from Krause, this factor still weighs in favor of piercing TSF’s veil because a 

reasonable jury could conclude Krause treated each entity as his own slush fund. TSF’s finances were not 

kept separate from The Menace’s and Kum & Go’s finances, and by extension, Krause’s finances.” Id. at 

942. 

48 Id. See also WILLIAM MEADE FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW OF CORPORATIONS § 

41.75 (2006). 

49 See Matlock v. Hankel, 707 So. 2d 1016 (La. Ct. App. 1998) 50 HOK Sport, Inc. v. FC Des Moines, L.C., at 935-36; See also United States v. Bestfoods, 524 U.S. 51, 62 

(1998). 

51 Id. 52 §8.30 Revised Model Non-profit Corporation Act 

53 Memorandum from Harmon, Curran, Spielberg, & Eisenberg, LLP [HCSE] on Organization Review to 

ACORN Beneficial Association, ACORN Housing Corporation, ACORN Institute, ACORN Votes, 
Page 13 of 99 

be walled off from the affiliates receiving federal funds. Likewise, ACORN’s 501(c)(3) 

affiliates, which receive tax-deductible contributions, are presumably walled off from 

ACORN’s political functions. As shown in this Report, there is evidence which 

questions whether taxpayer money and tax-deductible contributions are being kept 

separate from those resources used to endorse legislation or fund participation in the 

campaigns of candidates for public office. The public interest is best served if the opacity 

behind ACORN’s corporate structure and legal protections is removed. 

“Piercing” through ACORN’s legal protections would remove the distinctions 

between ACORN and its affiliates. This Report will show how ACORN walls off its bad 

acts by creating nominal affiliates both through a separate tax structure (Project Vote is a 

501(c)(3)) or a separate name and state of incorporation (e.g. ACORN Fair Housing 

Corporation Orlando, FL).54 

ACORN’s walls are artificial. It fails to maintain the necessary legal formalities 

required for many of its affiliated and subsidiary entities. ACORN’s opacity has allowed 

it to avoid responsibility, which is why during a debate Senator Barbara Mikulski (DMD) stated, “ACORN has never, to my knowledge, been convicted of a Federal crime.”55 

Yet Senator Mikulski ignores how ACORN’s opacity makes the organization too 

byzantine to be legally controlled. Many ACORN affiliates lack real boards or executive 

directors, making the legal channel of holding individuals or organizations liable 

practically un-navigable.56 Sadly, when ACORN’s leaders commit bad acts, the 

individuals who get caught tend to be low or moderate income workers – the types of 

individuals ACORN was founded to protect.57 

This reality is illustrated by recent events. In June 2009, seven ACORN workers 

in Pennsylvania were charged with forging 51 signatures and violating election laws in 

advance of the 2008 presidential election.58 In May 2009, two ACORN staff members 

were prosecuted in Clark County, Nevada for paying bonuses to workers who registered 

over 21 individuals per day.59 In July 2008, three ACORN workers were convicted of 

voter fraud in Kansas City because they flooded voter registration rolls with over 35,000 

false or questionable registration forms.60 In March 2008, an ACORN employee in West 

Reading, Pennsylvania, was sentenced to up to 23 months in prison for identity theft and 

 American Institute for Social Justice, Association of Community Organizations for Reform Now, Citizens 

Consulting, Inc., Citizens Services Inc., Communities Voting Together, Pennsylvania Institute for 

Community Affairs, Inc., Project Vote/Voting for America, Inc. (June 19, 2008) [hereinafter HCSE Memo] 

at 1 (ACORN_004927). 

54 See Appendix 1, infra. 55 155 CONG. REC. S3822-41 (Mar. 26, 2009) (statement of Sen. Mikulski). 56 HCSE Memo (June 19, 2008) at 1 (ACORN_004927).

57 See notes 3-15, supra. 58 Walter F. Roche Jr., Another Allegheny ex-ACORN worker will stand trial, PITT. TRIBUNE-REVIEW, June 

5, 2009, available at http://www.pittsburghlive.com/x/pittsburghtrib/news/pittsburgh/s_628302.html (last 

visited June 11, 2009). 

59 See ATTORNEY GENERAL’S COMPLAINT, available at 

http://sos.state.nv.us/information/news/press/2009/pdf/complaint-acorn (last visited June 22, 2009). 60 Department of Justice Press Release, available at 

http://kansascity.fbi.gov/dojpressrel/pressrel07/identitytheft010507.htm (last visited May 4, 2009) 
Page 14 of 99 

tampering with records,61 and forging 29 voter registration forms in order to collect a 

cash bonus.62 In 2007, three ACORN employees pled guilty, and four more were 

charged, in the worst case of voter registration fraud in Washington state history.63 In 

2007, a man in Reynoldsburg, Ohio was indicated on two felony courts of illegal voting 

and false registration, after being registered by ACORN to vote in two separate 

counties.64 In 2006, eight ACORN employees in St. Louis, Missouri were indicted on 

federal election fraud charges.65 In 2005, two ex-ACORN employees were convicted in 

Denver, CO of perjury for submitting false voter registrations.66 In 2004, a grand jury 

indicted a Columbus, Ohio ACORN worker for submitting a false signature and false 

voter registration form.67 In 1998, a contractor with ACORN-affiliated Project Vote was 

arrested in Arkansas for falsifying 400 voter registration cards.68 In addition to Nevada, 

Missouri, Pennsylvania, Washington, Arkansas, Colorado, Kansas, and Ohio, there have 

been prosecutions against ACORN workers in Connecticut, Texas, Wisconsin, and 

Michigan.69

By ignoring ACORN’s nonprofit walls, information about those members of its 

Board and the board of its affiliates who had knowledge and control over its corporate 

actions can be revealed. ACORN has ignored its corporate duties and has perpetuated 

fraud. As a result, ACORN’s legal protections must be ignored and, as a matter of law, 

federal funds must be denied to a partisan lobbying organization. 

 

61 News Staff, West Reading man gets jail for phony forms, READING EAGLE (Mar. 1, 2008), available at

http://www.readingeagle.com/article.aspx?id=82467 (last visited July 8, 2009). 62 Editorial, RNC: Obama & Acorn Fact Sheet, FOX. BUS. NEWS, Oct. 4, 2008, available at: 

http://www.foxbusiness.com/story/rnc-obama--acorn-fact-sheet/ (last visited June 1, 2009). 63 Keith Ervin, Three plead guilty in fake voter scheme, SEATTLE TIMES, Oct. 30, 2007, at B5; See also 

Shaila Dewan, A Vote Drive By Democrats In Louisiana Stirs Concern, N.Y. TIMES. Jun. 15, 2008, 

available at: http://www.nytimes.com/2008/06/15/us/politics/15vote.html (last visited June 10, 2009). 64 Bruce Cadwallader, Man voted in 2 counties in 1 election, COLUMBUS DISPATCH, May 9, 2007, at 04B. 65 Guilty pleas in election fraud, AP, Apr. 3, 2008, available at: 

http://query.nytimes.com/gst/fullpage.html?res=9D00E7DB153DF930A35757C0A96E9C8B63&partner=r

ssnyt&emc=rss (last visited June 22, 2009). 66 Briefing, ROCKY MTN NEWS, Jan. 4, 2005 at 21A. 67 Terrence Scanlon, Democratic Deception, WASH. TIMES. Oct. 18, 2004, available at

http://washingtontimes.com/news/2004/oct/18/20041018-093522-3974r/ (last visited June 2, 2009). 68 Claire Suddath, A Brief History of ACORN, TIME, Oct. 14, 2008, available at 

http://www.time.com/time/politics/article/0,8599,1849867,00.html (last visited May 11, 2009). 69 See generally Reggie Sheffield, Former temp worker accused of bogus voter registrations, THE PATRIOTNEWS, Jul. 24, 2008 at B02; Ken Dixon, ACORN voter signups questioned, CONNECTICUT POST, Aug 16, 

2008, available at: http://www.connpost.com/news/ci_10219729 (last visited March 10, 2009); Alan 

Bernstein, ACORN planting voter registrars in certain areas, HOUSTON CHRONICLE, Aug. 17, 2008 at B1; 

Molly Ball, Election fraud task force formed; Investigators already looking into voter registration issues, 

LAS VEGAS REVIEW-JOURNAL, Aug. 1, 2008 at 2B; Larry Sandler, Vote workers investigated, MILWAUKEE 

JOURNAL-SENTINEL, Aug. 29, 2008 at B3; Larry Sandler, More voter registration workers under scrutiny, 

MILWAUKEE JOURNAL-SENTINEL, Aug. 20, 2008 at B1; L.L Brasier, Bad voter applications found, 

DETROIT FREE PRESS, Sept. 14, 2008 at 1. 
Page 15 of 99 

A. ACORN Fails to Fulfill Its Corporate Duties 

Once a nonprofit organization is incorporated under the law of a state, it becomes 

a corporation and is subject to state corporation laws.70 The Uniform Management of 

Institutional Funds Act, which provides guidance to the governing boards of charitable 

organizations, directs, “members of a governing board of an institution shall exercise 

ordinary business care and prudence.”71 Courts apply the same standards to directors of 

nonprofit corporations as those applicable to directors of for-profit corporations.72 

The Revised Model Nonprofit Corporation Act requires a director to “discharge 

his or her duties as a director in good faith, with the care that an ordinarily prudent person 

in a like position would exercise under similar circumstances, and in a manner the 

director reasonably believes to be in the best interests of the corporation.”73 

Officers and directors of a nonprofit corporation owe a fiduciary duty to members 

of the association, and their failure to assume this duty can result in liability to both the 

association and the individual directors and officers.74 As fiduciaries, board members 

bear a duty of loyalty to the corporation and cannot improperly profit at the expense of 

the corporation.75 Nonprofits can breach duties of diligence76 and duties of loyalty,77 as 

well as duties to uphold the organizational mission and bylaws.78 In Louisiana, where 

ACORN is incorporated, “[o]fficers and directors of nonprofit corporations are required 

to discharge their duties in good faith, with the diligence, care, judgment and skill of an 

ordinarily prudent person.”79 

 

70 Id. 71 Id. See also §6 of UMIFA, codified, e.g. at Ohio Rev. Code § 1715.56. 72 See Colin T. Moran, Why Revlon Applies to Nonprofit Corporations, 53 BUS. LAW. 373, 373-95 (2008). 73 Revised Model Nonprofit Corporation Act Section §8.30(a). 

74 Schweickart v. Powers, 613 N.E.2d 403 (Ill. App. 1993). 

75 Martha Graham Sch. & Dance Found., Inc. v. Martha Graham Ctr. of Contemporary Dance, Inc., 153 F. 

Supp. 2d 512, 522 (S.D.N.Y. 2001). 

76 See Davis v. Black, 591 N.E.2d 11 (Oh. 1991); see also Blankenship v. Boyle, 329 F. Supp. 1089 (D.D.C. 

1971). 

77 See California v. Larkin, 413 F. Supp. 978 (N.D. Cal. 1976) (Trustee was sued for hypothecation of the 

assets of a charitable trust as security for a $320,000 loan to the trustee’s closely held for-profit corporation 

to be used by it to earn profits for the trust); see also Spitzer v. Schussel, 792 N.Y.S. 2d 798 (2005) (Dance 

group director sued by New York Attorney General for self-dealing and using the organization to facilitate 

a tax-avoidance scheme. Co-directors sued for failing to prevent alleged misconduct). 

78 See Monroe v. Brown, 381 N.E.2d 1151 (Ohio App. 1978) (The owners of a casino-type gambling 

facility, allegedly operated on behalf of charitable entities, were sued by Ohio’s Attorney General to open 

their books and disclose whether the operations were conducted for the benefit of the charities or for the 

private gain of the operators); see also In re Manhattan Eye, Ear & Throat Hosp., 715 N.Y.S.2d 575 (Sup. 

Ct. 1999) (The board of directors of a charitable corporation was sued for violation of its duty to ensure the 

mission of the corporation was carried out). 

79 See La. R.S. 12:226. 
Page 16 of 99 

1. ACORN Breached Its Fiduciary Duties by Covering up 

Dale Rathke’s Embezzlement 

FINDING: 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. 

According to the notes from an ACORN meeting held on August 15, 2008 in Los 

Angeles, Dale Rathke, ACORN Chief Organizer Wade Rathke’s brother, embezzled at 

least $948,000 between 1999 and 2000.80 The money was alleged to have been spent on 

a Concorde flight, credit cards, meals and trips.81 

This Committee obtained an internal report prepared for numerous ACORNentities by the Washington, D.C. law firm of Harmon, Curran, Spielberg & Eisenberg, 

LLP (hereinafter “HCSE”). The firm was retained as outside legal counsel for eleven 

separate ACORN affiliates to “conduct a review of the operations and inter-relationships 

of the set of . . . corporations addressed on this memo.”82 The firm was retained to 

provide advice about the “legally appropriate ways of structuring their relationships.”83 

The Memo identifies numerous problems with ACORN’s management structure, 

in addition to problems involving a lack of corporate integrity, improper political walls, 

tax code non-compliance, concerns about the legal use of federal funds, lack of 

administrative capabilities and ACORN’s inadequate response to the embezzlement by 

Dale Rathke.84 

The HCSE Memo raises questions about the degree to which ACORN affiliates 

that received federal funds improperly comingled those funds with other ACORN 

affiliated entities. 

Concerning the embezzlement, HCSE stated: 

[T]here was contradictory information about who at the board level 

had been told about the embezzlement and proposed handling of it 

in 2000. The management council may have been told that the 

information was shared with the entire executive committee when 

in fact only the President had been informed. There should be 

further investigation to determine who was told, and what 

representations the management council relied on in taking 

action.85

 

80 Notes from West Regional Meeting at 1 (Aug. 15, 2008) (ACORN_000314); see also Strom, supra note

16. 

81 Id. 82 HCSE Memo (June 19, 2008) at 1 (ACORN_004927). 

83 Id. 84 HCSE Memo (June 19, 2008) at 1-2 (ACORN_004927-004928). 

85 Id. at 12 (ACORN_004938). 
Page 17 of 99 

According to a memorandum from Wade Rathke on February 11, 2008, Louis 

Robein was hired as special counsel to assist ACORN’s in-house legal department and to 

audit “everything from reporting to record retention and compliance along with handling 

a series of issues with the IRS.”86 However, the HCSE Memo alleged “that there is also 

contradictory information about the role played by legal counsel in vetting the settlement 

of the Dale [Rathke] matter.”87 The HCSE Memo stated: 

In December 2000, Wade Rathke told Steve Bachmann as 

attorney and the management council (as upper level 

management) that the legal problems of solving Dale’s 

embezzlements would be turned over to Louis Robein, 

longtime counsel for Local 100, and regionally reputable labor 

lawyer who could reasonably be expected to provide reliable 

advice in managing this sort of situation. On June 10, 2008, 

[HCSE] met with Louis Robein who informed [us] that his role 

was far more limited. He related how around December 2000, 

Wade had a conversation with Louis to the effect that Dale had 

been caught in some embezzlement. No amount was mentioned. 

The discussion was mainly over what liabilities Wade might have 

to worry about, and Louis provided [some] general and preliminary 

advice. Neither Louis Robein nor his firm was retained to 

structure or review any sort of resolution to the Rathke 

embezzlement. . . . . It appears that this settlement was never 

reviewed by ACORN’s general counsel nor the attorney 

supposedly retained to do so. A hostile investigator might 

conclude that Wade deliberately told Steve Bachmann that he 

had retained different counsel on the matter in order to 

exclude legal counsel from meaningful participation in review 

of the proposed plan. And unfortunately, this is an 

organization that has to be prepared to be scrutinized by a 

hostile investigator.

88 

The Service Employees International Union (“SEIU”) Local 100 Form LM-2 filed 

with the Labor Department shows that SEIU made payments to Citizens Consulting Inc. 

(“CCI”) and the Elysian Fields Corporation. 89 According to the HCSE Memo, Wade 

Rathke disclosed his brother Dale's embezzlement to Louis Robein of Local 100. Local 

100’s Form LM-2 identifies Wade Rathke as the administrator of SEIU Local 100.90 Yet 

in filing its LM-2, Local 100, with Wade Rathke as its agent, claimed the labor 

organization did not “discover any loss or shortage of funds or other assets . . . even if 

 

86 Wade Rathke Memo (Feb. 11, 2008) at 3 (ACORN_004861). 

87 HCSE Memo (June 19, 2008) at 12 (ACORN_004938). 

88 Id. at 12-13. (ACORN_004938-004939) (emphasis added). 

89 See Form LM-2 Labor Organization Annual Report, SEIU Local 100, DEP’T OF LABOR, (2007), SEIU

LM2 2007 at 11 (March 30, 2007) (ACORN_004912).

90 Id. at 1 (ACORN_004902-004926). 
Page 18 of 99 

there has been repayment or recovery.”91 In a July 22, 2008 email, Steve Bachmann 

stated: 

To what extent does the Local 100 Board and Local 100 

members know about the perfidy of their Chief Organizer? Do 

they know how hokey their LM-2 filings are?92

An internal ACORN press release authored by the Interim Management 

Committee (“IMC”), a board-designated committee temporarily charged with managing 

ACORN in Wade Rathke’s absence,93 discussed the role played by legal counsel: 

[Marcel] Reid elaborates, saying ‘the Rathkes so dominated 

ACORN, that in approximately 2000, the organization’s general 

counsel admittedly deferred to Wade Rathke in addressing his 

brother’s alleged embezzlement.’ Indiana attorney Steve 

Bachmann identifies himself as ACORN’s general counsel. He 

essentially admits to washing his hands of the Dale Rathke matter 

once Wade claimed to bring alternative legal counsel in on it. On 

the day of Wade’s termination, he confessed to actually working 

with certain ACORN staffers to conceal the embezzlement. 

Maude Hurd admitted to knowing of the arrangement which a 

whistleblower apparently revealed nearly one decade later.94

A memorandum written by former members of the IMC, who were subsequently 

terminated, alleged: 

ACORN staff members Steven Kest, Jon Kest, Mike Shea, Zach 

Pollett (sic), Helene O’Brien, Amy Schur, Liz Wolf, Beth Butler, 

Mildred Brown and Bertha Lewis knew but conspired to conceal 

the embezzlement and decided to keep the information from the 

full Association Board and not to alert law enforcement. 

Additionally, ACORN executive committee members Maude Hurd 

(President) and Alton Bennett (Treasurer) knew but conspired to 

conceal the embezzlement and decided to keep the information 

from the full Association Board and not to alert law enforcement.95 

In a letter from James Gray, the IMC’s legal counsel, to the ACORN Association Board 

(hereinafter “Board”), Gray wrote: 

Unfortunately, our preliminary investigation has uncovered 

evidence which indicates Senior Staff and Executive Committee 

involvement in the commission and/or concealment of a variety of 

 

91 Id. at 2, question 13 (ACORN_004903). 

92 Email from Steve Bachmann (July 22, 2008) at 4 (ACORN_004328) (emphasis added and in original). 

93 IMC Allegations (Jan. 7, 2009) at 10, 14, 16, 23 (ACORN_004866-004890). 

94 IMC Transparency (Jan. 7, 2009) at 1 (ACORN_004864). 

95 IMC Allegations (Jan. 7, 2009) at 8 (ACORN_004873). 
Page 19 of 99 

unlawful and criminal acts, which could result in a duty for the 

Association Board members to report these acts to local or federal 

law enforcement agencies. Consequently, the IMC desires to 

identify and preserve all ACORN assets, and protect them from 

dissipation and concealment for the benefit of the Association 

Board. To that end, a Temporary Restraining Order has been 

granted (a copy is attached), which prohibits Dale Rathke, Wade 

Rathke Citizen’s Consulting Inc. and their agents from signing 

contracts or destroying documents, and has scheduled a 

preliminary hearing on August 21, 2008. The Rathkes, Senior 

Staff and Executive Committee members, who knew but did not 

divulge the embezzlement of funds to the full Association Board, 

have placed the entire association board in legal and financial 

jeopardy.96 

Gray’s memorandum informed the Board members of their liability for failing to disclose 

Dale Rathke’s embezzlement to the entire Board: 

Thus, the acts of Dale Rathke and the subsequent failure to divulge 

this embezzlement to the entire Association Board have created 

individual liability for all Association Board members. Actual 

ignorance of the fraud is not an excuse. Because Executive 

Committee members knew of the incident and cover-up, the entire 

Association Board is legally presumed to have known about the 

embezzlement in 1999 – 2000.97

Gray recommended the Board complete individual financial audits and a forensic 

examination.98 On October 18, 2008, Gray wrote a letter to the ACORN Association 

Board agreeing to withdraw a complaint against the ACORN Board, filed in a New 

Orleans court, as long as ACORN conducted an internal investigation including: 

 

96 Letter to the Board [James Gray] (Aug. 15, 2008) at 1-2 (ACORN_004896-ACORN_004897). 

97 Id. at 3 (ACORN_004898). 

98 Id. at 4 (ACORN_004899). 
Page 20 of 99 

2. Forensic Examination of the known embezzlement followed by 

an – 

3. Independent Audit of ACORN and related organizations 

performed by a licensed CPA firm hired by, supervised by and 

reporting directly to an – 

4. Audit Committee composed exclusive of executive committee 

members and senior staff officials.99

The letter further stated: 

The Interim Management Committee members must be given 

full and complete access to all corporate records. And all board 

members and staff should be directed to cooperate in any 

subsequent audit or investigation. These actions are part of the 

fiduciary function of the Board of Directors and are necessary to 

preserve the organizational integrity of ACORN and to prevent the 

commission or concealment of any other illegal acts.100

 In an email sent from Ralph McCloud of the Catholic Campaign for Human 

Development (an ACORN funder) to Steven Kest, Executive Director of ACORN, 

McCloud asked “[w]ho are the people who did not disclose the fraud over [ ] eight years 

ago? Do they have roles with ACORN now?”101 Kest stated, “[t]he following people 

were on the management council eight years ago, and were made aware of the 

embezzlement:”102 

Steve Kest 

Jon Kest 

Madeline Talbott 

Keith Kelleher 

Mike Shea 

Zach Polett 

Helene O’Brien 

Amy Schur 

Liz Wolff 

Beth Butler103 

Kest stated, “[t]he following people are still working for ACORN:”104

Steve Kest: National Executive Director 

 

99 Letter to the Board [Withdraw Mandamus] at 1 (Oct. 18, 2008) (ACORN_004900). 

100 Id. at 2 (ACORN_004901) (emphasis added). 101 Email from Marcel Reid to Michael McCray (Mar. 24, 2009) (forwarding email from Steven Kest to 

Ralph McCloud) at 5 (ACORN_004785) [hereinafter “Ralph McCloud CCHD”]. 

102 Id. at 5-6 (ACORN_004785-004786). 103 Id. 104 Id. 
Page 21 of 99 

Jon Kest: NY ACORN Head Organizer 

Helene O’Brien: National Field Director 

Beth Butler, Southern Regional Director105 

Kest further stated, “the following people are working for affiliated organizations:106 

Mike Shea: Executive Director, ACORN Housing Corporation 

Liz Wolff: Special Projects, CCI107

Ralph McCloud asked Steve Kest to “explain Wade Rathke’s current role at ACORN? 

He stepped down as ACORN's chief organizer but remains chief organizer for Acorn 

International LLC? Please explain the difference”108 Kest responded: 

By action of the ACORN Board on June 3 and then on June 20, 

Wade Rathke has no current role with ACORN. He is no 

longer Chief Organizer, and he is no longer employed in any 

capacity by ACORN. ACORN International (actually Inc, not 

LLC) is a separate corporation that works solely with ACORN 

affiliates outside the US, in Peru, Argentina, Mexico, the 

Dominican Republic, Canada, and India. Its board is made up of 

representatives from those non-US organizations. (ACORN US is 

represented on the board by Maude Hurd.) As of today, the Board 

of ACORN International continues to employ Wade as its chief 

organizer. However, representatives from the ACORN Board 

will be meeting with Wade later this month and will be asking 

him to step down from this role. As well, Wade Rathke has (and 

never had) any role with [the American Institute for Social Justice 

(“AISJ”].109

According to the August 15, 2008 notes of the ACORN East Regional meeting in 

Washington, D.C., Wade Rathke had not yet been removed from his role with 

ACORN:110

 

105 Id. 106 Id. 107 Id. 108 Id. at 3 (ACORN_004783). 

109 Id. at 3-4 (ACORN_004783-004784) (emphasis added). 110 Notes from East Regional Meeting (Aug. 15, 2008) at 3 (ACORN_00323). 
Page 22 of 99 

The internal report on ACORN by Harmon, Curran, Spielberg & Eisenberg, LLP 

(“HCSE Memo”) stated, “[the embezzlement] raises major concerns about transparency 

and accountability.”111 It claimed: 

[I]nvestigation is needed into questions about [Wade Rathke’s] 

failure to inform the board, or possibly even the full executive 

committee; the degree to which legal counsel and upper 

management may have been affirmatively misled; the identities 

and roles of those involved creating and implementing the 

response to the embezzlement; and the inter-corporate transfers 

made out of certain funds in response to the loss. These key 

questions must be investigated, confronted, and disclosed to 

appropriate parties.112

The New York Times reported that “[the] embezzlement of nearly $1 million eight years 

ago” was treated “as an internal matter” and ACORN “did not even notify its board.”113 

According to the Times, ACORN’s President, Maude Hurd, refused to disclose the 

embezzlement to the IRS: 

‘We thought it best at the time to protect the organization, as 

well as to get the funds back into the organization, to deal with 

it in-house,’ said Maude Hurd, president of Acorn [sic]. ‘It was 

a judgment call at the time, and looking back, people can agree or 

disagree with it, but we did what we thought was right.’114 

The IRS requires exempt organizations to report embezzlements on its federal tax 

information return (Form 990, Form W-2, or Form 1099) or on an amended federal tax 

information return.115 Section 4958 of the Internal Revenue Code imposes an excise tax 

on excess benefit transactions between a disqualified person and an applicable taxexempt organization.116 A disqualified person is liable for a twenty-five percent (“25%”) 

tax on the excess benefit.117 An organization manager may also be liable for a ten 

percent (“10%”) excise tax on the excess benefit transaction, if he or she “knowingly, 

willfully, and without reasonable cause” participated in the excess benefit transaction.118 

According to the Congressional Research Service, tax-exempt “[o]rganizations 

that owe the penalty and excise taxes . . . must file an excise tax return (e.g., Form 4720 

 

111 HCSE Memo (June 19, 2008) at 2 (ACORN_004928). 112 Id. at 1 (ACORN_004927). 113 Stephanie Strom, Funds Misappropriated at 2 Nonprofit Groups, N.Y. TIMES, July 9, 2008, available at

http://www.nytimes.com/2008/07/09/us/09embezzle.html (last visited May 7, 2009). 114 Id. (emphasis added). 115 Economic Benefit Transactions, INTERNAL REVENUE SERVICE, available at: http://www.irs.gov/pub/irstege/eotopice04. 116 Intermediate Sanctions, Tax Information for Charitable Organizations, INTERNAL REVENUE SERVICE, 

available at http://www.irs.gov/charities/charitable/article/0,,id=123298,00.html. 117 2007 Instructions for Form 990 and Form 990-EZ, Tax Information for Charities & Other Non-Profits, 

INTERNAL REVENUE SERVICE, available at http://www.irs.gov/pub/irs-pdf/i990-ez. 118 Id. 
Page 23 of 99 

or Form 1120-POL).”119 The excise tax return includes the aggregate totals of the taxable 

expenditures and taxes owed and the names of managers who approved the activities.120 

The filings identify inter-corporate transfers made out of certain funds in response to the 

loss (embezzlement).121 

The IRS allows for a disqualified person to correct an excess benefit by making a 

payment directly to the applicable tax-exempt organization.122 If a disqualified person 

fails to correct an excess benefit by a certain date, the tax on the excess benefit increases 

to 200%.123

Based upon the documents cited above, ACORN’s failure to report Dale Rathke’s 

embezzlement to the IRS constitutes fraud. Tax fraud is intentional wrongdoing on the 

part of a taxpayer with the specific intent to evade a tax known to be owed.124 Fraud may 

be inferred from conduct intended to conceal, mislead, or otherwise prevent the collection 

of such taxes.125 According to the Supreme Court, because direct proof of the taxpayer’s 

intent is rarely available, fraud may be proven by circumstantial evidence and reasonable 

inferences drawn from the facts.126 In Bradford v. Commissioner,

127 the Ninth Circuit 

Court of Appeals held that fraudulent intent can be inferred from various kinds of 

circumstantial evidence, setting forth the “badges of fraud” demonstrating fraudulent 

intent. Fraud may be presumed by: understatement of income; inadequate records; 

failure to file tax returns; implausible or inconsistent explanations of behavior; 

concealment of assets; and failure to cooperate with tax authorities.128

a) ACORN Violated ERISA 

ACORN violated its fiduciary responsibilities under the Employee Retirement 

Income Security Act of 1974 (“ERISA”), which protects the benefit rights of 

employees.129 Stephanie Strom, in an October 22, 2008 report in the New York Times, 

stated ACORN Fund, a health care benefits fund, “had advanced ‘a large amount of 

 

119 Erika Lunder, Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements, 

CRS RPT. FOR CONG., Sept. 11, 2007 at 24; see also IRC § 6104(b) and (d). 120 Id. 121 Id. See also Developments Editor, Developments in the Law – Nonprofit Corporations, 105 HARV. L.

REV. 1578, at 1599 (1992) (The Internal Revenue Code “imposes an absolute prohibition on almost every 

conceivable transaction between a private foundation” and an officer or director). 

122 Economic Benefit Transactions, INTERNAL REVENUE SERVICE, available at: http://www.irs.gov/pub/irstege/eotopice04. 123 2007 Instructions for Form 990 and Form 990-EZ, Tax Information for Charities & Other Non-Profits, 

INTERNAL REVENUE SERVICE, available at http://www.irs.gov/pub/irs-pdf/i990-ez. 124 See Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986). 125 See Graves v. Commissioner, T.C. Memo 1994-616 (T.C. 1994). 126 Spies v. United States, 317 U.S. 492 (1943). 127 796 F.2d 303 (9th Cir. 1986). 128 Id. at 307-308. 

129 29 U.S.C. §1105. 
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money’” to ACORN and “it appeared that the money was used to cover ‘the cash 

shortfall caused by the embezzlement.’”130

The June 19, 2008 HCSE Memo identified ACORN’s current pension fund as 

“Council Beneficial Association, or CBA” and its health plan as “Council Health Plan, or 

CHP.”131 The memo stated: 

Two other revelations need to be further investigated. These 

pertain to ACORN Beneficial Association, or ABA, a discretionary 

plan in place before the creation of CBA that was intended not to 

be a true pension fund covered by the ERISA law, and to ACORN 

Fund, a similar discretionary health care fund that was in place 

before the creation [of] CHP. A large part of the embezzled 

funds ($215,000) were charged through ACORN’s AmEx 

account to ABA. When the theft was discovered, this meant 

that Dale owed ACORN this amount, and ACORN in turn 

owed ABA for the overpayment. [We are] told that ABA 

decided to write this debt off as a gift to ACORN (though the 

debt from Dale naturally was not forgiven). Although it is the 

organizations’ legal position that this fund was not covered by 

ERISA and therefore not subject to its rules that would prohibit 

this sort of gift, it is nonetheless the case that a number of 

organizations, possibly including unions and charities, paid 

funds into ABA for entirely different purposes. They did not 

make those contributions in order to make a gift to ACORN. 

[We] have not gotten information about who authorized this 

decision, but those questions need to be asked. Either the board 

was involved in the decision and can explain the rationale, or they 

were not, and there are serious questions to ask as to who 

authorized this expenditure. 

As for ACORN fund, it apparently had advanced a large amount 

of money to ACORN. If the Fund was not covered by ERISA, it 

may have had the discretion to do this. If it were covered by 

ERISA . . . this would be a prohibited loan to a related party. 

In any case, after resolution of the embezzlement and execution of 

the note between Dale Rathke and CCI, the situation was that 

Dale owed CCI, CCI owed ACORN, and ACORN owed 

ACORN Fund. It was agreed to take ACORN out of this picture, 

so that now it is CCI that owes this money to ACORN Fund. 

[We] have not gotten information to determine how this decision 

was made or approved, but it certainly creates concern. There is 

the appearance, at least, that money was taken out of (or not 

 

130 Stephanie Strom, Acorn Report Raises Issues of Legality, N.Y. TIMES, Oct. 22, 2008, available at

http://www.nytimes.com/2008/10/22/us/22acorn.html (last visited May 7, 2009). 131 HCSE Memo (June 19, 2008) at 12 (ACORN_004938). 
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paid back to) a fund established to cover employee health care 

costs in order to cover the cash shortfall caused by the 

embezzlement. This decision, combined with the apparent 

failure to notify the governing boards of affected organizations 

or obtain adequate legal counsel, could generate significant 

liabilities for the Fund and its directors. Again, there must be 

inquiry into the decisions about moving these funds, the advice if 

any that was relied on, and the best response now to minimize 

legal concern. As with ABA, if the board of directors does not 

have answers to questions about this organization, we need to ask 

why not.132 

One month later, on July 22, 2008, Steve Bachmann, ACORN’s General Counsel, 

confirmed HCSE’s concerns in an email suggesting: 

[Wade Rathke] might be sued as a trustee under ERISA, given 

his record of behavior with the ERISA funds that has been 

uncovered. For better or worse this is a trigger that should not be 

pulled until November or December . . . [Wade Rathke] might be 

sued for his abuse of ABA and AFund, two charitable funds, 

both quasi-ERISA funds. . . . The point here is that corporate 

law generally says that corporate formalities and protections are 

ignored when they are being abused for purposes of fraud. So to 

the degree that [Wade Rathke] wants to play that game and we 

show that he’s a crook, the courts will ignore his games[.]133

Bachmann suggested a number of legal positions could be used to induce Wade Rathke, 

ACORN’s historic Chief Organizer, into a limited role in ACORN.134 Bachmann 

discussed the liabilities involved with ACORN’s opaque corporate structure: 

Beyond [HCSE’s] research into whether or not the [Dale Rathke] 

note can be sold at a better price is the fundamental question of 

whether the Rathkes got any releases signed when they signed 

their promises and pledges. In other words, the theory is that 

they signed them in exchange for a release for all liabilities. 

There is a LOT of liability here, the money owed, the interest 

owed, damages to reputation, cost of recovery, etc., etc. But it 

appears that ACORN, CCI, and all the other organizations signed 

nothing when they got the papers from the Rathkes. So 

presumably they may still be able to sue them for losses for which 

they have not yet been compensated.135

 

132 HCSE Memo (June 19, 2008) at 13 (ACORN_004939) (emphasis added). 133 Email from Steve Bachmann (July 22, 2008) at 3-4 (ACORN_004327-004328) (emphasis in original 

and added). 

134 Id. 135 Id. (emphasis added). 
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According to Bachmann, ACORN board members could have sued Wade Rathke as a 

trustee under ERISA for his abuse of the ACORN Beneficial Fund (“ABA”) and 

ACORN Fund (“AFund”), “two quasi-ERISA, charitable funds,” and can sue under 

common law theories of negligence for Rathke’s ignoring corporate formalities and 

protections, the lack thereof being abused for purposes of fraud.136 A December 15, 2006 

year end report by SEIU Local 880, an affiliate of ACORN, discusses the millions of 

dollars in health care funding it received: 

Childcare Health Fund - Contained within our most recent contract 

covering the 40,000 childcare providers, there is a provision 

guaranteeing $27 million paid out over 18 months (beginning in 

July, 2007) to local 880 to set up a health benefit for the childcare 

providers. We had wanted $150 million over three years, but 

“only” won $27 million. We believe that we can cover thousands 

of providers, depending on the plan and schedule of benefits. 

Preliminary numbers show that about 8000 providers would 

qualify and about 4000 would use this comprehensive benefit we 

are putting together now. Toward that end, we are in the 

negotiating process with United Healthcare, the largest insurer in 

the world to fashion a plan like this for our members. It is scary 

and hopeful at the same time, that we could fashion a health 

benefit for thousands and bring much-needed health care to a 

population that has been denied health care for so long.137

According to the Local 880 report, CCI performs Local 880’s legal services and exACORN head organizer Robert Bloch has helped Local 880’s political activities: 

Legal Representation - In the past we have used Steve Bachmann 

and the CCI legal team; SEIU counsel, Craig Becker; Art Martin 

in Southern Illinois; and most recently, ex-ACORN head 

organizer, Robert Bloch’s law firm. We plan to continue using 

these legal resources in the future. But we have been increasingly 

using Robert Bloch[’]s law firm for a lot of legal needs in 2006. 

Robert[’]s firm has been a key help in FLSA and neutrality 

wins. We are moving more business their way and will continue to 

do so.138

Notes from the August 15, 2008 ACORN East Regional Meeting in Washington, D.C., 

show the embezzled money was paid back through ACORN’s health fund:139 

 

136 Id. Negligence under 26 U.S.C. § 6653 is defined as the lack of due care or the failure to do what a 

reasonable and prudent person would do under similar circumstances. 26 U.S.C. § 6653 (a)(1)(A) and (B); 

see also Allen v. Commissioner, 925 F.2d 348, 353 (9th Cir. 1991). 137 Local 880 at 9-10 (Dec. 15, 2006) (ACORN_004358-004359). 138 Id. at 13-14 (ACORN_004362-004363) (emphasis added). 

139 Notes from East Regional Meeting (Aug. 15, 2008) at 1 (ACORN_00321). 
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HCSE’s June 2008 concerns about ACORN’s health fund appear to be confirmed 

in the August 2008 meeting notes:140 

According to the East Regional meeting notes, Forest City Ratner provided the loan 

alleged in the HCSE Memo to have been used to pay back ACORN’s health fund, not 

from the accounts directly embezzled.141 The agreement was as follows:142

 

140 Id. at 2 (ACORN_00322). 141 Id. 142 Executed FCR (Aug. 19, 2008) at 1-2 (ACORN_000094-000095). 
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Page 29 of 99 

As stated in the HCSE Memo, this transaction – where a charity grants money to a 

501(c)(3) in order to pay off a debt for a health fund – is a prohibited loan to a related 

party, violating the fiduciary responsibilities directors have under ERISA.143 As stated in 

the HCSE Memo, ACORN and its directors covered up the embezzlement loss by taking 

money out of and failing to pay back a fund established to cover employee health care 

costs, failing to notify the governing boards of the affected organizations and failing to 

obtain adequate legal counsel.144 

b) ACORN Breached Its Duty of Care 

Dale Rathke’s embezzlement violated ACORN’s duty of care to its members 

because Rathke did not “act in good faith” nor was his transaction “inherently fair from 

the corporation’s point of view.”145 A nonprofit corporation’s duty of loyalty requires 

directors to act in good faith and in a manner they reasonably believe is in the best 

interests of the organization.146 

Dale Rathke was secretary-treasurer and director of internal operations of Citizens 

Consulting, Inc. (CCI), a non-profit entity handling ACORN and all of its affiliates 

accounting, and “actively manage[d], supervise[d] and direct[ed] the business affairs and 

operations of CCI.”147 According to an affidavit by ACORN legal counsel Brian Mellor, 

ACORN and its affiliates still use CCI: 

MELLOR stated that ACORN use an online payroll system 

identified as CCI OMS. . . . The information from the timesheets 

is then entered into the online system by the political organizers 

supervising the canvassers. When a bonus is paid, there is a 

comments section in the payroll system that should be used to 

explain the reason for the bonus. MELLOR stated that he 

caused payroll reports to be generated from the data in the 

CCI payroll system. He provided me with an electronic copy of 

four such reports. MELLOR opened one of the reports on his 

laptop and showed the columns titled “Incentive” and ‘Comments’. 

MELLOR pointed out that some of the entries reflect the payment 

of ‘Blackjack’ or ‘21+’.148

In an email between ACORN National Executive Director Steven Kest and Ralph 

McCloud, of the Catholic Campaign for Human Development (“CCHD”), Kest described 

CCI as follows: 

 

143 See ERISA Fiduciary Prohibited Transaction Rules, K&L GATES ALERT, available at

http://www.klgates.com/files/Publication/7e40b6c6-2c73-4243-b353-

ae156790b296/Presentation/PublicationAttachment/af13fd44-86ef-4b2a-8a04-b49f5e613a4c/IMERISA_0806_Fiduciary_Prohibited_Transaction_Rules (last visited June 22, 2009). 144 HCSE Memo (June 19, 2008) at 13 (ACORN_004939). 145 Boston Children’s Heart Found., Inc. v. Nadal-Ginard, 73 F.3d 429, 433 (1st Cir. 1996). 146 §8.30 Revised Model Non-profit Corporation Act. 147 Herman v. Citizens' Consulting, 1997 U.S. Dist. LEXIS 7376 at *1, 8 (D. La. 1997) 148 ACORN AFFIDAVIT, available at: http://sos.state.nv.us/information/news/press/2009/pdf/AFFIDAVITACORN.pdf, at 9, lines 14-25 (last visited June 22, 2009) (emphasis added). 
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Citizens Consulting, Inc. is an independent organization. It is a 

non-profit corporation with no special tax status run by a selfperpetuating board. Both AISJ and ACORN have contracts with 

CCI to do their accounting work and corporate record 

keeping. . . . CCI has two staff members who are assistant officers 

of ACORN with authority to act on behalf of ACORN solely on 

administrative matters. (For example: opening up bank accounts at 

the direction of ACORN management.) This is standard corporate 

practice. Paul Satriano, the national Treasurer for ACORN, is a 

new board member of CCI.149

Seven years prior to Dale Rathke’s embezzlement, Dale Rathke and CCI were sued by 

the Secretary of Labor in the federal district court in New Orleans for violating overtime 

and record-keeping provisions of the Fair Labor Standards Act.150 Federal agents from 

the Department of Labor were concerned about the recent suit filed against ACORN in 

New Orleans, and in an October 13, 2008 letter, James Gray, writing to Maude Hurd, 

ACORN’s President, and Steve Kest, ACORN’s Executive Director, stated: 

You have been previously advised that due to the admission that a 

felony has been committed, that other federal offenses may have 

also been committed including but not limited to; Title 18 U.S.C. 

1341, Mail Fraud, 18 U.S.C. (sic) 1001, Presenting a False 

Document to the (sic) an Agent of the United States Government; 

18 U.S.C. § 1027 False statements and concealment of facts in 

relation to documents required by the Employee Retirement 

Income Security Act of 1974 and other possible offenses. Due to 

which federal Agents from the Department of Labor attended the 

October 2, 2008 preliminary hearing.151 

According to an October 16, 2008 Legal Report by the Interim Management Committee, 

ACORN’s ERISA concerns had not been addressed.152 

c) The Embezzlement Is An “Excess Benefit” 

Transaction Prohibited By The IRS 

Since 1996, the Internal Revenue Service (“IRS”) has been empowered to fine 

and otherwise penalize executives of nonprofit corporations who receive excessive 

compensation for services and benefits, as well as officers, directors or trustees who 

approve such arrangements.153 The Internal Revenue Code imposes initial taxes, 

additional taxes and excise taxes on the executives who receive excess benefits, as well 

 

149 Ralph McCloud CCHD at 3 (Nov. 11, 2008) (ACORN_004783) (emphasis added). 150 Herman v. Citizens' Consulting, 1997 U.S. Dist. LEXIS 7376 at *1 (D. La. 1997). The Department of 

Labor alleged that “since November 1992, CCI and Rathke . . . have violated Sections 7, 11 (c) and 15 (a) 

(2) and 15 (a) (5) of the Act, 29 U.S.C. §§ 207, 211 (c), 215 (a) (2) and (5).” Id. at *8. 151 Letter to Board (Oct. 13, 2008) at 2 (ACORN_004492) (emphasis in original). 152 IMC Legal Report [Karen Inman] (Oct. 16. 2008) at 3 (ACORN_004497). 153 1-12 Liability of Corporate Officers and Directors §12.01. 
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as upon organization managers who participate in excess benefit transactions.154 Under 

the Code, the sale, transfer or use for the benefit of “a disqualified person” of income or 

assets of the foundation are prohibited transactions.155 

According to the ACORN internal report by the law firm of Harmon, Curran, 

Spielberg & Eisenberg, LLP (“HCSE Memo”), the embezzlement occurred in 1999 to 

2000 and was not reported until 2008, yet the statute of limitations for an excess benefit 

transaction is generally three or six years, depending upon whether the transaction was 

reported.156 

Under 2 U.S.C. § 1606, whoever knowingly fails to remedy a defective filing is 

subject to a civil fine, and depending on the extent and gravity of the violation, can be 

imprisoned or fined, or both, under title 18 of the United States Code.157 The ACORN 

Board, which had knowledge of and control over ACORN’s IRS reporting, did not 

properly report Dale Rathke’s excess benefit transaction, i.e. the embezzlement. 

2. ACORN Breached Its Corporate Duties by Failing to 

Abide by its Bylaws 

FINDING: 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. 

A nonprofit’s articles of incorporation or “articles . . . includes the trust 

instrument, the corporate charter, the articles of association, or any other written 

instrument by which an organization is created.”158 A nonprofit fails to observe corporate 

formalities when it “loans[] money back and forth without any legal documentation[,]” 

when “the ‘officers ignored their obligations under the corporate articles and bylaws’ and 

‘the officers personally controlled the business and misused corporate funds.’”159

The unreported Rathke embezzlement meets the first criterion for failing to heed 

corporate formalities. ACORN insiders produced a presentation from the ACORN Board 

outlining the ACORN Board’s fiduciary duties and documenting the ACORN Board’s 

knowledge of its fiduciary responsibilities.160 Article 6 of the ACORN Bylaws requires 

 

154 26 U.S.C. §4958(c)(1)(A) and (f)(1)(A)-(B). Self-dealing transactions that would benefit an officer, 

director or employee are prohibited by this statute. 

155 See 26 U.S.C. §§ 4941-4946. 156 I.R.C. 6501(a), (e)(3), (l). See also IRS Internal Revenue Manual § 7.27.30.9 (Period of Limitations), 

paragraphs 3 and 4, http://www.irs.gov/irm/part7/irm_07-027-030.html (last visited June 22, 2009). 157 2 U.S.C. §1606. 158 26 CFR 1.501(c)(3)-1. 

159 Supra note 47 at 942. 160 Board of Directors Fiduciary Responsibilities (undated) at 1-16 (ACORN_004517-004532). 
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all checks drawn on the bank accounts of the corporation to be authorized by the 

Board.161

Documents produced by former ACORN employees illustrate how ACORN’s 

officers ignored their duties under their corporate articles and bylaws. ACORN’s Bylaws 

describe ACORN’s national operations as an outgrowth of local community 

organizations affiliating on a district and statewide basis.162 Under the Bylaws, the 

ACORN board “can remove officers with . . . a vote equal in number to three-fourths of 

the members sitting on the Board.”163 After the embezzlement was disclosed, the 

ACORN Board established an Interim Staff Management Committee (“ISM” Committee) 

to elect three members (the Interim Management Committee “IMC”) to serve on the 

Committee and report to the Board every month.164 Karen Inman, Carol Hemingway, 

and Marcel Reid were selected to the IMC.165 The Bylaws require, “[e]ach state 

Executive Board [have] a system for settling grievances within local groups in the state, 

to the end that ACORN’s organizational democracy, harmony and unity might be 

maintained.”166 According to the ACORN Bylaws, the Chief Organizer serves at the 

pleasure of the Board of Directors.167 The Bylaws also require local chapters to be placed 

under administratorships when necessary to ensure against corruption.168 

In a July 13, 2008 teleconference of the ACORN Association Board, the Board 

approved for funds to be directed to the investigation and auditing activities of the 

IMC:169 

The IMC filed a complaint on August 12, 2008 against Wade Rathke and 

members of the ACORN board. Although the IMC withdrew its complaint, eight 

ACORN board members continued the lawsuit. An August 24, 2008 letter sent to the 

ACORN Board from the eight former ACORN employees (“ACORN 8”) of the Interim 

Management Committee (“IMC”) stated, “(1) staff is not being paid, (2) payroll taxes are 

 

161 IMC Transparency (Jan. 7, 2009) at 6; ACORN Bylaws, Art. 9, at 8-9 (on file with author); IMC 

Transparency (Jan. 7, 2009) at 4 (ACORN_004869). 

162 Id. Art.1,3-5, 6, cl. 15, at 7. 163 Id. Art. 7, cl. 2, at 7-8. 164 Id. at 2. 165 Id. at 3. 166 Id. Art 11: Grievances. 167 Id. 168 Id. at 11. 

169 ACORN Association Board Meeting (July 13, 2008) at 1 (ACORN_00391). 
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not being paid, (3) member checking accounts have been overdrawn, and (4) ACORN 

operational accounts have been depleted.”170 According to an October 16, 2008 legal 

report prepared by IMC member Karen Inman, the ACORN Board failed to provide an 

insurer with audited financial statements and there are ongoing issues with IRS 

compliance and with state taxing authorities.171

Although the Bylaws require three-fourths vote for removal, because members of 

the IMC (“ACORN 8”) filed an action against ACORN’s Board, Maude Hurd, President 

of ACORN, wrote to ACORN 8: 

On November 9, 2008 the ACORN Executive Committee met and 

considered the resolutions of the majority of state boards. The 

feedback from the states was clear, and the Executive Committee 

acted upon it by voting that any member participating in the 

mandamus action, now or in the future, shall not be eligible to 

hold office or serve on any Association Board committee. 

Accordingly, you are hereby removed from any office or 

committee position you may have held.172 

According to Maude Hurd, no member participating in the suit against ACORN, 

including Karen Inman and Marcel Reid, was permitted to attend the scheduled Bylaws 

Committee meeting: 

[T]he membership of Karen Inman and Marcel Reid in ACORN is 

cancelled, and they are removed from the Association Board, and 

that any other members participating in the mandamus action shall 

not be eligible to hold office or serve on any committee of the 

Association Board. 173 

Hurd further stated: 

These actions were taken in order to protect the Association 

against the harm caused by the unauthorized and reckless lawsuit, 

the insistence on airing internal disputes in the press, and the 

failure to abide by the democratically-made decisions of the full 

organization. Any state, region, or local group that seeks to 

undermine these decisions may be subject to administratorship 

according to Article 13 of the Bylaws.174 

The purported firings of Karen Inman, Marcel Reid and Carol Hemingway were 

executive decisions made without following the three-fourths voting requirement 

specified in the ACORN Bylaws. 

 

170 TRO Summary for Association Board (Aug. 24, 2008) at 2 (ACORN_004472). 171 IMC Legal Report [Karen Inman] (Oct. 16, 2008) at 2 (ACORN_004496). 172 IMC Allegations at 13 (Jan. 7, 2009) (ACORN_004878) (emphasis added). 173 Acorn Termination Notices (Nov. 11, 2008) at 1 (on file with author). 174 Id. at 2. 
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ACORN 8 claimed the ACORN executive committee lacked the authority it 

exercised because the board ignored the bylaws:175 

According to a letter from ACORN 8 attorney James Gray, Liz Wolf, an ACORN 

staff member, continued to receive and spend corporation money even after being told to 

stop by the IMC.176 ACORN 8’s temporary restraining order enjoined and prohibited the 

defendants from continuing “to enter into contracts and waste money of the Corporation 

and [make] any payments on behalf of the Corporation other than for wages already 

earned until further orders of the Court.”177 A Louisiana court required ACORN to 

“disclose the location of all banking accounts, deposits of money and contracts belonging 

to ACORN.”178 According to ACORN 8, these disclosures have not been made. 

ACORN 8 claimed the Board ignored their attorney James Gray’s October 13, 2008 letter 

to the ACORN Executive Board, including Maude Hurd and Steven Kest, requesting 

ACORN to cease entering into any agreements or negotiating any contracts intended to 

divest ACORN assets or property to Wade Rathke without the full Association Board’s 

approval.179

3. ACORN’s Financial and Structural Mismanagement Has 

Led to Its Failure to Uphold Its Corporate Duties 

 

175 IMC Allegations (January 7, 2009) at 14 (ACORN_004879). 176 6-Amended TRO Petition [James Gray] at 3 (ACORN_000024). 177 Id. at 4 (ACORN_000025); See also Writ of Mandamus (Sept. 19, 2008) at 3-4 (ACORN_000040-

000041). 

178 Id. at 6-7 (ACORN_000027-000028). 

179 Letter to Board (Oct. 13, 2008) at 1-2 (ACORN_004491-004492). 
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FINDING: 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. 

ACORN exercises control over housing corporations,180 media entities,181 labor 

organizations,182 building corporations,183 service providers,184 501(c)(3)’s,185 political 

action committees,186 and health funds,187 among others.188 According to the Louisiana 

Secretary of State database, Wade Rathke is on the board of 30 ACORN-affiliated 

corporations, many of which are defunct.189 The ACORN COUNCIL is composed of 

ACORN and ACORN International.190 Over 361 corporations compose the COUNCIL 

and Dale and Wade Rathke are affiliated with over 100 of them.191 The law firm of 

Harmon, Curran, Spielberg & Eisenberg LLP (“HCSE”), ACORN’s outside counsel, 

identified numerous problems with ACORN’s management structure, including a lack of 

corporate integrity, the existence of improper political walls, a failure to comply with the 

tax code, concerns about the legal use of federal funds, a lack of administrative 

capabilities, and an inadequate response to the embezzlement.192 According to the HCSE 

 

180 ACORN Corporate Structure (undated) at 2-3 (ACORN Center for Housing, Inc., Desert Rose Homes, 

L.L.C.) (on file with author). 

181 Id. at 4 (ACORN Television in Action for Communities, Inc.). 182 Id. at 5 (Local 100, Local 880, American Home Day Care Workers Association, Inc., United Security 

Workers of America). 

183 Id. at 6 (Broad Street Corporation, Elysian Fields Corporation, New York Organizing and Support 

Center, Inc.). 

184 Id. at 7 (ACORN Associates, Inc., ACORN Campaign Services, Inc., Citizens Consulting, Inc., Citizen 

Services, Inc.). 

185 Id. at 8 (ACORN Institute, Inc.; American Institute for Social Justice, Inc.; Project Vote/Voting for 

America, Inc.; ACORN Law for Education Representation & Training, Inc.). 186 Id. at 9 (ACORN Political Action Committee, Inc.). 187 Id. (ACORN Beneficial Association, Inc., McLellan Multi-Family Corporation). 188 Id. 189 Email from Steve Bachmann (July 22, 2008) at 1 (ACORN_004325). 

190 ACORN Grant Request to the Democracy Alliance at 12-13 (Mar. 24, 2006) (ACORN_004348-

004349). 

191 Id. See also Appendix 1, infra. 192 HCSE Memo (June 19, 2008) at 1-2 (ACORN_004927-004928). 
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Memo, ACORN accepts federal grant funds yet lacks a whistleblower policy, fails to 

meet federal audit requirements, and lacks an ongoing relationship with legal counsel.193 

Private foundations, like Citizens Consulting Inc. (“CCI”) and Project Vote 

(ACORN’s get-out-the-vote organization) must pay an excise tax on any lobbying 

expenditures they make, yet, according to their Form 990’s, they never reported their 

expenditures to the IRS.194 On the basis of their joint representation before the United 

States District Court in Louisiana, ACORN Fair Housing, CCI, and SEIU Local 100 all 

share lawyers.195 According to testimony made before the House Judiciary Committee, 

all donations to ACORN or any of its approximately 361 affiliates are deposited into 

bank accounts held by CCI; thereafter, CCI transfers money into various affiliate 

accounts: 

Project Vote in 2007 had a $28 million dollar budget which was 

funded by CCI, an affiliate of ACORN. CCI is an acronym for 

Citizens Consulting Incorporated. Ms. Moncrief [sic] testified: 

‘CCI is basically the accounting arm for all of the money, the 

payments, who gets what, the – how the organization operates 

and flows and makes sure its bills are paid. All of that goes 

through CCI. . . . CCI makes disbursements to them either 

directly into their account or does transfers between I guess the 

different organizations.’ All donations to ACORN or any of its 

approximately 175 affiliates are deposited into bank accounts 

held by CCI. Thereafter, CCI transfers money into various 

affiliates, one being Project Vote.

196 

HCSE stated it was difficult to determine whether ACORN’s 501(c)(3) funds were 

always disbursed for 501(c)(3)-appropriate purposes: 

All 501(c)(3)s must also ensure that their funds are spent only with 

appropriate corporate approval. This does not mean that the board 

should approve [each] expenditure. Authority may be delegated to 

an appropriate staff person, and may be further delegated by that 

person. Such delegation must be explicit and in writing. [Citizens 

Consulting Inc., (“CCI”)], which controls the bank accounts, 

must be instructed not to disburse funds without appropriate 

approval. It must be given copies of the written expenditure 

authority delegation, and maintain lists of authorized 

 

193 Id. at 10 (ACORN_004936). 

194 See 2000-2008 Form 990s (Project Vote, ACORN International, AISJ, ACORN Institute, ACORN 

Housing Corporation), available at http://www.guidestar.org/ (see id. at 11, 15 and 16 where ACORN does 

not disclose excess benefit transactions or political activity) (hereinafter “Form 990”); See also IRC §4945 

and Tax Reform Act of 1969 (P.L. 91-172). 

195 Compare Local 100, Serv. Emples. Int'l Union v. Assumption Parish Sch. Bd., 1996 U.S. Dist. LEXIS 

5577 (D. La. 1996) with Louisiana Acorn Fair Hous. v. Quarter House, 952 F. Supp. 352 (D. La. 1997). 

196 What went wrong with the 2008 election?: Hearing Before the H. Judiciary Comm., 111TH CONG. 5 

(2009) (statement of Heather Heidelbaugh) (emphasis added). 
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individuals. The organizations must also inform CCI when a 

staff person leaves, moves, or otherwise should no longer be on 

the authorized list. They should have explicit written 

revocation of expenditure authority in their files. All staff 

must understand that CCI cannot disburse any funds without 

proper approval. 

An example where this comes up is when organizations have 

agreements to work jointly on a project, or for one to provide grant 

funding to the other. A contract or grant letter is necessary to 

establish that relationship, but not sufficient to authorize a 

payment. Just as with outside parties, only a person with legal 

authority for a payor should disburse its funds. I have seen at 

least one instance where that did not happen, although the 

payment was for a 501(c)(3)-permissible project, and one that 

apparently the 501(c)(3) in question was participating in. The 

point is that general agreement to provide funding to a project 

is not the same as making payments, and the other 

organization seeking funds should not be the one to control the 

making of payments. Otherwise, there is danger that we 

cannot demonstrate that 501(c)(3) funds are always disbursed 

for 501(c)(3)-appropriate purposes.

197

HCSE stated “[r]ecent administrative problems relating to ERISA and IRS filings and 

payments further indicate the need to call in outside vendors, expand capacity, or rethink 

CCI’s role.”198 

Based upon this Committee’s review of the Form 990s of several ACORNaffiliates, Project Vote paid ACORN $10,861,825 from 2000 through 2006.199 Project 

Vote also paid ACORN affiliate CSI $1,206,942 in 2005 and 2006, and paid $1,266,967 

to ACORN affiliate CCI from 2000 through 2004.200 Since 2000, AISJ paid ACORN 

$1,926,831.201 In 2000, AISJ paid CCI $362,464 and ACORN Associates, Inc.202

$258,593.203 As reported in The Washington Examiner: 

Federal tax records also show the ACORN Institute paid CCI $61,443 in 

2006 and $50,134 in 2007. . . ACORN Housing tax records showed a 

2006 payment of $238,953 to CCI for ‘administrative services.’204 

 

197 HCSE Memo at 8-9 (ACORN_004934-004935) (emphasis added). 

198 Id. at 11 (ACORN_004937). 

199 Form 990, supra note 194. 200 Id. 201 Id. 202 Id. 203 Id. 204 Kevin Mooney, Tax documents show ACORN link to affiliates, May 19, 2009, available at

http://www.washingtonexaminer.com/opinion/columns/special-editorial-reports/Tax-documents-showACORN-link-to-affiliates-45443062.html (last visited June 19, 2009). 
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ACORN insider Anita MonCrief said the accounts were commingled: 

The money goes into accounts at CCI. CCI has dozens – dozens 

and dozens of accounts. Some of them are Project Vote. Some of 

them are ACORN . . . Those checks were usually copied, and [Ms. 

MonCrief] would have PDF access to them. The checks that [Ms. 

MonCrief] received [she] would copy and send them over to Little 

Rock for processing.205 

According to documents ACORN insiders Anita MonCrief and Marcel Reid produced to 

this Committee, ACORN engaged in unreported transactions between its affiliates. 

According to an email by Steve Bachmann, SEIU Local 100, ACORN Institute (a 

501(c)(3)), ACORN Community Labor Organizing Center (“ACLOC”),206 ACORN 

International,207 Affiliated Media Foundation Movement (“AMFM”), the Association for 

the Rights of Citizens, Inc. (“ARC”),208 the Elysian Fields Corporation, and Citizens 

Consulting Inc. (“CCI”), are interchangeably controlled by ACORN: 

Local 100 was nurtured by ACORN, but I think US Labor law 

prevents ACORN from interfering in Local 100 affairs. And it is 

not clear that ACORN wants to bother with Local 100 anymore, 

except to collect money Local 100 has borrowed from ACORN 

affiliates (some $250,000). . . . Acorn Institute. I think this is 

clearly an ACORN corporation, but I have to observe that it 

seems to me that [Wade Rathke] has been trying to fill it with 

shills. I think it is one of ACORN’s major 501c3s, and control 

of it needs to be monitored . . . . ACLOC. I think control of 

this organization is up for grabs, but the more critical question 

is who gets business from SEIU and ACORN. . . . AINT. This 

is ACORN International. [Wade Rathke] should probably start 

his own darn international org. If he wants this one, he has to use 

it without the ACORN name. . . . AMFM. This was founded as 

a media resource corporation. I thought there was nothing to 

this corporation until I found out that it is, in theory, owed 

some $45,000 once the $750,000 [Dale Rathke] moneys are 

distributed. WR has no moral right to this money—or the 

corporation, for that matter. In any case, he has been scrambling to 

make this corporation “real” and had some Board meeting on July 

2. . . . ARC. This used to be a key 501c3 feeder for labor 

projects. Right now the Board supposedly consists of Steve 

Bachmann and Mildred Edmond. And Dale Rathke and Cornelia 

have supposedly left this Board. ACORN should advise Wade 

Rathke that this corporation is going to be cleaned up, and 

should probably be closed down. . . . CCI. The point here is 

 

205 Id. 206 A-CLOC, available at: http://www.acloc.org/ (last visited June 13, 2009). 207 Acorn International, available at: http://www.acorninternational.org/ (last visited June 13, 2009). 208 ARC WEBSITE, available at: http://www.arc.org/ (last visited June 13, 2009). 
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that if ACORN wants nothing to do with [Wade Rathke], then 

presumably CCI needs to terminate its contracts with any WR 

tainted organization. These conflict of interest issues are about

to come to a head with CCI attorneys. . . . In the present crisis 

the CCI lawyers may have to face these issues shortly. As an 

ethical if not a legal matter, the whole of CCI will have to face 

these issues also. . . . COUNCIL. If ACORN wants to have 

nothing to do with [Wade Rathke], then any [Wade Rathke] 

organization is going to have to be ejected from the COUNCIL, in 

particular, Local 100 and its subsidiaries. . . . EFC. There may 

be problems with other building corporations, but this is the 

Big Mama because there is so much property held by EFC. 

[Elizabeth Kingsley] is working hard to get on top of this 

situation which is a byzantine empire until itself. However, it 

does appear that it has been misused and abused by the Rathke 

brothers, and ACORN may have some self-help options available 

to it.209 

According to a petition for a temporary restraining order, preliminary 

injunction and permanent injunction filed against ACORN’s board, CCI, 

which functions as a management center for ACORN, facilitated 

ACORN’s mismanagement: 

Defendant CCI is either an affiliate of or a contractor for ACORN 

and provides paycheck and cash management services for 

ACORN. Defendant Mike Jones is a principal of CCI. On 

information and belief, all assets belonging to ACORN or its 

affiliates are administered in some way by CCI. CCI knew or 

should have known that it was obligated to disclose to Acorn’s full 

Board of Directors Dale Rathke’s embezzlement and the Rathke 

family’s subsequent assumption of the debt. Further, CCI 

breached its duties and its trust to ACORN, ACORN’s affiliates, 

and ACORN’s contributors by deceptively carrying the agreement 

with [the] Rathke family as a loan to an officer on its books when 

no such loan occurred without knowledge or authority of 

ACORN’s full Board of Directors. Such clandestine and deceptive 

practices were continued when CCI, through its principal, Mike 

Jones, informed a disinterested ACORN Board member that she 

was prohibited from reviewing the financial records of ACORN or 

its affiliates because CCI was an independent payroll service with 

no connection to ACORN or its affiliates (despite the fact that all 

of ACORN’s assets were administered by CCI). CCI and 

ACORN’s respective brochures and marketing materials refer to 

each other as interrelated entities. Moreover, the records of the 

Louisiana Secretary of State show that at least seventy-five 

 

209 Email from Steve Bachmann (July 22, 2008), at 2-3 (ACORN_004326-004327) (emphasis added). 
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corporations have boards of directors interlocking with ACORN, 

many of which list a principal place of business identical to that of 

ACORN.210 

A 2008 CCI organizational chart provided to Committee staff identifies Michael 

Jones, CPA as the Chief Financial Officer,211 and Steve Bachmann as the General 

Counsel of the CCI Legal Department.212 According to HCSE’s analysis, “CCI has no 

chief organizer, nor any agreement with any other entity with such a person that would 

allow them to exercise such authority.”213 

A July 22, 2008 memorandum prepared by Bachmann reflected CCI’s control of 

400 bank accounts for 170 ACORN affiliates, many of them defunct.214 CCI provides 

consulting services, including administrative, financial, bookkeeping, and legal support, 

primarily to nonprofit organizations.215 CCI controls ACORN and its affiliates’ bank 

accounts.216 CCI controls the account of CVT, whose funds are readily available to 

ACORN.217 

This Committee obtained internal ACORN financial documents reflecting crossover financial transfers between ACORN and its affiliates. These documents reflect 

transactions between ACORN local chapters, the American Institute for Social Justice 

(“AISJ”), and Citizens Consulting Inc. (“CCI”), in addition to a number of corporate and 

governmental vendors:218

 

210 Petition for Temporary Restraining Order, Preliminary Injunction, and Permanent Injunction, Acorn v. 

Rathke, 08-8342 (La. Dist. Ct. 24 Dist. 8/21/08); __ So. 2d. __, at 2 (ACORN_00375). 211 CCI-ACORN Entities (July 29, 2008) at 2 (ACORN_004506). 212 Id. at 11 (ACORN_004515). 213 HCSE Memo (June 19, 2008) at 3 (ACORN_004929). 214 Email from Steve Bachmann (July 22, 2008) at 1 (ACORN_004325); See also Notes from West 

Regional Meeting (August 15, 2008) at 1 (ACORN_000314). 

215 HCSE Memo (June 19, 2008) at 8-9 (ACORN_004934-004935). 216 HCSE Memo (June 19, 2008) at 8 (ACORN_004934). 217 Id. 218 AISJ-LA-03.21.01 – Political ops at 1-11 (Mar. 21, 2001) (ACORN_00106). 
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Page 42 of 99 

The HCSE Memo described one of ACORN’s affiliates, Communities Voting Together 

(“CVT”), a political organization, as lacking independent control: 

CVT may have been treated like a pot of money available to 

ACORN to carry out state-level political work. Funds were 

committed and activities undertaken in its name without the 

knowledge of the CVT officers or key staff person.219

According to the HCSE Memo, CVT, if not operated as a “properly ‘nonconnected’ 

organization,” can not legally make communications about federal candidates, “which it 

continues to do.”220 HCSE then warned: “[i]f it does so anyways, it will create 

tremendous liability for itself, and likely for both ACORN and ACORN Votes.”221 

According to the memo, CCI “must not allow any CVT funds to be disbursed without 

proper authorization.”222 According to HCSE’s analysis, ACORN affiliates lack 

independent control because CCI has actual authority over them.223 According to HCSE, 

CCI cannot simultaneously authorize decisions over federally-funded organizations and 

lobbying organizations: “If [CCI allows CVT funds to be disbursed without 

authorization], CVT should be moved out of CCI.”224

According to ACORN insiders, the Service Employees International Union 

(“SEIU”) has given ACORN $4 million.225 A December 10, 2006 report from Wade 

 

219 HCSE Memo (June 19, 2008) at 8 (ACORN_004934). 220 Id. 221 Id. 222 Id. 223 Id. 224 Id. 225 IMC Transparency (January 7, 2009) at 4 (ACORN_004869). 
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Rathke describes a building services partnership between ACORN and SEIU.226 Rathke 

stated ACORN’s incentive in using CCI to control accounts: 

[M]y inability to convince SEIU 880 not to leave the shared 

collective of our family of organizations around the shared 

services of CCI was my major disappointment of the year and 

represents . . . the largest internal threat to our family of 

organizations.227 

According to HCSE, CCI lacks a legitimate board and yet it is the “nerve center” of 

ACORN’s administrative functions.228 CCI has no in-house or third-party capabilities for 

monitoring its own problems.229 HCSE presented concerns about CCI’s capacity and 

performance, citing “administrative problems relating to ERISA and IRS filings:”230 

Recent administrative problems relating to ERISA and IRS filings 

and payments further indicate the need to call in outside vendors, 

expand capacity, or rethink CCI’s role . . . CCI itself needs to put a 

real Board in place ASAP.231

State-based ACORN chapters share funds with ACORN COUNCIL and CCI.232 The 

American Institute for Social Justice (“AISJ”) has wired money to ACORN, which then 

transferred the money to CCI accounts, without making any disclosures to the IRS.233 

Additionally, American Express has a $125,000 garnishment action against Dale 

Rathke.234 Any sort of fraud committed by a nonprofit is subject to federal and state 

securities laws.235 

A March 11, 2003 memo from Nathan Henderson-James, Development Director 

of ACORN-California to Amy Schur, Management Council member of ACORN, 

discuses the political issues involved with CCI and its ACORN accounts, as well as the 

charitable donation account for the Catholic Campaign for Human Development 

(“CCHD”): 

If part of the problem is that CCI doesn’t get accurate reporting

from the field on income, then why don’t we create a system that 

ensures accuracy? . . . Many cities have more than one account. 

For example, Sacramento has the ACORN account, the CCHD 

account, and the Sacramento Living Wage Campaign account. 

 

226 Chief Organizer Report 2006 (Dec. 10, 2006) at 7 (ACORN_004824). 227 Id. (emphasis added). 228 HCSE Memo (June 19, 2008) at 2 (ACORN_004928). 

229 Id. 230 Id. at 10, n.7. See e.g. id. at 11. 231 Id. at 11. 232 AISJ-LA-03.21.01 – Political ops at 1-11 (Mar. 21, 2001) (ACORN_00106). 233 Id. 234 Email from Steve Bachmann (July 22, 2008) at 1 (ACORN_004325). 235 Timothy L. Horner & Hugh. H. Makens, Nonprofit Symposium: Securities Regulation of Fundraising 

Activities of Religious and Other Nonprofit Organizations, 27 STETSON L. REV. 473, 474 (1997). 
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We need accurate accounting for each account, independently 

of the other. Not having this causes some measure of political 

trouble with allies in Sacramento (though this has now been 

more or less resolved).

236

On June 20, 2008, at an ACORN Association Board meeting in Detroit, HCSE 

told ACORN President Maude Hurd, “there are at least 100 separate corporations within 

ACORN and . . . corporate relationships should be re-examined and regularized.”237 In a 

July 22, 2008 memorandum, ACORN General Counsel Steve Bachmann stated, “[t]he 

fact that [Wade Rathke] and his brother [Dale Rathke] used their positions as ACORN 

agents to insinuate themselves into positions of power in [affiliate] corporations 

suggest[s] the degree to which fiduciary duty requires them to leave.”238 Bachmann 

identified the ACORN Institute as a 501(c)(3) but claimed, “control of it needs to be 

monitored.”239 

Despite the apparent abuses of federal funds by CCI, HCSE claimed these abuses 

persisted because ACORN lacked a whistleblower policy: 

First and foremost, any entity receiving government funding 

should have in place a serious and enforced whistleblower policy. 

Any employee, or an employee of another organization, or a 

member of the public, who has any information about the misuse 

of grant funds or related conduct should have a clear avenue to 

report the concern without fear of reprisal.240

a) ACORN Lacks Quality Control in Hiring and 

Supervision of Employees 

Nonprofit 501(c)(3)’s, like Project Vote – an ACORN affiliate – have fiduciary 

duties.241 According to the Wall Street Journal, Project Vote purposefully lacks hiring 

standards so allegations of wrongdoing ensnare low-level employees, not directors.242 

According to a former Justice Department attorney involved in ACORN investigations, 

ACORN hired ex-convicts to conduct voting registrations and ACORN volunteers had a 

history of not turning in Republican registrations.243 According to the Eighth Circuit 

Court of Appeals, ACORN not only has a history of hiring those with arrest records, but 

hiring embezzlers as well: 

 

236 CCI Memo (Mar. 11, 2003) at 2-3 (ACORN_004308-004309) (emphasis added). 237 ACORN Association Board Meeting (July 13, 2008) at 1 (ACORN_00391). 238 Email from Steve Bachmann (July 22, 2008) at 1 (ACORN_004325). 

239 Id. 240 HCSE Memo (June 19, 2008) at 10 (ACORN_ 004936). 241 1-12 Liability of Corporate Officers and Directors §12.01. 242 John Fund, An Acorn Whistleblower Testifies in Court, WALL STREET J., Oct. 30, 2008, available at 

http://online.wsj.com/article/SB122533169940482893.html (last visited May 11, 2009). 243 Interview with Asheesh Agarwal, former Deputy Assistant Attorney General, Department of Justice, in 

Wash., D.C. (Mar. 30, 2009) [hereinafter Agarwal Interview]. 
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Pending sentencing in federal court, Hipenbecker was released 

on bond. While free on bond, Hipenbecker became employed by 

the Minnesota Association of Community Organizations for 

Reform Now (ACORN). Soon after being hired, Hipenbecker 

embezzled approximately $ 1500 from ACORN. Upon learning 

of Hipenbecker's latest crime, the district court revoked 

Hipenbecker's bond and informed her that the district court was 

contemplating an upward sentencing departure.244 

In response to voter registration fraud during the 2004 General Election, the 

Special Investigations Unit of the Milwaukee Police Department reported: 

[T]wo persons who had entered guilty pleas to misdemeanor 

charges of Election Fraud within one year of the November 

General Election also were employed as Election Inspectors for 

the Election Commission on November 2, 2004. . . . These 

reviews lead the Task Force to find that 18 persons were sworn in 

as Deputy Registrars in 2004 that were convicted felons and 

under Department of Correction supervision. Of the 15 felons 

that listed a sponsoring organization, eight named ACORN as 

their sponsoring agency.”245

ACORN disregarded the risks of hiring those with criminal records to register 

voters. ACORN attorney Brian Mellor, writing to King County, Washington prosecutor 

Norm Maleng concerning a voter registration fraud case, wrote “my review of the [voter 

registration] applications has led me to decide to refer these three employees to your 

office to investigate them for possible voter-registration fraud[.]”246

According to testimony before the House Judiciary Committee: 

[ACORN] knew there was a problem with “the quality of the 

people they were getting. Some of the people didn’t know how to 

use basic office . . . systems, which made it very hard for copying 

 

244 United States v. Hipenbecker, 115 F.3d 581, 583 (8th Cir. 1997) (emphasis added). 245 Milwaukee Police Dep’t, Special Investigations Unit, Report of the Investigation into the November 2, 

2004 General Election in the City of Milwaukee, available at: 

http://graphics2.jsonline.com/graphics/news/MPD_2004voterfraudprobe_22608.pdf (emphasis added). 246 Mike Carter, King County investigates apparent forgery of hundreds of voter cards, SEATTLE TIMES, 

Mar. 16, 2007, available at: 

http://seattletimes.nwsource.com/html/localnews/2003621500_webfraud17m.html (last visited June 16, 

2009); See also Settlement Agreement from Sam Reed, Washington Secretary of State and Daniel 

Satterberg, King County Prosecuting Attorney, to Brian Mellor, ACORN Senior Counsel and Steve 

Bachmann, ACORN General Counsel (July 25, 2007), available at: 

http://www.secstate.wa.gov/office/pdf/Settlement%20and%20Compliance%20Agreement.pdf. 
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the registration card and making sure that they were turning in 

accurate counts and work ethic issues.”247

On February 24, 2009 Project Vote General Counsel Brian Mellor told a Nevada 

state criminal investigator the following concerning bonuses for voter registrations: 

In regard to “Blackjack,” MELLOR stated that it was not ACORN 

policy to pay performance related bonuses to their staff. MELLOR 

stated that back in 2003, ACORN engaged in a voter registration 

drive during which they compensated their canvassers through 

bonuses linked to the number of voter registration forms collected 

by each canvasser. This policy turned out to be a bad policy and 

since then, ACORN has not compensated canvassers based on 

performance.248 

According to notes produced from former ACORN insider Anita MonCrief, the federallyfunded Project Vote actively maintained registration quotas and provided monetary 

incentives based on registrations: 

Standards for canvassers – 20 cards/day – is this a realistic 

number? In Cincinnati, canvassers tended to stop at the number 

instead of go on; problems with duplicates (voters registering with 

ACORN multiple times), Missouri (KC and St. Louis) had lots of 

people who did this; saturation leads to duplicates; not because 

standard is unrealistic but because not enough people working on 

developing new sites; 20 standard can create practical equivalent 

of pay-per-card, legal concern . . . .249

A 2004 ACORN voter registration manual stated, “[a]nyone who performs at less than 

three voter registrations per hour should not be on the staff [sic].”250 

Heather Heidelbaugh testified before the House Judiciary Committee that 

ACORN’s voter registration programs lacked on-going training of canvassers251 as well 

as other problems such as a practice ACORN encouraged of its canvassers turning in 

duplicate registrations.252 Regarding voter registration, Anita MonCrief testified, 

 

247 What went wrong with the 2008 election?: Hearing Before the H. Judiciary Comm., 111TH CONG. 1-17 

(2009) (statement of Heather Heidelbaugh). 

248 ACORN AFFIDAVIT, available at: http://sos.state.nv.us/information/news/press/2009/pdf/AFFIDAVITACORN.pdf, at 8, lines 17-22 (last visited June 22, 2009). 

249 POLOPS VR NOTES (undated) at 1-2 (ACORN_000372-000373). 250 Brad Bumsted & Walter F. Roche Jr., Reform association's manual suggests use of quota system, PITT.

TRIBUNE REVIEW, June 14, 2009, available at: 

http://www.pittsburghlive.com/x/pittsburghtrib/news/regional/s_629482.html (last visited July 6, 2009). 251 What went wrong with the 2008 election?: Hearing Before the H. Judiciary Comm., 111TH CONG. 7 

(2009) (statement of Heather Heidelbaugh). 

252 Id. at 8. See also Lara Lakes Jordan, Officials: FBI Investigates ACORN for voter fraud, ABC NEWS, 

Oct. 17, 2008, available at http://abcnews.go.com/Politics/wireStory?id=6054185 (last visited Apr. 29, 

2009). 
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“ACORN was more interested in the total number of submitted registrations than the total 

number of valid registrations.”253 

While ACORN aspires to institute quality control mechanisms for its voting 

efforts, these guidelines failed on a regular basis.254 Documents obtained by the 

Committee show ACORN authorizing the selection of members charged with voter 

registration. Accordingly, ACORN can be held responsible for any fraudulent conduct 

having arisen from Project Vote’s registration efforts.255 

A nonprofit corporation’s legal protections are disregarded if “its finances are not 

kept separate from individual finances . . . the corporation is used to promote fraud or 

illegality,” or “corporate formalities are not followed.”256 If just one of these factors is 

proven, then the tax-exempt privileges of ACORN and its affiliates are dissolved and 

what remains is the absolute uncertainty about ACORN’s having complied with election 

and tax laws, among others.257 In a settlement agreement between ACORN and the King 

County prosecutor in Seattle, Washington, ACORN acknowledged its liability “as a 

corporate entity” for the submission of “fraudulently collected” voter registrations “not 

reviewed pursuant to the quality control procedures” and “willfully turning in fraudulent 

cards.”258 

B. ACORN and Its Affiliates Are Not in Compliance With 

The IRS 

Nonprofits are exempt from taxation because corporations organized and operated 

exclusively for charitable or educational purposes benefit the public.259 Based upon the 

legislative history behind 501(c)(3), tax-exempt status was designed to serve an economic 

benefit: “the Government is compensated for the loss of revenue by its relief from 

financial burden which would otherwise have to be met by appropriations from public 

funds.”260 Compliance with tax laws was assumed to ensure the effective management of 

nonprofit corporations.261

 

253 Id. (Page 51, line 1-4). 254 Quality Control (Jan. 2004) (ACORN_000397-000405); See also PV Voter Registration Organizing 

Manual (Jan. 2004) (ACORN_004310-004319). 

255 See e.g. New York Central R. Co. v. U.S., 212 U.S. 481 at 493-494 (1909). 256 HOK Sport, supra note 47 at 936. (quoting Lakota Girl Scout Council, Inc. v. Havey Fund-Raising 

Mgmt., Inc., 519 F.2d 634, 638 (8th Cir. 1975). 257 Id. 258 Settlement Agreement from Sam Reed, Washington Secretary of State and Daniel Satterberg, King 

County Prosecuting Attorney, to Brian Mellor, ACORN Senior Counsel and Steve Bachmann, ACORN 

General Counsel (July 27, 2007), available at: 

http://www.secstate.wa.gov/office/pdf/Settlement%20and%20Compliance%20Agreement.pdf. 259 Christian Echoes Nat’l Ministry v. United States, 470 F.2d 849, 853-854 (10th Cir. 1972). 260 H.R. Rep. No. 1860, 75th Cong., 3d Sess. 19 (1939). 261 United Cancer Council, Inc. v. Comm’r, 165 F.3d 1173, 1179 (7th Cir. 1999). 
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1. Congress, In Regulating Nonprofits, Intended 

Nonprofits As Not-For-Politics 

FINDING: 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. 

Section 501(c)(3) is limited to activities whose purpose is to neither influence 

legislation nor support participation or intervention in political campaigns on behalf of 

candidates for public office.262 This limitation in Section 501(c)(3) originated from the 

Revenue Act of 1934, which allowed organizations tax exempt status if “no substantial 

part of the activities of which is carrying on propaganda, or otherwise attempting, to 

influence legislation.”263 The legislation was drafted after the decision in Slee v. 

Commissions of Internal Revenue, where the Second Circuit upheld the IRS’s denial of 

an exemption to a group whose purposes were not exclusively charitable, educational or 

scientific.264 Section 501(c)(3) was further limited when, in 1954, Congress barred 

participation or intervention in political campaigns on behalf of candidates for public 

office.265

Based upon the legislative history of Section 501(c), when a corporate activity has 

a political purpose, the corporation is no longer “exclusively” charitable or educational. 

Congress intended nonprofit political activity to be interpreted broadly.266 According to 

this interpretation, a nonprofit influences legislation whenever it makes “appeals to the 

public to react to certain issues.”267 If an “essential part of the program” is “to promote 

desirable governmental policies consistent with its objectives through legislation” then a 

substantial part of the corporation’s activities are “influencing or attempting to influence 

legislation.”268 “[A]ttempts to elect or defeat certain political leaders” reflect an 

“objective to change the composition of the federal government.”269 

2. ACORN And Its Affiliates Violate Their Restrictions as 

Nonprofits 

FINDING: 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. 

 

262 See Dickinson v. United States, 346 U.S. 389 (1953). 263 26 U.S.C. §501(c)(3). 264 42 F.2d 184 (2nd Cir. 1930). 265 See Christian Echoes, supra note 259 at 854. 266 Id. at 856. 267 Id. 268 Id. 269 Id. 
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According to a March 24, 2006 funding request prepared by ACORN’s Executive 

Director Steve Kest and Political Director Zach Polett, ACORN receives funding from 

membership dues, fundraising initiatives and contributions, foundation support, corporate 

contributions, and individual high donor contributions.270 In 2007, ACORN raised 

$4,171,000 in small-dollar unrestricted non-(c)3 dues and other income from their 

membership.271 By the end of 2008, ACORN increased this annual amount to over $7 

million.”272 

According to the internal report on ACORN by the law firm of Harmon, Curran, 

Spielberg & Eisenberg, LLP (“HCSE Memo”), it is absolutely uncertain whether 

ACORN and its affiliates, including CCI and Project Vote, have “done things right:” 

[L]ack an adequately documented delineation of 501(c)(3) from 

non-501(c)(3) work . . . However, [we] cannot confirm that 

strategic decisions about which regions do 501(c)(3) versus 

non-501(c)(3) voter engagement work are not being made by 

the same person or people. At a minimum, there is not 

adequate demonstrable separation between these functions. As 

a result, we may not be able to prove that 501(c)(3) resources 

are not being directed to specific regions based on 

impermissible partisan considerations. Remember, it is the

IRS that enforces the rules for 501(c)(3)s. In general the 

government has the burden of proving you have done 

something wrong, but when it comes to tax compliance, the 

burden is on the organization to maintain records to document 

it has done things right.

273 

If ACORN is improperly managing its inter-corporate relations, it is difficult to 

determine whether ACORN has complied with federal tax laws. 

HCSE’s analysis shows ACORN failed to properly account for its disbursements: 

Just as with outside parties, only a person with legal authority 

for a payor should disburse its funds. [We] have seen at least 

one instance where that did not happen, although the payment 

was for a 501(c)(3)-permissible project, and one that apparently the 

501(c)(3) in question was participating in. . . . Otherwise, there is 

danger that we cannot demonstrate that 501(c)(3) funds are 

always disbursed for 501(c)(3)-appropriate purposes.

274 

 

270 ACORN Grant Request to the Democracy Alliance at 12 (Mar. 24, 2006) (ACORN_004348); Note that 

“membership dues” refers to the service fees ACORN charges its low and moderate income constituents. 271 Id. at 5 (Mar. 24, 2006) (ACORN_004341). 272 Id. 273 HCSE Memo (June 19, 2008) at 7 (ACORN_004933) (emphasis added). 274 Id. at 9 (emphasis added). 
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According to HCSE, ACORN, a 501(c)(4), has actual control over the decisions of 

Project Vote, a 501(c)(3): 

Project Vote has on paper a procedure to select regions where 

it will do voter registration, but [we] have heard reports in the 

past that in practice those decisions may be communicated to 

[Project Vote] from ACORN. . . . Project Vote (and PICA, the 

other voter registration corporation) needs to really be in charge of 

deciding where 501(c)(3) resources will be focused. The [Project 

Vote] and PICA Executive Director(s) must be charged with 

implementing the procedures (or supervising that work) to set 

strategic priorities for the organization without answering to any 

other entity or person. These corporations and their chief staff 

people must control their own funds; the ED must report only to 

her/his own board, unless a formal, legally vetted written 

agreement appropriately delegates that authority elsewhere. And 

the ED must not be wearing other ‘hats’ that jeopardize her 

ability to act solely in the interest of these 501(c)(3)s.

275 

Project Vote is a 501(c)(3) organization.276 Project Vote’s revenue in 2008 was 

$28,676,637.277 Project Vote does business with ACORN Voter Registration, Citizens 

Consulting Inc. (“CCI”), CCI Legal, and Citizens Servicing Inc. (“CSI”).278 In 2005, 

there were over a thousand transactions, amounting to nearly $12 million between 

ACORN and its affiliates.279 In a March 11, 2003 memorandum from Nathan 

Henderson-James of the California ACORN chapter to Amy Schur, ACORN 

Management Council member, Henderson-James summarized the financial difficulties at 

CA ACORN and recommended CCI change its budgetary practices with respect to local 

ACORN chapters.280 Henderson-James has held simultaneous titles at ACORN and 

CSI.281 

According to the HCSE Memo, ACORN and one of its affiliates, American 

Institute of Social Justice (“AISJ”) failed to meet the IRS reporting back requirements 

necessary for grantors to demonstrate how their money was spent by the grantees.282

HCSE found problems with ACORN’s compliance with § 501(c)(3) of the tax code, 

suggesting: 

[We] have recently provided documents for [American Institute for 

Social Justice (hereinafter “AISJ”)] to use governing its 

 

275 Id. at 7; IMC Allegations (Jan. 7, 2009) at 5 (Project Vote is a 501(c)(3) that hires ACORN to perform 

voter registration drives) (ACORN_004870) (emphasis added). 

276 Project Vote 501(c)(3) IRS letter (Nov. 8, 2004) (ACORN_00103). 277 Project Vote Revenues 07-08 (undated) (ACORN_000356). 278 Project Vote 2004-2005 (undated) (ACORN_005063-005105). 

279 Id. 280 CCI Memo (Mar. 11, 2003) at 2-3 (ACORN_004308-004309) (emphasis added). 281 Email from Nathan Henderson-James to Anita MonCrief (Dec. 8, 2006) (on file with author). 282 HCSE Memo (June 19, 2008) at 8 (ACORN_ 004934). 
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relationship with ACORN. There is an overall agreement, and two 

transmittal letters that can be used for specific types of funding. 

Similar documents should be used by [ACORN International 

(hereinafter “AI”)], and any other 501(c)(3) that makes grants to 

ACORN. 

We believe those documents have been or will be implemented. 

However, merely papering the transfer of money is not sufficient. 

The c3s must be able to demonstrate that their funds were 

actually used as intended, for c3 purposes. Any grant to a non501(c)(3) requires reporting back to the grantor can prove how 

its money was spent by the grantee. Historically, this has not 

happened. The new grant documents require this reporting, 

and if it does not happen, [We] would advise the [ACORN 

International] and [American Institute for Social Justice] 

boards and key staff that no further grants should be made to 

any office that has outstanding reports on previous grants.

283 

HCSE advised ACORN concerning the importance of protecting corporate formalities in 

its financial transactions amongst affiliates, finding: 

Many of the corporate entities in the COUNCIL would have 

not operated with sufficient formalities. Staff roles have not 

been clearly delineated, and in various instances funds have 

been raised and spent by people with no official relationship to 

a given corporation. Boards have not always been maintained, 

much less met and exercised their governance role. Board 

meetings are not held, or if they are, minutes are not kept, or if 

minutes are kept, they never make it into the files at CCI. There is 

no point in having these different corporations in place if they are 

not respected. If not properly operated, they create difficulties 

(e.g., potential conflicts of interest for lawyers, non-trivial 

administrative burden of state filings, and the appearance that 

someone is trying to hide something under a byzantine corporate 

structure) without generating the desired benefits, whatever those 

may be. 284 

ACORN’s insufficient screening off of separate entities from one another makes it 

difficult to ensure compliance. For instance, Local 100 made a $15,941 loan to SEIU 

Local 880.285 Local 100 paid $122,346 to ACORN and Project Vote’s accounting firm of 

Duplantier, Hrapman, Hogan, and Maher LLP, $73,984 to Elysian Fields Corporation, 

and $48,188 to Citizens Consulting Inc.286 Local 100 received $14,214 in loans from 

 

283 Id. (emphasis added). 284 Id. at 2-3 (ACORN_004928-004929) (emphasis added). 285 See Form LM-2 Labor Organization Annual Report, SEIU Local 100, DEP’T OF LABOR, (2007), SEIU

LM2 2007 at 6 (March 30, 2007) (ACORN_004907). 286 Id. at 11 (ACORN_004912). 
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CCI.287 Local 100 provided $71,899 in gifts to the Service Workers Action Team and 

$5,000 to the SEIU Local 1991.288 Local 100 paid legal counsel Karim Shabazz 

$5,184.289 An additional $5,670 was paid to CCI.290 The Local 100 Political Action 

Committee files Form 8872 with the IRS, reflecting its status as a 527 political 

organization.291 

According to the Congressional Research Service (“CRS”), the IRS lacks the 

resources and administrative diligence necessary to investigate illicit activities.292 

Because the IRS assumes 501(c)(3) funds are not used by affiliated 501(c)(4)’s for 

lobbying purposes, the IRS is unlikely to detect a violation of the Lobbying Disclosure 

Act by a 501(c)(4) such as ACORN.293 Because the IRS chooses which organizations it 

audits, a scheme used in which private foundation money goes into a social welfare 

organization’s lobbying expenditures could be promulgated without detection under the 

IRS’s legal radar.294 According to CRS, Internal Revenue Code (“IRC”) 501(c)(3) 

organizations are required to report “their aggregate political expenditures and any excise 

taxes imposed during the year on their lobbying and political expenditures.”295

3. ACORN And Its Affiliates Engage In Substantial 

Lobbying Activities 

FINDING: 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. 

 

287 Id. at 12 (ACORN_004913). 288 Id. at 20 (ACORN_004921). 

289 Id. at 21 (ACORN_004922). 

290 Id. at 22 (ACORN_004923). 

291 Id. at 25(ACORN_004926). 

292 Interview with Erika Lunder, Attorney, Congressional Research Service, in Wash., D.C. (May 14, 

2009); See also Email from Erika Lunder, CRS attorney, to Oversight and Government Reform minority 

staff (Mar. 17, 2009, 12:06 PM EST) (on file with author). 

293 Id. 294 Id. Donald Tobin, The Law of Politics: The Role of Law in Advancing Democracy: Political 

Campaigning by Churches and Charities: Hazardous for 501(c)(3)s, Dangerous for Democracy, 95 GEO.

L.J. 1313, 1318-19. 

295 Erika Lunder, Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements, 

CRS RPT. FOR CONG., Sept. 11, 2007 at 28. 
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The tax code permits 501(c)(4)s and 501(c)(3)s to lobby, although lobbying may 

not be a “substantial part” of a 501(c)(3)'s (Project Vote, ACORN Institute, American 

Institute for Social Justice (“AISJ”)) activities.296 Internal Revenue Code (“IRC”) 

§501(c)(3) organizations may conduct nonpartisan voter registration and get-out-the-vote 

drives.297 The activities may not indicate a preference for any candidate or party.298 The 

communication must not identify any candidates for a given public office.299 Candidates 

must be named or depicted on an equal basis.300 The activity is limited to urging acts 

such as voting and registering and to describing the hours and places of registration and 

voting, and all registration and get-out-the-vote drive services are made available without 

regard to the voter’s political preference.301 501(c)(4) organizations such as ACORN 

may participate in an unrestricted amount of lobbying so long as the lobbying is related to 

the organization’s exempt purpose.302 Section 18 of the Lobbying Disclosure Act of 

1995303 prohibits organizations described in IRC §501(c)(4) from receiving “federal 

grants, loans, or other awards if they engage in lobbying activities”304 Participating in 

political campaigns cannot be the organization’s primary activity.305 

A 501(c)(4) can participate in lobbying activities, but under the U.S. Code, a 

501(c)(4), such as ACORN Housing, cannot lobby if it receives federal funding.306 A 

501(c)(4) must have separate accounts from 501(c)(3)’s under Section 18 of the 

Lobbying Disclosure Act, which placed restrictions on “lobbying activities” by certain 

nonprofit groups, as a condition to receiving federal grants and loans.307 In other words, 

CCI cannot control the accounts of both ACORN Housing Corporation and Project Vote, 

which the HCSE Memo alleges to be the case. Section 18 of the Lobbying Disclosure 

Act of 1995 places statutory restrictions upon the lobbying activities of nonprofit civic 

and social welfare organizations, such as ACORN, which are tax-exempt under section 

501(c)(4) of the Internal Revenue Code.308 Section 501(c)(4) civic leagues and social 

welfare organizations are prevented from engaging in any “lobbying activities,” if the 

organization receives any federal grant, loan, or award even with their own private 

 

296 See Rev. Rul. 2007-41, 2007-25 I.R.B. 1421 

297 Id. 298 Id; See also Judith E. Kindell and John Francis Reilly, Election Year Issues, IRS 2002 EO CPE Text, 

448-451 (2002). 

299 Rev. Rul. 2007-41, 20087-25 I.R.B. 1421; 20082 EO CPE Text, at 376-77. 300 IRS 2002 EO CPE Text, 448-451 (2002); Judith E. Kindell and John Francis Reilly, Election Year 

Issues, FY 2002 IRS EXEMPT ORGANIZATIONS TECHNICAL INSTRUCTION PROGRAM, at 379, available at

http://www.irs.gov/pub/irs-tege/eotopici02.pdf (last visited June 22, 2009). 301 Id. 302 Erika Lunder and L. Paige Whitaker, 501(c)(4) Organizations and Campaign Activity: Analysis Under 

Tax and Campaign Finance Laws, CRS RPT. FOR CONG., Mar. 30, 2009, at 5. 303 P.L. 104-65. 304 Erika Lunder, Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements, 

CRS RPT. FOR CONG., Sept. 11, 2007, at 14. 305 See also Treas. Reg. § 1.501(c)(4)-1(a)(2)(ii); Gen. Couns. Mem. 34233 (December 30, 1969). 306 Email from Erika Lunder, CRS attorney, to Oversight and Government Reform minority staff (Mar. 17, 

2009, 12:06 PM EST) (on file with author). 

307 Id. 308 P.L. 104-65, 109 Stat. 691, 703-704, as amended by P.L. 104-99, Section 129, 110 Stat. 34; see also 

H.Rept. 104-339, 104TH CONG. 24 (1995).
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funds.309 There is a presumption that ACORN used federal funds for lobbying because 

the HCSE Memo stated it is undeterminable whether federal funds were commingled 

with lobbying accounts and was addressed to ACORN Housing, which received federal 

funds. 

Under section 501(c)(3) of the Internal Revenue Code, organizations may not 

make statements endorsing or opposing a candidate, publish or distribute campaign 

literature, or make any type of contribution, monetary or otherwise, to a political 

campaign.310 Section 501(c)(3) prohibits charitable organizations from “participat[ing] 

in, or interven[ing] in (including the publishing or distributing of statements), any 

political campaign on behalf of (or in opposition to) any candidate for public office.”311

While 501(c)(4) social welfare organizations are not barred from engaging in 

campaign activity,312 “[t]he promotion of social welfare does not include direct or 

indirect participation or intervention in political campaigns on behalf of or in opposition 

to any candidate for public office.”313 Because under the tax code, a 501(c)(4) 

organization’s primary activity must be promoting social welfare, campaign activity (and 

any other activities not in furtherance of an exempt purpose) cannot be the organization’s 

primary activity.314 So long as ACORN’s primary activity is promoting social welfare, 

their lawful participation in campaign activity does not affect their 501(c)(4) status.315 

However, according to ACORN’s 2005-2007 Strategic Plan, ACORN might be in every 

respect a political organization: 

But just as important as our organizations’ role in mobilizing 

existing progressive voters, ACORN and similar groups actually 

create new progressive voters. We reach out to people who are 

perhaps apolitical, or whose connection to politics is mediated 

through right-wing media, and their experiences in organizations 

like ACORN turn them into politically engaged citizens who 

cast their votes based on what they learn through their work 

with the organization. They join a campaign to increase the 

minimum wage, or to win more affordable housing, or to end 

predatory financial practices – and they find out which 

political leaders are on their side on these issues, and which 

ones aren’t. Candidates who purport to stand with low and 

moderate income voters by promoting tax cuts and so-called 

“family values” are then measured against a different 

yardstick – and are caught short when voters realize they are 

 

309 See 2 U.S.C. § 1611; See also Jack Maskell, Lobbying Regulations on Non-Profit Organizations, CRS

RPT. FOR CONG., May 7, 2008 at 7. 310 Erika Lunder, Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements, 

CRS RPT. FOR CONG., Sept. 11, 2007 at 11. 311 Id. 312 Id. 313 Treas. Reg. § 1.501(c)(4)-1(a)(2). 314 Erika K. Lunder and L. Paige Whitaker, 501(c)(4) Organizations and Campaign Activity: Analysis 

Under Tax and Campaign Finance Laws, CRS RPT. FOR CONG., Mar. 30, 2009 at 8. 315 See Rev. Rul. 81-95, 1981-1 C.B. 332. 
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really standing with the corporate interests. In summary, groups 

like ACORN are creating an expanded progressive electorate.

316

While section 501(c)(4) organizations are permitted to engage in campaign 

activity, they are subject to tax if they make an expenditure for a section 527 “exempt 

function” defined under the Code as “influencing or attempting to influence the selection, 

nomination, election, or appointment of any individual to any federal, State, or local 

public office or office in a political organization, or the election of Presidential or VicePresidential electors.”317 Both the tax and campaign finance laws are relevant for 

determining whether 501(c)(3)s and 501(c)(4)s may engage in campaign activity.318 

Under the Code, 501(c)(4) organizations are required to file an annual information 

return (Form 990) with the IRS.319 The IRS has revised the form in order to encourage 

tax compliance, accountability, and transparency.320 Filing organizations are now 

required to report information regarding their political activities on the new Schedule 

C.321 According to the IRS, section 501(c)(4) organizations filing the Form 990 must: 

(1) Describe their direct and indirect political campaign activities; 

(2) Report the amount spent conducting campaign activities and 

the number of volunteer hours used to conduct those activities; 

(3) Report the amount directly spent for § 527 exempt function 

activities; 

(4) Report the amount of funds contributed to other organizations 

for § 527 exempt function activities; 

(5) Report whether a Form 1120-POL (the tax return filed by 

organizations owing the section 527 tax) was filed for the year; 

and 

(6) Report the name, address, and employer identification number 

of every section 527 political organization to which a payment 

was made and the amount of such payments, and indicate 

whether the amounts were paid from internal funds or were 

contributions received and directly transferred to a separate 

political organization.322

Section 501(c)(4) organizations must also report the names and addresses of 

donors who contributed at least $5,000 during the year on the Schedule B of the Form 

990.323 Because ACORN has delayed its reporting to the IRS, as evidenced by the HCSE 

 

316 ACORN Strategic Plan at (Apr. 2005) at 1 (ACORN-00278) (emphasis added and in original). 317 I.R.C. § 527(f); I.R.C. § 527(e)(2); Erika Lunder, Tax-Exempt Organizations: Political Activity 

Restrictions and Disclosure Requirements, Sept. 11, 2007, at 19. 318 See Erika K. Lunder and L. Paige Whitaker, 501(c)(4) Organizations and Campaign Activity: Analysis 

Under Tax and Campaign Finance Laws, CRS RPT. FOR CONG., Mar. 30, 2009 at 8.

319 See I.R.C. § 6033. 320 IRS Form 990, available at http://www.irs.gov/charities/article/0,,id=185561,00.html (last visited May 

4, 2009). 

321 IRS SCHEDULE C, available at http://www.irs.gov/pub/irs-pdf/f990sc.pdf (last visited June 22, 2009). 322 See I.R.C. § 6033(e). 323 I.R.C. § 6104(b) and (d). 
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Memo and the email from Steve Kest to Ralph McCloud, ACORN used its funds for 

impermissible political purposes. According to an article in the Quarterly Journal of 

Economics, not all those entities whose noncompliance has been discovered will be 

subject to enforcement action because the IRS does not have the resources to proceed 

against every known transgressor.324 According to the notes from ACORN’s August 15, 

2008 East Regional meeting, ACORN owes over $800,000 to the IRS.325 According to 

CRS, the IRS does not actively investigate violations of its reporting rules and does not 

enforce the “no substantial part” test, giving ACORN a free pass to violate these 

regulations.326 

Under the Lobbying Disclosure Act, ACORN, a 501(c)(4), must be separately 

incorporated, keep separate books, and spend and use resources which are not part of or 

otherwise paid for by the tax-deductible contributions to its 501(c)(3) affiliate 

organizations.327 According to CRS, “[i]n cases where an organization creates an IRC 

§501(c)(4) organization and an IRC §501(c)(3) organization, the organizations must be 

legally separate entities, and their activities and funds must be kept separate.”328

Under the Lobbying Disclosure Act, lobbying activities include direct “lobbying 

contacts and efforts in support of such contacts” such as preparation, planning, research 

and other background work intended for use in such direct contacts.329 A “lobbying 

contact” under the Lobbying Disclosure Act is an “oral or written communication 

(including an electronic communication) to a covered executive branch official or a 

covered legislative branch official” which concerns the formulation, modification or 

adoption of legislation, rules, regulations, policies or programs of the federal 

government.330

According to the Wall Street Journal, ACORN and its affiliates operate as a 

political organization: 

Acorn [sic] – made up of several legally distinct groups under that 

name – has become an important player in the Democrats’ effort to 

win the White House. Its voter mobilization arm is co-managing a 

$15.9 million campaign with the group Project Vote to register 1.2 

million low-income Hispanics and African-Americans, who are 

among those most likely to vote Democratic. Technically 

nonpartisan, the effort is one of the largest such voter-registration 

drives on record. The organization’s main advocacy group lobbied 

 

324 Jennifer F. Reinganum and Louis L. Wilde, A Note on Enforcement Uncertainty and Taxpayer 

Compliance, Q. J. OF ECON (1998). 325 Notes from East Regional Meeting (Aug. 15, 2008) at 1 (ACORN_000321). 326 Erika Lunder, Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements, 

CRS RPT. FOR CONG., Sept. 11, 2007 at 7; See also Jack Maskell, Lobbying Regulations on Non-Profit 

Organizations, CRS RPT. FOR CONG., May 7, 2008 at 7. 327 Jack Maskell, Lobbying Regulations on Non-Profit Organizations, CRS RPT. FOR CONG., May 7, 2008 at 

6. 

328 Id. 329 Lobbying Disclosure Act, 2 U.S.C. § 1602(7), P.L. 104-65, §3(7). 330 2 U.S.C. § 1602(8), P.L. 104-65, § 3(8). 
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hard for passage of the housing bill, which provides nearly $5 

billion for affordable housing, financial counseling and mortgage 

restructuring for people and neighborhoods affected by the housing 

meltdown. A third Acorn [sic] arm, its housing corporation, does a 

large share of that work on the ground.331 

According to the finance plan of the Friends of Sherrod Brown,332 ACORN sought to: 

Raise $1.5 million out of Cleveland over the next 10 months. This 

is based on what past US Senate races raised as well as the target 

populations that exist in Cleveland and who is capable of giving 

and raising.333 

In its year end report dated on December 15, 2006, the Local 880 chapter of the 

Service Employees International Union (“SEIU”) stated: 

Because we were key in the early organizing and moving this 

national campaign by both ACORN and SEIU, we were wellpositioned to win. Our early support of Governor Blagojevich

and his commitment to support an Executive Order allowing 

homecare and home child care workers to organize put us far 

ahead of the other states.334

In discussing SEIU’s joint campaigns with ACORN, the document stated: 

This year, thanks to a flawless campaign led by Illinois ACORN, 

Local 880, and the SEIU Illinois Council and our allies, on July 

1st, 2007 the Illinois minimum wage will rise to $7.50 per hour 

and then rise in three other steps to $8.25 by 2010. This is a $1.75 

increase over the present state minimum wage of $6.50 and $3.10 

over the present federal minimum wage of $5.15. This increase 

will do more than raise over 600,000 Illinoisans over the current 

minimum wage. It will also force the state to raise reimbursement 

rates for thousands of homecare and other workers and trigger 

increases in all of our contracts. If not for the work of our sister 

organization, ACORN, this would never have happened.

335 

 

331 Elizabeth Williamson and Brody Mullins, Democratic Ally Mobilizes In Housing Crunch, WALL STREET 

J, July 31, 2008, at A1. 

332 “Friends of Sherrod Brown” is a fundraising committee for U.S. Senator Sherrod Brown (D-OH). See 

http://www.sherrodbrown.com/ (last visited July 7, 2009). 333 SB Finance Plan at 1 (undated) (ACORN_00294). 334 Local 880 at 5 (Dec. 15, 2006) (ACORN_004354) (emphasis added); Illinois Governor Rod Blagojevich 

was arrested on federal corruption charges on December 9, 2008. See Press Release, Department of 

Justice, Illinois Gov. Rod R. Blagojevich and His Chief of Staff John Harris Arrested on Federal 

Corruption Charges, (Dec. 9, 2008), available at: 

http://chicago.fbi.gov/dojpressrel/pressrel08/dec09_08.htm (last visited July 7, 2009). 335 Id. See also id. at 7-8, discussing several joint SEIU-ACORN campaigns (emphasis added). 
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According to the year end report, SEIU shares lawyers with CCI, an ACORN affiliate 

which, as alleged previously, manages the accounts of 501(c)(3) nonprofits which must 

be separated from political activities: 

Legal Representation - In the past we have used Steve 

Bachmann and the CCI legal team; SEIU counsel, Craig Becker; 

Art Martin in Southern Illinois; and most recently, ex-ACORN 

head organizer, Robert Bloch’s law firm. We plan to continue 

using these legal resources in the future.

336

It further states, “[h]igh level Blagojevich staff credited us later with helping move the 

vote that allowed him to win”337

The Local 880 document also lists Keith Kelleher as the Head Organizer.338 In 

the email ACORN Executive Director Steven Kest wrote to CCHD director Ralph 

McCloud, he stated “[t]he following people were on the management council eight years 

ago, and were made aware of the [Dale Rathke] embezzlement:” and lists Keith 

Kelleher.339 

HCSE stated, “[it] cannot confirm that strategic decisions about which regions do 

501(c)(3) versus non-501(c)(3) voter engagement work are not being made by the same 

person or people.”340 HCSE also stated, “[f]ences need to be erected to wall off types of 

election-related activity that must be kept completely separate.”341 ACORN does not 

have strict walls of separation between its 501(c)(3) activities and its 501(c)(4) activities. 

HCSE stated, “ACORN lacks the protective ‘walls’ needed to ensure that various types of 

activity are kept sufficiently separate.’”342 In a November 22, 2006 memorandum, Zach 

Polett, ACORN’s political director, stated his organizational plans for Project Vote, a 

501(c)(3): 

Develop and promote a Project Youth Vote, as a branded project of 

Project Vote/Voting for America, Inc., thus taking advantage of the 

fact that Project Vote and its work with ACORN were, by far, the 

largest Youth voter registration program in the country in 2004 . . . 

Expand Project Vote’s 2005 – 2006 anti-voter suppression work by 

raising the funds to enable Project Vote to serve as the national 

clearinghouse for voter suppression state legislation (stopping the 

bad bills) and begin the work of expanding the franchise by 

introducing Voter Bill of Rights legislation in a targeted set of 

states.343

 

336 Id. at 13-14. (emphasis added). 337 Id. at 18. 338 Id. at 1. 

339 Ralph McCloud CCHD at 5-6 (Nov. 11, 2008) (ACORN 004785-004786). 340 HCSE Memo (June 19, 2008) at 7 (ACORN_004933). 341 HCSE Memo (June 19, 2008) at 1 (ACORN_004927). 342 Id. at 6 (ACORN_004932). 343 PolOps 2007-2008 Projects (Nov. 22, 2006) at 3 (ACORN_004322). 
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As stated in a 2006 ACORN National Political Operations report (hereinafter 

“ACORN Political Report”), ACORN controls the accounts of Project Vote: 

[T]hrough a joint effort with ACORN National Operations, 

Political Operations migrated our database functions to 

DonorPerfect. [ACORN National Political Operations Strategic 

Writing and Research Department (“SWORD”)] has provided the 

administrative support to this project and provides the on-going 

development associate-level of support for tracking our grantbased fundraising for our various 501c3 voter participation 

efforts.344

 Another instance of the lack of separation between activities involves CCI. In an 

email between ACORN National Executive Director Steven Kest and Ralph McCloud, of 

the Catholic Campaign for Human Development (“CCHD”), Kest described CCI as 

follows: 

Citizens Consulting, Inc. is an independent organization. It is a 

non-profit corporation with no special tax status run by a selfperpetuating board. Both [American Institute for Social Justice 

(“AISJ”)] and ACORN have contracts with CCI to do their 

accounting work and corporate record keeping . . . CCI has two 

staff members who are assistant officers of ACORN with authority 

to act on behalf of ACORN solely on administrative matters. (For 

example: opening up bank accounts at the direction of ACORN 

management.) This is standard corporate practice. Paul Satriano, 

the national Treasurer for ACORN, is a new board member of 

CCI.345 

As stated in the IRS Form 990 filed by Project Vote, CCI performs Project Vote’s 

accounting services as well.346 HCSE found ACORN’s lack of clearly delineated staff 

roles created “the appearance that someone is trying to hide something under a byzantine 

corporate structure,” further noting, “funds have been raised and spent by people with no 

official relationship to a given corporation.”347 The lack of separation is problematic, for, 

according to HCSE, 501(c)(3) funds are being used for ACORN’s political activities. 

According to the Associated Press, ACORN and its affiliates have received over 

$31 million of taxpayer dollars from 1998 to 2007.348 ACORN affiliates received nearly 

 

344 ACORN Political Operations Report at 2 (2006) (ACORN_4788). 345 Ralph McCloud CCHD at 3 (Nov. 11, 2008) (ACORN 004783). 346 Project Vote 2007 990, supra note 194 at 10. 347 HCSE Memo (June 19, 2008) at 2-3 (ACORN_004928-004929). 348 Jim Abrams, House GOP leader asks Bush to cut off ACORN funds, AP, Oct. 23, 2008, available at 

LEXIS. 
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$10 million in federal taxpayer funding in 2008 alone.349 ACORN’s 2008 budget was 

estimated at $110 million.350 

ACORN Executive Director Steven Kest and Political Director Zach Polett, 

writing in a 2006 grant request to the Democracy Alliance, stated: 

ACORN’s core organizational budget for 2006 – not including our 

voter participation work – is just over $38 million. (Note: this total 

includes budgets of c3 organizations that share ACORN’s 

mission.) Income sources are a mix of small-dollar self-financing 

through membership dues and other membership fundraising and 

contributions; foundation support; contributions from corporations 

with whom we have entered into partnerships; and individual high 

donor contributions. We have concrete plans for growing each of 

these sources over the next three years; in particular, we are 

significantly expanding our development department, and are 

working with allies in the foundation and individual donor 

communities on these strategies.351

The ACORN Housing Corporation (AHC), an ACORN affiliate, received $7.8 

million in federal grant funding in 2008.352 AHC received $687,000 from the Fannie 

Mae Foundation in 2007 alone.353 AHC received over forty percent of its funding from 

taxpayers.354 As stated in documents produced to the Committee by former ACORN 

insiders, government grants constituted forty percent of ACORN’s operational 

funding.355 The Department of Housing and Urban Development (“HUD”) gave $8.2 

million to ACORN from 2003 to 2006 and $1.6 million to ACORN affiliates.356 

The ACORN Political Report describes ACORN’s federal funding as follows: 

In 2006, we helped win grant awards for $912,378 in federal 

funding from HUD. Overall, we helped write and 

submit 13 federal grants to HUD for FY2006, four of which are 

still outstanding. With Valerie Coffin, Fair Housing Director, we 

helped raise $450,000 in FY2006 FHIP funding for fair housing 

education and outreach. This year New Orleans also received an 

additional $100,000 in new funding from reallocated FY2005 

 

349 Id. 350 James Terry, Ensuring the Integrity of the U.S. Electoral System, Testimony, JUDICIARY SUBCOMM. ON 

THE CONST., CIVIL RIGHTS AND CIVIL LIBERTIES AND H. ADM. SUBCOMM. ON ELECTIONS, Joint Hearing on 

Federal, State and Local efforts to Prepare for the General 2008 Election, Sep. 24, 2008, at 4. 351 ACORN Grant Request to the Democracy Alliance at 12 (Mar. 24, 2006) (ACORN_004348). 352 Kim Horner, ACORN helping many keep homes: Nonprofit group provides counseling, assists with 

mortgage payment plans, DALLAS MORNING NEWS, May 2, 2008, at 12B. 353 2007 FANNIE MAE GRANTS & SPONSORED EVENTS/CONFERENCES, ACORN HOUSING CORPORATION INC

1 (2007), http://www.fanniemae.com/aboutfm/pdf/2007giving_report.pdf. 354 Peter J. Parisi, ACORN, meet RICO: Let the prosecution begin, WASH. TIMES, Dec. 9, 2008, at A04. 355 IMC Allegations (January 7, 2009) at 3 (ACORN_004868). 356 Id. at 4 (ACORN_004869). 
Page 61 of 99 

FHIP funding. In Dallas, the ACORN Institute received a ROSS 

grant for $362,378 over three years from reallocated FY2005 funds 

to provide services and training to public housing residents in that 

city. We have also continued to provide support on reporting and 

other requirements for approximately $4 million in LEAP grant 

funds (FY2004 and FY2005). 

In a June 4, 2007 email from Nathan Henderson-James, Director, Strategic 

Writing and Research Department, Project Vote wrote the following to Apryl Walker, 

Head Organizer, Delaware ACORN: 

Apryl, 

 

I[n] an effort to ensure that we are in compliance with 

government regs about these [Election Assistance Commission 

(“EAC”)] grants and whatnot, I'm going to ask you to take the 

report you did back in December about the DE poll worker 

project (which I am attaching) on ACORN letterhead with a 

cover letter saying something like "Here's the report of our 

activities for the Poll Worker Project." [ . . . ] Actually here's some 

suggested language: 

‘Please find enclosed a summary of the work undertaken by DE 

ACORN for the Young Poll Worker Recruitment Project. As you 

can see we met or exceeded our numeric goals for numbers of 

workers recruited. We consider this project a success. It was great 

to partner with Project Vote on this project and we look forward to 

working with you again when circumstances warrant it. If you 

have any comments or questions do not hesitate to contact me at 

(number) or (e-mail). 

Regards, 

Apryl Walker 

Head Organizer 

Delaware ACORN.’357

ACORN staff have used federal Election Assistance Commission (“EAC”) grants 

interchangeably between the 501(c)(4) and 501(c)(3) affiliates.358 According to an 

internal Project Vote report, “Project Vote’s Poll Worker Recruitment Project in 

Delaware, part of the EAC’s Help America Vote College Program, was a success.”359 

The email above reflects ACORN’s attempt to create the impression ACORN was 

 

357 Email from Nathan Henderson James (June 4, 2007) (on file with author) (emphasis added). 358 DE ACORN Stud. Pollworker Proj. 12-22-06 Report (Dec. 22, 2006) at 1-2 (ACORN_004377-

004378). 

359 PV-Pollworkers Report (May 7, 2007) at 1 (ACORN_004828). 
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separating its federal funds from Project Vote’s activities, when, in essence, ACORN 

staff used federal EAC grants interchangeably between the 501(c)(4) and 501(c)(3) 

affiliates. Project Vote won grants of $912,378 in federal funding from HUD.360 

ACORN’s 2005-2007 Strategic Plan stated: 

Issue campaigns play the dual role within ACORN of attracting 

new members, and educating or politicizing existing members (in 

addition to their obvious value in winning concrete improvements 

in the lives of our members and our broader constituency). Over 

the next three years we plan to continue our work on a set of issues 

where we have a proven track record: increasing state and 

local minimum wages; combating predatory financial 

practices, ranging from predatory mortgage lending to rip-off 

tax-prep services to abusive credit card scams; working to 

improve public schools; promoting the development of 

affordable housing; protecting the franchise/making every vote 

count; and fighting key elements of the national Republican 

program, including social security privatization, cuts to 

Medicaid and other critical programs, and additional tax 

breaks for the rich.

361

A January 2009 complaint by several ACORN insiders stated ACORN receives 

millions in federal funding: 

Grants have been issued to ACORN by the Department of 

Housing and Urban Development, which gave $8.2 million to 

ACORN in the years between 2003 and 2006, as well as $1.6 

million to ACORN affiliates. The Environmental Protection 

Agency gave a $100,000 grant to ACORN in 2004 for a 

Louisiana Justice Project, which removed lead from the homes of 

low income families. The Justice Department also gave a grant 

to ACORN in 2005 for a juvenile delinquency program.

362

ACORN has a national political operations capability called Strategic Writing and 

Research Department that, according to the complaint, directs “demographic and 

elections research, development of major fundraising proposals and supporting materials, 

policy analysis support for the Election Administration program, and . . . telling the story 

of the COUNCIL’s involvement in the electoral process.”363 According to Nathan 

Henderson-James, ACORN National Political Operation’s director: 

In 2006 SWORD had five main priorities: fundraising, 

developing local political plans, eligible voter demographic 

 

360 ACORN Political Operations Report at 2 (2006) (ACORN_4788). 361 ACORN Strategic Plan (Apr. 2005) at 2 (ACORN-00279) (emphasis added). 362 IMC Allegations (Jan. 7, 2009) at 3 (ACORN_004866-004890) (emphasis added). 363 ACORN Political Operations Report at 4 (2006) (ACORN_004790). 
Page 63 of 99 

research, presentations, and reports and other forms of telling 

the story of electoral participation by ACORN members and 

staff. . . . Almost all of the work supported the election 

administration and voter participation programs of various 

COUNCIL organizations.

364

In the same document where Henderson-James reported on Project Vote’s 

research activities in relation to its Election Assistance Commission 

(“EAC”) grants, ACORN’s partisan activities: 

As 2006 draws to a close, we are completing the compilation of a 

document that will give us a list of all the upcoming elections in 

every county with an ACORN office or that is on the official 

Expansion List. This list includes elections at all levels and 

covers both primaries, generals, and run-offs. The information 

on this list will be made available generally as soon as it is 

completed and by request until that point.

365 

According to USASpending.gov, a federal government website for tracking government 

grants, ACORN Housing Corporation received $1,623,570 in Fiscal Year 2009.366

According to the ACORN political report, ACORN Housing and several affiliates have a 

history of receiving federal grants: 

Federal Funding: In 2006, we helped win grant awards for 

$912,378 in federal funding from HUD. Overall, we helped write 

and submit 13 federal grants to HUD for FY2006, four of which 

are still outstanding. With Valerie Coffin, Fair Housing Director, 

we helped raise $450,000 in FY2006 FHIP funding for fair 

housing education and outreach. This year New Orleans also 

received an additional $100,000 in new funding from reallocated 

FY2005 FHIP funding. In Dallas, the ACORN Institute received a 

ROSS grant for $362,378 over three years from reallocated 

FY2005 funds to provide services and training to public housing 

residents in that city. We have also continued to provide support on 

reporting and other requirements for approximately $4 million in 

LEAP grant funds (FY2004 and FY2005).367 

According to a 1995 Report from the Office of the Inspector General of the Corporation 

for National and Community Service, the federal government audited and investigated 

the ACORN Housing Corporation’s activities and stated: 

 

364 ACORN Political Operations Report at 1 (2006) (ACORN_004787) (emphasis added). 365 Id. at 2 (ACORN_004788) (emphasis added). 366 Grants to ACORN Housing, USA SPENDING.GOV, available at: 

http://www.usaspending.gov/faads/faads.php?reptype=r&detail=-

1&datype=T&sortby=t&database=faads&recip_id=5920&fiscal_year=2009&record_num=f500 (last 

visited June 17, 2009). 

367 ACORN Political Operations Report at 6 (2006) (004792) (emphasis in original). 
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We determined that AHC and ACORN are separate corporate

entities, but that they do not always operate at ‘arms length.’

Finally, we questioned approximately $95 thousand of costs 

charged to the grant because the documentation and 

information to support the costs was inadequate to establish 

that they were allowable under the grant and applicable 

regulations. CNS terminated the grant because evidence 

obtained in a separate OIG investigation . . . indicated that

AHC violated the National and Community Service Act, as 

amended, CNS Regulations and policies as well as the grant 

agreement.

368 

Allegations that ACORN has been inappropriately involved in partisan politics 

have dogged the nonprofit for years. As far back as 1997, the former House Committee 

on Economic and Educational Opportunities identified numerous problems with 

ACORN-affiliated entities involving improper participation in partisan political activities. 

The Report stated: 

Most notable in this regard is . . . the apparent cross-over 

funding between ACORN, a political advocacy group and 

ACORN Housing Corp. (AHC), a non profit, AmeriCorps 

grantee . . . . [I]t was learned that AHC and ACORN shared office 

space and equipment and failed to assure that activities and funds 

were wholly separate . . . . [I]t was revealed that AmeriCorps 

members of AHC raised funds for ACORN, performed voter 

registration activities, and gave partisan speeches. In one 

instance, an AmeriCorps member was directed by ACORN staff to 

assist the White House in preparing a press conference in support 

of legislation. AmeriCorps members were also directed to 

encourage their clients to lobby on behalf of legislation.369

These problems still exist. Anita MonCrief’s cited testimony before the House Judiciary 

Committee suggested that the federally-funded 501(c)(3) Project Vote and the politically 

partisan, active lobbyer ACORN were practically inseparable. She testified: 

Project Vote is basically considered ACORN political operations.” 

Ms. MonCrief testified: [page 44, line 1-25] “There was active 

cooperation between ACORN’s political wing and Project 

Vote...[They] basically had the same staff. Nathan Henderson 

James was the strategic writing and research department...director 

of ACORN and he was the research director of Project Vote. Zach 

 

368 OFFICE OF THE INSPECTOR GENERAL, CORPORATION FOR NATIONAL AND COMMUNITY SERVICE,

SEMIANNUAL REP. TO THE CONGRESS, at 3-4 (1995) (emphasis added). 

369 SUBCOMM. ON OVERSIGHT AND INVESTIGATIONS, 104TH CONG., “Report on the Activities of the 

Committee on Economic and Educational Opportunities,” H. REP. NO. 104-875, at 69-70 (Comm. Print 

1997) (emphasis added). 
Page 65 of 99 

[Polett] was the executive director of Project Vote and the 

executive director of ACORN political. All of the organizations 

and the entities worked together. We shared the same space.” 

Further, Ms. MonCrief testified: “...there’s no real separation 

between the organizations for real. So when you have the same 

people that are working, that are—like, I was getting paid through 

Project Vote’s checkbook, but I was working on ACORN stuff. I 

even did PowerPoints during the midterm elections for Jeffrey 

Robinson where they were like, okay, don’t vote for Albert Win 

[sic] (ph) or vote for this person. And they had doorknob – door 

hangers that they would go and put on people’s doors, and we 

turned this into a PowerPoint presentation. So there was never any 

division between the staff where you would say, okay, this is (2)(3) 

stuff and this (c)(4) stuff. It was just—I don’t want to say business 

as usual, but it was a lot of collaboration between the 

organizations.” [page 89, lines 21-25, page 90 1-25, page 91, lines 

1-3].370

More factually, former Oklahoma Congresswoman Cleta Mitchell was concerned about 

ACORN violating the Federal Election Campaign Act of 1971: 

A not-for-profit corporation is treated no differently from a forprofit corporation for purposes of the federal campaign finance 

laws, which absolutely prohibit corporate contributions to 

campaigns of federal candidates and / or corporate expenditures to 

support or oppose a federal candidate. The FECA further prohibit 

expenditures by non-profit corporations such as ACORN and 

Project Vote which are made in coordination with, at the request, 

behest, suggestion or with the material involvement of a federal 

campaign (such as the Obama presidential campaign). The 

solicitation of funds by an organization for purposes of engaging in 

partisan campaign activities or to support or assist a federal 

campaign and/or candidate convert the organization into a Section 

527 political organization and further [instantiate] a federal 

political committee required to register with the Federal Election 

Commission (“FEC”). Contributions to such an organization are 

limited to $5,000 per calendar year and may not be received / 

accepted from corporations. Further, expenditures made by an 

organization in coordination with a candidate or political 

committee are considered contributions to that committee and are 

subject to the $5,000 per election limit.371

 

370 What went wrong with the 2008 election?: Hearing Before the H. Judiciary Comm., 111TH CONG. 1-17 

(2009) (statement of Heather Heidelbaugh). 

371 Id. at 15-16. 
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With over 360 ACORN-affiliated organizations,372 ACORN’s counsel, the law firm of 

Harmon, Curran, Spielberg & Eisenberg LLP (“HCSE”), advised: 

Corporate forms must be maintained and respected . . . This 

includes having real boards and a real principal staff 

person/Executive Director for each.”373 

HCSE stated ACORN’s lack of clearly delineated staff roles created “the appearance that 

someone is trying to hide something under a byzantine corporate structure,” further 

noting, “funds have been raised and spent by people with no official relationship to a 

given corporation.”374 The American Institute for Social Justice, Inc.’s (“AISJ”) 2006 

990 shows AISJ paid ACORN $566,136375 and $4,952,288.376 According to HCSE: 

ACORN’s communications director is on the payroll of AISJ, and 

another AISJ employee manages the building on Canal Street 

where many different corporations reside. This is not 

appropriate.377 

HCSE stated, “[f]ences need to be erected to wall off types of election-related activity 

that must be kept completely separate.”378 HCSE stated, “ACORN lacks the protective 

‘walls’ needed to ensure that various types of activity are kept sufficiently separate.’”379 

In a March 24, 2006 grant request from ACORN director Steven Kest and political 

director Zach Polett to The Democracy Alliance, both Kest and Polett write about 

ACORN’s political activities in the same context in which they discuss ACORN Housing 

and get out the vote initiatives – both of which receive federal funding: 

Each ACORN office carries out multiple issue campaigns at all 

times. Among our current priorities: campaigns to raise the 

minimum wage or enact living wage policies, through state or 

local legislation or ballot initiatives (see below); campaigns to 

eliminate predatory financial practices by mortgage lenders, 

payday lenders, and tax preparation companies; campaigns to 

win the development of affordable housing through 

inclusionary zoning policies and community benefits 

agreements; campaigns to improve the quality of and funding 

for urban public schools; and a campaign that has organized 

displaced New Orleans residents and is fighting for the 

equitable rebuilding of that city. . . . ACORN and its affiliated 

organizations provide extensive services to our members and 

 

372 ACORN Universe of Corporations (undated) (ACORN_00001-000012). 373 HCSE Memo (June 19, 2008) at 1 (ACORN_004927). 374 Id. at 2-3. 375 AISJ 2006 990 at 10, supra note 194. 376 Id. at 20. 377 HCSE Memo (June 19, 2008) at 5 (ACORN_004931). 378 Id. at 1. 

379 Id. at 6. 
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constituency, as a vehicle for building and strengthening our local 

chapters. These include: free tax preparation focusing on the 

Earned Income Tax Credit; screening for eligibility for federal 

and state benefit programs; and, through the ACORN Housing 

Corporation, first time homeowner mortgage counseling and 

foreclosure prevention assistance, and low income housing 

development. . . . Building on our success with a statewide 

ballot initiative to raise the minimum wage in Florida in 2004, 

we have initiated similar campaigns to place minimum wage 

increases on the November 2006 ballot in OH, MI, AZ, MO 

and CO. . . . Finally, ACORN runs one of the most extensive 

voter participation projects in the country, as a fully integrated 

component of our overall community organizing program.

380

In the grant request, Kest and Polett describe ACORN’s political wins: 

Among the hundreds of victories over the past 4 years, here are a 

few of the most significant . . . . Won increases in the state 

minimum wage, through legislation or ballot initiative, in FL, IL, 

NJ, NY. . . . Won huge reforms in the subprime/predatory 

mortgage industry, including a $500 million-plus settlement with 

Household Finance, significant reforms by Citigroup, Wells, and 

many others; and the passage of anti-predatory lending legislation 

in CA, NM, NJ, NY, and additional states. . . . Forced the nation’s 

largest tax preparation companies (H&R Block, Jackson-Hewitt, 

and Liberty) to reform their pricing and practices for low income 

consumers. . . . Expanded access to prime credit for low income 

home-buyers, and helped over 25,000 families directly get firsttime mortgages. . . . Over the last two election cycles (2001-02 

through 2003-04), we registered 1,353,473 low- and moderateincome and minority voters and in 2004 we targeted a GOTV 

universe of 2.3 million low- and moderate-income and minority 

voters with over 8.7 million contact attempts.381

According to a SEIU Local 880 report dated December 15, 2006, ACORN maintains 

Political Action Committees (“APACs”) and has volunteer committees of members who 

raise funds for to participate in partisan electoral work and communicate messages in 

support of candidates to the ACORN membership and constituency. 382 

According to internal ACORN documents produced to the Committee, ACORN 

has performed political work for former Illinois Governor Rod Blagojevich and several 

Senate Democrats: 

 

380 ACORN Grant Request to the Democracy Alliance at 2-3 (Mar. 24, 2006) (ACORN_004338-004339) 

(emphasis added). 

381 Id. at 7 (ACORN_004343). 382 ACORN Grant Request to the Democracy Alliance at 12-13 (Mar. 24, 2006) (ACORN_004348-

004349). 
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Local 880 2006 Legislative/Political Analysis - We have had a 

great year on the legislative front - which is directly related to 

our past political work with Blagojevich and the Senate Dems. . 

. . With the elections in 2007 (Aldermen and Mayor) just around 

the corner, we will need to build and maintain a much bigger 

political infrastructure statewide in ’07. And we need to get ready 

for the big one in ’08 – OBAMA FOR PRESIDENT! . . . 

Although Governor Blagojevich did not have a serious 

challenger, Cook County Board President Stroger, who had a 

massive stroke right before the election, did. It was a very tight 

race and turnout was key. Local 880 moved between 50-100 

members and staff to work the precincts for Blago and Stroger 

in March, and while Blago blew out his challenger, Stroger, in the 

hospital and close to death, barely squeaked by with 52% of the 

vote and 880’s and SEIU’s and APAC’s volunteers in the high 

turnout precincts on the south side, brought it home. High level 

Blagojevich staff credited us later with helping move the vote 

that allowed him to win. Later, in the general election, we had 

even more success. . . . Local 880 Political Director, Rochelle 

Prather, in coordination with Local 880 organizing staff statewide, 

trained and turned out hundreds of our members and staff for the 

final push – not only in the Governor’s race, but in five targeted 

races in southern and western Illinois the Dems needed to defend 

or pick up. We won all of the races we worked in and received 

a lot of credit for our work. 383 

The document continues with: 

Because we were key in the early organizing and moving this 

national campaign by both ACORN and SEIU, we were wellpositioned to win. Our early support of Governor Blagojevich 

and his commitment to support an Executive Order allowing 

homecare and home child care workers to organize put us far 

ahead of the other states.

384 

In the 2006 Democracy Alliance request, Kest and Polett explicitly discuss the cross-over 

of funding between ACORN’s 501(c)(4), 501(c)(3), and 527 affiliates: 

ACORN’s voter participation budget varies with the election cycle, 

from a high of $24 million in the 2004 cycle to expenditures of $4 

million in 2005 and a projected $12 million in 2006. (Note: these 

totals include support for ACORN and c3 and 527 organizations 

that share ACORN’s mission) Funding comes largely from 

foundation and high-donor sources. As with ACORN’s core 

 

383 Local 880 at 17-18 (Dec. 15, 2006) (ACORN_004366-004367) (emphasis added). 384 Local 880 at 5 (Dec. 15, 2006) (ACORN_04354) (emphasis added). 
Page 69 of 99 

organizational budget, we have recently expanded our 

development department working on voter participation 

fundraising, and are aggressively seeking to diversify the number 

of funders who support our work.385

According to a press release from the Department of Justice, ACORN’s labor affiliate, 

the Service Employees International Union (“SEIU”), was involved in a discussion with 

Blagojevich concerning his potential Senate appointment.386 

ACORN directly lobbied political officers, and there is a credible presumption 

that ACORN induced its constituent members to subscribe to partisan ideological 

preferences.387 Such circumstances might have contributed to numerous incidences of 

illegal political activity in the 2008 election. According to the Campaign Finance 

Institute, section 501(c) organizations, including section 501(c)(4) groups, spent 

approximately $400 million attempting to influence federal elections in 2008, which the 

Institute described as “a big step up from the last two elections.”388 During the 2008 

election cycle, a nonprofit tax law specialist at the IRS claimed the agency planned to 

take a closer look at the campaign activities of § 501(c)(4) organizations.389 Public 

concern about violations of the campaign intervention prohibition by § 501(c) 

organizations prompted the IRS to develop the Political Activity Compliance Initiative 

(PACI).390 

ACORN’s political plan for Ohio (hereinafter “Ohio Political Plan”), authored by 

Katy Gall, Ohio ACORN Head Organizer, Mark Engelhardt, ACORN Political Director, 

Midwest, and Jeremy Mitchell, Ohio ACORN Legislative Director, stated that ACORN’s 

voter education efforts have overtly partisan goals: 

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 about 

candidates who support issues important to working families. Our 

paid professional canvass will execute tightly managed Voter ID 

and GOTV canvasses moving our core constituency of base and 

 

385 ACORN Grant Request to the Democracy Alliance at 13 (Mar. 24, 2006) (ACORN_004349). 386 DOJ Press Release, available at http://chicago.fbi.gov/dojpressrel/pressrel08/dec09_08.htm (last visited 

May 3, 2009). 

387 See Erika Lunder and L. Paige Whitaker, 501(c)(3) Organizations and Campaign Activity: Analysis 

Under Tax and Campaign Finance Laws, CRS RPT. FOR CONG., Jan. 14, 2009, at 6. 388 Campaign Finance Institute, Outside Soft Money Groups Approaching $400 Million in Targeted 

Spending in 2008 Election, Oct. 31, 2008, available at

http://www.cfinst.org/pr/prRelease.aspx?ReleaseID=214 (last visited June 22, 2009). 

389 See Diane Freda, IRS Considering Project to Examine Political Activity of 501(c)(4) Groups, BNA

DAILY TAX REPORT, May 13, 2008. 

390 The 2004 report is available at http://www.irs.gov/pub/irs-tege/final_paci_report.pdf (last visited June 

22, 2009). The 2006 report, which includes updated 2004 statistics, is available at

http://www.irs.gov/pub/irs-tege/2006paci_report_5-30-07.pdf. 
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swing voters to the polls to vote for the candidates who most 

closely align with a progressive Working Families Agenda.391

According to the Ohio Political Plan, ACORN paid for poll research in Ohio’s 

congressional districts:392

A spreadsheet provided to this Committee by former ACORN employee Anita MonCrief 

shows ACORN’s analysis of 14 nationwide congressional districts where the 2006 

winning margin of Republican members were less than the amount of voters produced by 

ACORN voter registration drives.393 Documents produced to this Committee reflect 

ACORN’s meticulous research into Project Vote’s new registration numbers,394 analyses 

of campaign spending by Republicans,395 an internal memorandum from Sanford 

Newman, one of Project Vote’s founders, on voter registration drives,396 donor lists from 

the Democratic National Committee (DNC), the Democratic Senatorial Campaign 

Committee (DSCC) and the Democratic Congressional Campaign Committee (DCCC),397

donor lists of unions, lists of contributors to Senator John Kerry (D-MA),398 documents 

 

391 2007-08 OHIO Pol Plan-Draft2b – Copy at 10 (Apr. 2007) (ACORN_000368). 

392 Id. at 10. 

393 Project Vote Registration Projections, Appendix 2, 14 CD (Apr. 11, 2007) at 1-2 (ACORN_000357-

00358). 

394 2005 PV new registration summary-2 (ACORN_004452-004453). 

395 Campaign spending at 1 (ACORN_000107). 

396 Project Vote Registration Projections (Apr. 14, 2007) at 1-14 (ACORN_000298-000311). 

397 DSCC DNC SCCC 10k and up (2004) (ACORN_004084-004293) (listing 5,054 donations of above 

$10,000 to the DSCC, DNC, and SCCC). 

398 JFK List (ACORN_000406-000489). 
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reflecting over 37,000 campaign contributions to former President Bill Clinton, as well as 

information about 347 donations to Clinton campaign coffers from 61 different unions. 399 

ACORN maintains a list of 59,995 campaign contributors to President Barack 

Obama’s election efforts.400 The Obama campaign made a substantial contribution to 

Citizens Services Inc. (“CSI”), a nonprofit corporation. However, in notes dated April 6, 

2006 about ACORN affiliate America Votes, the document stated: 

We prefer that political money go to us in the form of a vendor, 

which would be CSI, our for-profit business, which doesn’t have to 

report the cash because it’s a business, like the phone company.401

In a memorandum from Zach Polett to the ACORN Political Operations Senior Staff, 

Polett wrote, “[h]ave CSI play a major field role in the general election and, possibly, in the 

primaries.”402 In the memo, Polett discussed ACORN’s congressional district strategy, 

coordination with Project Vote, and lobbying strategies: 

Working with ACORN Research Dept, Campaign Department

and others, identify a set of potential “asks” for gubernatorial 

and mayoral candidates that directly impact ACORN’s 

membership growth goals . . . . Work with a targeted set of 

ACORN Head Organizers and their Regional Field Directors to 

develop long-term political power-building plans for those cities 

and states, including development and training of full-time state 

political directors in those states. . . . Register 1,000,000 voters in 

the 2007 – 2008 election cycle . . . . Develop and promote a 

Project Youth Vote, as a branded project of Project Vote/Voting 

for America, Inc., thus taking advantage of the fact that Project 

Vote and its work with ACORN were, by far, the largest Youth 

voter registration program in the country in 2004. . . . Establish 

and fund a "Voter Participation Research Institute" for doing 

voter engagement experiments and then writing plans and 

methodologies based on the results of that research. . . . 

Expand Project Vote’s 2005 – 2006 anti-voter suppression work 

by raising the funds to enable Project Vote to serve as the national 

clearinghouse for voter suppression state legislation (stopping the 

bad bills) and begin the work of expanding the franchise by 

introducing Voter Bill of Rights legislation in a targeted set of 

states. . . . Define a national ACORN-identified values and 

policy issue that defines ACORN’s policy and political work this 

election cycle. . . . Get candidates from the presidency on down 

to identify themselves as supporters of the issue[.] Use the issue 

to increase turnout among base voters and to get independent and 

 

399 Clinton 2nd Q (ACORN_000490-004059) and union donors (ACORN_004060-004083). 400 Obama 2nd Q (on file with author). 401 America Votes Overview Notes (Apr. 6, 2006) at 1 (ACORN_000312). 402 PolOps 2007-2008 Projects (Nov. 22, 2006) at 2 (ACORN_004321). 
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swing voters to support candidates who actively support the 

issue and campaign on it. . . . Congressional District Strategy:

Develop a plan, for 2007 implementation and funding, that targets 

organizing, communications and political work in a set of 

marginal CDs that changed party in the 2006 election. [Also 

develop list of seats in which current party holds a seat that went 

the opposite way in the last presidential election – these will 

contain a number of seats likely to be closely contested in 08.] . . . 

Identify issues (generally federal) around which to conduct earned 

media grasstips [sic] issue advocacy campaigns with a goal of 

providing support for the new Congressperson when they take 

stands on popular progressive issues. . . . Build a political 

operation, perhaps using 2007 elections when they exist, that 

puts in place electoral field capacity and lists that can be used 

in 2008. . . . Establish a federal PAC and a funding plan for it . 

. . Expand our CSI campaign consulting business . . . Develop 

CSI as a profit center for the work of Political Operations. . . . 

Expand ACORN’s power and reach by creating the in-house 

capacity to deliver political capacity when it’s needed: managing 

ballot measure campaigns; collecting signatures; running large 

electoral field campaigns; running campaigns of local 

candidates for office; conducting grasstips [sic] lobbying 

campaigns; etc. . . . Write a business plan for CSI, including 

marketing plan and pricing plan. . . . Identify or hire a Managing 

Director for CSI’s external business. . . . Identify a list of 

potential funded ballot measure campaigns that CSI should 

pursue for full-service and/or signature collection management 

contracts. . . . Identify a list of 2007 and 2008 candidate 

campaigns that CSI should pursue for contracts and 

relationships. . . . Secretaries of State: Identify 2007 and 2008 

Secretary of State races in which we should play, with the goal 

of getting responsible, pro-voter, competent people in these 

offices.

 403

An internal document shows ACORN Political Director Zach Polett controlling the 

activities of ACORN, Communities Voting Together (“CVT”) and Citizens Services Inc. 

(“CSI”): 

 Story for Election Day will be makeup of the House. Places where 

voter mob can be a factor in these races is where we should think 

pushing a strong program. CVT (527) is one of the ways that this 

could be done smartly and legally. Did work in Corzine 2005 

and in Wynn 2006. CSI ran Edwards field under contract. 

 

403 PolOps 2007-2008 Projects (Nov. 22, 2006) at 3-5 (ACORN_004321-004323) (emphasis added). 
Page 73 of 99 

CVT could do something similar to its 2005/06 work in other 

CD’s where it makes sense.404

 According to a document provided by former ACORN employees, the ACORN 

Community Labor Organizing Center (“ACLOC”) led important campaigns including the 

Texas for Obama Campaign.405 According to the document, ACLOC raised 1.3 million 

dollars from political campaigns and delivered the funds directly to ACORN offices.406

The document noted, “[d]oes the ACORN association board want Wade to be this 

intimately involved in coordinating campaigns this close to ACORN?”407 ACORN 

readily acknowledged its partisan behavior. 

V. Conclusion 

American nonprofits generate $1.3 trillion in revenues, have assets over $2 

trillion, and employ 15 million people.408 Nonprofits represent a substantial portion of 

the activities directed toward public service, a mission obstructed by the fraud of groups 

like ACORN. On the basis of this Report, the legal protections distinguishing ACORN 

and its affiliates must be ignored because the ability to ascertain whether federal moneys 

are being walled off from ACORN’s political activities is impracticable. As a result, 

ACORN and its Council of affiliates represent a politically partisan lobbying 

organization. ACORN and its affiliates’ nonprofit exemptions and receipt of federal 

grants must therefore bear greater scrutiny. 

 

404 Notes-Pol Ops Mgt Mtg (Sept. 15, 2006) at 1 (ACORN_004371) (emphasis added). 405 02-04-2009 (Feb. 4, 2009) at 1-4 (ACORN_000018-000021). 406 Id. 407 Id. at 2. 408 INTERNAL REVENUE SERVICE, CHARITIES & OTHER TAX-EXEMPT ORGANIZATIONS STATISTICS, 

available at http://www.irs.gov/taxstats/charitablestats (follow Charities & Other Tax-Exempt 

Organizations link) (last visited June 22, 2009). 
Page 74 of 99 

VI. Appendix 1: ACORN Council 

The following 361 entities compose the ACORN COUNCIL 

1. Association of Community Organizations for Reform Now (“ACORN”) 

2. ACORN National Office: Brooklyn, NY 

3. ACORN Bronx, NY 

4. ACORN Brooklyn, NY 

5. ACORN Buffalo, NY 

6. ACORN Hempstead, NY 

7. ACORN HOUSING CORPORATION Brooklyn, NY 

8. PROJECT VOTE Brooklyn, NY 

9. MHANY Brooklyn, NY 

10. ACORN National Office: Washington, D.C. 

11. ACORN Washington, DC 

12. ACORN HOUSING CORPORATION Washington, DC 

13. ACORN Political 1334 G St, NW Suite B Washington, DC 20005 

14. AISJ Washington, DC 

15. ACORN National Office: Little Rock, AR 

16. ACORN Pine Bluff, AR 

17. ACORN Housing Corporation Little Rock, AR 

18. ACHC Little Rock, AR 

19. ANP Little Rock, AR 

20. PROJECT VOTE Little Rock, AR 

21. KABF Little Rock, AR 

22. SEIU LOCAL 100 Little Rock, AR 72206 

23. ACORN National Office: Phoenix, AZ 

24. ACORN Glendale, AZ 

25. ACORN Mesa, AZ 

26. ACORN Tucson, AZ 

27. ACORN Housing Corporation Phoenix, AZ 

28. ACORN National Office: Dallas, TX 

29. ACORN Arlington, TX 

30. ACORN Dallas, TX 

31. ACORN El Paso, TX 

32. ACORN Ft. Worth, TX 

33. ACORN Houston, TX 

34. ACORN Irving, TX 

35. ACORN San Antonio, TX 

36. ACORN Research Dallas, TX 

37. ACORN HOUSING CORPORATION Dallas, TX 

38. ACORN HOUSING CORPORATION Houston, TX 

39. ACORN HOUSING CORPORATION San Antonio, TX 

40. AGAPE Dallas, TX 

41. SEIU LOCAL 100 Corpus Christi, TX 

42. SEIU LOCAL 100 Dallas, TX 
Page 75 of 99 

43. SEIU LOCAL 100 Houston, TX 

44. SEIU LOCAL 100 San Antonio, TX 

45. ACORN National Office: Boston, MA 

46. ACORN Boston, MA 

47. ACORN Brockton, MA 

48. ACORN Springfield, MA 

49. ACORN HOUSING CORPORATION Boston, MA 

50. ACORN HOUSING CORPORATION Springfield, MA 

51. ACORN National Office: New Orleans, LA 

52. ACORN Baton Rouge, LA 

53. ACORN Lake Charles, LA 

54. ACORN New Orleans, LA 

55. ACORN HOUSING CORPORATION New Orleans, LA 

56. Louisiana ACORN Fair Housing Organization New Orleans, LA 

57. ALERT New Orleans, LA 

58. AISJ New Orleans, LA 

59. SEIU LOCAL 100 Baton Rouge, LA 

60. SEIU LOCAL 100 Lake Charles, LA 

61. SEIU LOCAL 100 New Orleans, LA 

62. SEIU LOCAL 100 Shreveport, LA 

63. HOTROC New Orleans, LA 

64. ACORN Bay Point, CA 

65. ACORN Fresno, CA 

66. ACORN Los Angeles, CA 

67. ACORN Oakland, CA 

68. ACORN Sacramento, CA 

69. ACORN San Bernardino, CA 

70. ACORN San Diego, CA 

71. ACORN San Francisco, CA 

72. ACORN San Jose, CA 

73. ACORN Santa Ana, CA 

74. ACORN HOUSING CORPORATION Fresno, CA 

75. ACORN HOUSING CORPORATION Los Angeles, CA 

76. ACORN HOUSING CORPORATION Oakland, CA 

77. ACORN HOUSING CORPORATION Sacramento, CA 

78. ACORN HOUSING CORPORATION San Diego, CA 

79. ACORN HOUSING CORPORATION San Jose, CA 

80. ACORN HOUSING CORPORATION Santa Ana, CA 

81. ACORN Aurora, CO 

82. ACORN Denver, CO 

83. ACORN HOUSING CORPORATION Denver, CO 

84. ACORN Bridgeport, CT 

85. ACORN Hartford, CT 

86. ACORN Waterbury, CT 

87. ACORN HOUSING CORPORATION Bridgeport, CT 

88. ACORN HOUSING CORPORATION New Haven, CT 
Page 76 of 99 

89. ACORN 408 East 8th St. Wilmington, DE 

90. ACORN Ft. Lauderdale, FL 

91. ACORN Hialeah, FL 

92. ACORN Jacksonville, FL 

93. ACORN Lake Worth, FL 

94. ACORN Miami, FL 

95. ACORN Orlando, FL 

96. ACORN St. Petersburg, FL 

97. ACORN c/o the Progressive Center Tallahassee, FL 

98. ACORN Tampa, FL 

99. ACORN HOUSING CORPORATION Miami, FL 

100. ACORN HOUSING CORPORATION Orlando, FL 

101. Floridians For All Miami, FL 

102. ACORN Atlanta, GA 

103. ACORN HOUSING CORPORATION Atlanta, GA 

104. ACORN Honolulu, HI 

105. ACORN Chicago, IL 

106. ACORN Springfield, IL 

107. ACORN HOUSING CORPORATION Chicago, IL 

108. ACORN HOUSING CORPORATION of IL 

109. SEIU LOCAL 880 Chicago, IL 

110. SEIU LOCAL 880 East St. Louis, IL 

111. SEIU LOCAL 880 Harvey, IL 

112. SEIU LOCAL 880 Peoria, IL 

113. SEIU LOCAL 880 Rock Island, IL 

114. SEIU LOCAL 880 Springfield, IL 

115. ACORN Indianapolis, IN 

116. ACORN IA 

117. Peace and Social Justice Center of South Central Kansas Wichita, KS 

118. ACORN Louisville, KY 

119. ACORN Baltimore, MD 

120. ACORN Hyattsville, MD 

121. ACORN HOUSING CORPORATION Baltimore, MD 

122. ACORN Detroit, MI 

123. ACORN HOUSING CORPORATION Detroit, MI 

124. Edison Neighborhood Center Kalamazoo, MI 

125. ACORN St. Paul, MN 

126. ACORN HOUSING CORPORATION St. Paul, MN 

127. ACORN Financial Justice Center St. Paul, MN 

128. ACORN Kansas City, MO 

129. ACORN St. Louis, MO 

130. ACORN HOUSING CORPORATION Kansas City, MO 

131. ACORN HOUSING CORPORATION St. Louis, MO 

132. SEIU LOCAL 880 East St. Louis, MO 

133. SEIU LOCAL 880 St. Louis, MO 

134. ACORN Jersey City, NJ 
Page 77 of 99 

135. ACORN Newark, NJ 

136. ACORN Paterson, NJ 

137. ACORN HOUSING CORPORATION Jersey City, NJ 

138. ACORN Albuquerque, NM 

139. ACORN Las Cruces, NM 

140. ACORN HOUSING CORPORATION Albuquerque, NM 

141. ACORN Charlotte, NC 

142. ACORN Cincinnati, OH 

143. ACORN Cleveland, OH 

144. ACORN Columbus, OH 

145. ACORN Toledo, OH 

146. Lagrange Village Council Toledo, OH 

147. ACORN Portland, OR 

148. ACORN HOUSING CORPORATION Portland, OR 

149. ACORN Allentown, PA 

150. ACORN Harrisburg, PA 

151. ACORN Philadelphia, PA 

152. ACORN Pittsburgh, PA 

153. ACORN HOUSING CORPORATION Philadelphia, PA 

154. ACORN HOUSING CORPORATION Philadelphia, PA 

155. ACORN HOUSING CORPORATION Pittsburgh, PA 

156. ACORN Providence, RI 

157. ACORN HOUSING CORPORATION Providence, RI 

158. ACORN Memphis, TN 38104 

159. ACORN Norfolk, VA 

160. ACORN Richmond, VA 

161. ACORN Burien, WA 

162. ACORN Milwaukee, WI 

163. ACORN HOUSING CORPORATION Milwaukee, WI 

164. ACORN Beverly, L.L.C. 

165. ACORN Center for Housing, Inc. 

166. Arkansas Community Housing Corporation 

167. ACORN Community Land Association, Inc. 

168. ACORN Community Land Association Albuquerque NM 

169. ACORN Community Land Association of Louisiana Baltimore MD 

170. ACORN Community Land Association of Louisiana New Orleans LA 

171. ACORN Community Land Association of Pennsylvania, Inc. 

172. ACORN Community Land Association of IL. 

173. ACORN Community Labor Organizing Center, Inc. 

174. ACORN Fair Housing, A Project Of American Institute Washington DC 

175. Arkansas ACORN Fair Housing, Inc. 

176. New Mexico ACORN Fair Housing Albuquerque NM 

177. ACORN Fair Housing Washington DC 

178. ACORN Housing 1 Associates, LP (limited partnership) 

179. ACORN Housing 2 Associates, LP (limited partnership) 

180. ACORN Housing 2, Inc. 
Page 78 of 99 

181. ACORN Housing Affordable Loans, LLC 

182. ACORN Housing Corporation, Inc.

183. Desert Rose Homes, L.L.C. 

184. Franklin ACORN Housing, Inc. 

185. Mott Haven ACORN Housing Development Fund 

186. Mutual Housing Association of New York, Inc. 

187. New Orleans Community Housing Organization, Inc. 

188. ACORN Community Land Association of Illinois 

189. Massachusetts ACORN Housing Corporation 

190. Broad Street Corporation 

191. Elysian Fields Corporation 

192. ACORN 2004 Housing Development Fund Corporation 

193. ACORN 2005 Housing Development FUND CORPORATION 

194. ACORN Dumont-Snediker Housing Development Fund Corporation 

195. Dumont Avenue Housing Development Fund 

196. Elysian Fields Partnership 

197. Fifteenth Street Corporation 

198. New York ACORN Housing Company Inc 

199. Development Fund Corporation 

200. New York Organizing and Support Center, Inc 

201. Baltimore Organizing and Support Center, Inc. 

202. Chicago Organizing and Support Center, Inc. 

203. Houston Organizing and Support Center, Inc. 

204. 5301 McDougall Corporation 

205. New Mexico Organizing and Support Center, Inc. 

206. New York Organizing and Support Center, Inc. 

207. Phoenix Organizing and Support Center, Inc. 

208. 385 Palmetto Street Housing Development Fund Corporation 

209. Sixth Avenue Corporation 

210. 4415 San Jacinto Street Corporation 

211. St. Louis Organizing and Support Center, Inc. 

212. St. Louis Tax Reform Group, Inc. 

213. Greenwell Springs Corporation 

214. Austin Organizing and Support Center, Inc. 

215. Boston Organizing and Support Center, Inc. 

216. American Home Day Care Workers Association, Inc. 

217. American Workers Association 

218. Baton Rouge Association of School Employees, Inc. 

219. Hospitality Hotel and Restaurant Organizing Council 

220. Illinois Home Child Care Workers Association, Inc. 

221. Labor Link, Inc. 

222. Labor Neighbor Research and Training Center, Inc. 

223. Missouri Home Child Care Workers Association, Inc. 

224. Middle South Home Day Care Workers Association, Inc. 

225. Wal-Mart Alliance for Reform Now, Inc. 

226. Wal-Mart Association for Reform Now 
Page 79 of 99 

227. Working Families Association, Inc. 

228. Wal-Mart Workers Association, Inc. 

229. People Organizing Workfare Workers/ACORN/CWA, Inc. 

 Workers/ACORN/CWA, Inc. 

230. Texas United City-County Employees, Inc. 

231. Texas United School Employees, Inc. 

232. United Labor Foundation of Greater New Orleans, Inc. 

233. United Security Workers of America 

234. Orleans Criminal Sheriffs 

235. SEIU Local 100 

236. SEIU Local 880 

237. Arkansas Broadcasting Foundation, Inc. 

238. Agape Broadcasting Foundation, Inc. 

239. Affiliated Media Foundation Movement, Inc. 

240. Allied Media Projects, Inc. 

241. ACORN National Broadcasting Network, Inc. 

242. Alabama Radio Movement, Inc. (Dissolved) 

243. ACORN Television in Action for Communities, Inc. 

244. California Community Television Network 

245. Flagstaff Broadcasting Foundation, Inc. 

246. Iowa ACORN Broadcasting Corporation 

247. Maricopa Community Television Project, Inc. 

248. Montana Radio Network, Inc. 

249. Radio New Mexico, Inc. 

250. Shreveport Community Television, Inc. 

251. Crescent City Broadcasting Corporation 

252. KABF Radio 

253. KNON Radio 

254. ACORN Institute, Inc. 

255. ACORN Institute Inc. Washington DC 

256. ACORN Institute Dallas TX 

257. ACORN Institute Inc. New Orleans LA 

258. American Institute for Social Justice, Inc. 

259. Association for Rights of Citizens, Inc. 

260. New York Agency for Community Affairs, Inc. 

261. Pennsylvania Institute for Community Affairs, Inc. 

262. Project Vote/Voting for America, Inc. 

263. ACORN Tenant Union Training & Organizing Project, Inc. 

264. ACORN Law for Education Representation & Training, Inc. 

265. American Environmental Justice Project, Inc. 

266. ACORN International, Inc. 

267. Environmental Justice Training Project, Inc. 

268. Movement for Economic Justice, Education & Training Center, Inc. 

269. Missouri Tax Justice Research Project, Inc. 

270. ACORN Beneficial Association, Inc. 

271. ACORN Canada 
Page 80 of 99 

272. ACORN Children's Beneficial Association, Inc. 

273. ACORN Campaign to Raise the Minimum Wage, Inc. 

274. ACORN Cultural Trust, Inc. 

275. ACORN Dual Language Community Academy 

276. ACORN Fund, Inc. 

277. ACORN Foster Parents, Inc. 

278. ACORN Institute Canada 

279. ACORN Political Action Committee, Inc. 

280. ACORN Tenants' Union, Inc. 

281. Community Training for Environmental Justice, Inc. 

282. Connecticut Working Families 

283. Democracy for America 

284. Hammurabi Fund, Inc. 

285. McLellan Multi-Family Corporation 

286. Metro Technical Institute, Inc. 

287. New Party National Committee, Inc. 

288. Volunteers for America, Inc. 

289. Volunteers for California, Inc. 

290. Volunteers for Missouri, Inc. 

291. ACORN Management Corporation 

292. Associated Regional Maintenance Systems 

293. ACORN Associates, Inc. 

294. ACORN Associates Inc. Albuquerque NM 

295. ACORN Campaign Services, Inc. 

296. ACORN Services, Inc. 

297. Citizens Consulting, Inc. 

298. Chief Organizer Fund, Inc. 

299. Citizens Services, Inc. 

300. People's Equipment Resource Corporation, Inc. 

301. National Center for Jobs & Justice 

302. Service Workers Action Team 

303. Living Wage Resource Center 

304. American Home Childcare Providers Association 

305. Association for the Rights of Citizens Inc 

306. California Community Network 

307. Child Care Providers for Action Franklin 

308. Citizens Action Research Project 

309. Citizens Campaign for Work, Living Wage & Labor Peace 

310. Citizens for Future Progress 

311. Citizens Campaign for Finance Reform 

312. Floridians for All PAC 

313. Greenville Community Charter School Inc 

314. Student Minimum Wage Action Campaign 

315. Site Fighters 

316. Social Policy 

317. Southern Training Center 
Page 81 of 99 

318. ACORN Votes 

319. Communities Voting Together 

320. Arkansas ACORN Political Action Committee 

321. Arkansas New Party 

322. California APAC 

323. Citizens for April Troope 

324. Colorado Organizing and Support Center, Inc. 

325. Citizens Campaign for Fair Work 

326. Citizens Services Society, Inc. 

327. Clean Government APAC 

328. Community Voices Together 

329. Community Real Estate Processing, Inc. 

330. Council Beneficial Association 

331. Council Health Plan 

332. Desert Rose Homeowners' Association 

333. District of Columbia APAC 

334. Friends of Wendy Foy 

335. Illinois APAC 

336. Illinois New Party 

337. Institute for Worker Education 

338. Jefferson Area Public Employees 

339. Jefferson Area School Employees 

340. Local 100 Health & Welfare Fund 

341. Local 100 Political Action Committee 

342. Local 100 Retirement Fund 

343. Local 880 PAC 

344. Local 880 Political PAC 

345. Louisiana APAC 

346. Maryland APAC 

347. Massachusetts APAC 

348. Missouri APAC 

349. Mutual Housing Association of New York Neighborhood Restore 

350. Neighbors for Arthelia Ray 

351. Neighbors for Maria Torres 

352. Neighbors for Ted Thomas 

353. New Mexico APAC 

354. New Orleans Campaign for Living Wage Committee 

355. New York APAC 

356. Oregon APAC 

357. Orleans Criminal Sheriffs Workers Organization, Inc. 

358. Pennsylvania APAC 

359. Progressive Houston 

360. Progressive St. Louis 

361. Rhode Island APAC 

 
Page 82 of 99 

VII. Appendix 2: RICO Analysis 

ACORN 8 alleged RICO violations under 18 U.S.C. §1962(c): 

(1) the defendant persons (2) were employed by or associated with 

an enterprise (3) that engaged in or affected interstate commerce 

and that (4) the defendant persons operated or managed the 

enterprise (5) through a pattern (6) of racketeering activity, and (7) 

the complaints [sic] were injured in its business or property by 

reason of the pattern of racketeering activity. Thus, the 

complainants feel that a formal RICO investigation is also 

warranted.409

Asheesh Agarwal, a former Justice Department attorney, produced to the 

Committee a memorandum (“Memo”) analyzing whether Project Vote could be sued 

under the civil provisions of the Racketeer Influenced Corrupt Organization Act 

(“RICO”).410 The Memo concluded, “such a claim would face a very high hurdle in 

satisfying the ‘business or property’ element of a [civil] RICO claim. We could probably 

get by a Rule 11 motion, but probably not a motion to dismiss.”411 

The Memo analyzed the predicate offenses of mail and wire fraud, stating 

“[a]lthough the federal mail and wire fraud statutes do not themselves establish a private 

right of action, such a claim is permitted under the [criminal] RICO statute itself.”412

The federal civil RICO provision provides, “[a]ny person injured in his business 

or property by reason of a violation of section 1962 of this chapter may sue therefor in 

any appropriate United States district court...”413 While the Memo analyzed whether 

“voters [had] been ‘injured in... business or property[,]’ it did not analyze whether 

Project Vote, or its affiliate, ACORN, caused taxpayers or donors to be injured in their 

business or property.414 The Memo characterized the “right to vote or to a fair election 

process” as “property”.415 

 

409 IMC Allegations (Jan. 7, 2009) at 2 (ACORN_004867). 410 The Committee staff believed that the memorandum was the work product of the Department of Justice. 

Asheesh Agarwal has informed the Committee that the Department of Justice's Civil Rights Division did 

not author the memorandum that analyzed a possible civil RICO suit against ACORN. Mr. Agarwal has 

informed the Committee that he, as former Deputy Assistant Attorney General, did not author the 

memorandum. 

411 Memo (received March 30, 2009) at 1 (ACORN_004776). Asheesh Agarwal sent the memorandum to 

the Committee staff on March 30, 2009. The staff was under the impression that the memo was authored 

by Mr. Agarwal during his time at the Department of Justice (“DOJ”). As of August 3, 2009, Mr. Agarwal 

claims the memo was not authored by him and was not the work product of the Department of Justice. 

412 Id. (emphasis added). 413 18 U.S.C § 1964. 414 Memo (received March 30, 2009) at 2 (ACORN_004777). 415 Id. (ACORN_004777). 
Page 83 of 99 

The Memo analyzed “property” under the Supreme Court’s decision in McNally 

v. United States416 and the Sixth Circuit decision, United States v. Debs.

417 In McNally, 

decided five years before Debs, the Court limited the definition of “property” under the 

mail and wire fraud statutes. The McNally Court considered whether a patronage scheme 

by a Kentucky public official had deprived the citizens of Kentucky of the property right 

to have the state government’s affairs conducted honestly. Under McNally, “property” 

under the mail and wire fraud acts did not include intangible rights such as “the right of 

the citizenry to good government.”418 However, the Debs Court interpreted the Hobbs 

Act to hold the loss of the opportunity to vote as a loss of property not a “deprivation of 

rights.”419 The Memo analyzed the distinction as follows: 

After discussing the implications of McNally’s holding in some 

detail, the Debs court nonetheless concluded that ‘property’ under 

the Hobbs Act included the right to elect union officials. The Debs 

court argued that the McNally decision could be explained by the 

fact that there, the Court had been motivated by concerns of 

federalism and had not wanted to interfere with ‘setting standards 

of disclosure and good government for local and state officials.’ 

See Debs at 202 (quoting McNally at 360). The Debs Court found 

these same federalism concerns were not implicated in union 

elections.420 

According to the Memo, the McNally case was later explicitly overturned by 18 U.S.C. 

§1346, which held that a “scheme or artifice to defraud” under the mail and wire fraud 

statutes included the deprivation of the “intangible right of honest services.”421 

The Memo addressed the criminal provisions of RICO under 18 U.S.C. §1962. 

The criminal RICO statute instructs: 

It shall be unlawful for any person employed by or associated with 

any enterprise engaged in, or the activities of which affect, 

interstate or foreign commerce, to conduct or participate, directly 

or indirectly, in the conduct of such enterprise's affairs through a 

pattern of racketeering activity or collection of unlawful debt.422

According to the Memo, ACORN can be easily established as an “enterprise” under the 

RICO statute “as that term is defined to include ‘any individual, partnership, corporation, 

association, or other legal entity, and any union or group of individuals associated in fact 

although not a legal entity[.]’”423 The Memo also held, “we should be able to 

 

416 McNally v. United States, 483 US 350 (1987). 417 949 F. 2d 199 (6th Cir. 1992). 418 McNally at 356. 

419 Id. at 201 (emphasis in original). 420 Memo (received March 30, 2009) at 2 (ACORN_004777). 421 See United States v. Ames Sintering Co., 927 F.2d 232 (6thCir 1990) (recognizing that section 1346 

overturned or superseded McNally). 422 18 U.S.C. § 1962(c). 423 Memo (received March 30, 2009) at 3 (ACORN_004778), citing 18 U.S.C. §1961. 
Page 84 of 99 

demonstrate that [ACORN’s] racketeering constitutes a ‘pattern’ which, under the statute, 

is ‘at least two acts of racketeering activity,’”424 The Memo claimed ACORN’s activities 

constituted “racketeering” under §1341 (mail fraud) and §1343 (wire fraud) of the 

code.425

18 U.S.C. §1341’s requirements are met if the mail is used to execute a scheme 

involving money or property. 18 U.S.C. §1341 specifies: 

Whoever, having devised or intending to devise any scheme or 

artifice to defraud, or for obtaining money or property by 

means of false or fraudulent pretenses, representations, or 

promises, or to sell, dispose of, loan, exchange, alter, give away, 

distribute, supply, or furnish or procure for unlawful use any 

counterfeit or spurious coin, obligation, security, or other article, or 

anything represented to be or intimated or held out to be such 

counterfeit or spurious article, for the purpose of executing such 

scheme or artifice or attempting so to do, places in any post office 

or authorized depository for mail matter, any matter or thing 

whatever to be sent or delivered by the Postal Service, or 

deposits or causes to be deposited any matter or thing whatever to 

be sent or delivered by any private or commercial interstate carrier, 

or takes or receives therefrom, any such matter or thing, or 

knowingly causes to be delivered by mail or such carrier according 

to the direction thereon, or at the place at which it is directed to be 

delivered by the person to whom it is addressed, any such matter or 

thing, shall be fined under this title or imprisoned not more than 20 

years, or both.426 

18 U.S.C. §1343 is analogous to the mail fraud language but refers to the use of wire 

transmission: 

Whoever, having devised or intending to devise any scheme or 

artifice to defraud, or for obtaining money or property by 

means of false or fraudulent pretenses, representations, or 

promises, transmits or causes to be transmitted by means of 

wire, radio, or television communication in interstate or 

foreign commerce, any writings, signs, signals, pictures, or 

sounds for the purpose of executing such scheme or artifice, 

shall be fined under this title or imprisoned not more than 20 years, 

or both. If the violation occurs in relation to, or involving any 

benefit authorized, transported, transmitted, transferred, disbursed, 

or paid in connection with, a presidentially declared major disaster 

or emergency (as those terms are defined in section 102 of the 

 

424 Id. 425 18 U.S.C. §§ 1341, 1343. 426 Memo at 3-4 (ACORN_004778-004779), citing 18 U.S.C. § 1341 (emphasis in original). 
Page 85 of 99 

Robert T. Stafford Disaster Relief and Emergency Assistance Act 

(42 U.S.C. 5122)), or affects a financial institution, such person 

shall be fined not more than $1,000,000 or imprisoned not more 

than 30 years, or both.427 

The Memo claimed “[ACORN] engaged in a scheme to defraud voters of their 

intangible right to honest government services.”428

The federal criminal RICO statute defines property as real property “including 

things growing on, affixed to, and found in land” and tangible and intangible personal 

property “including rights, privileges, interests, claims, and securities.”429 In discussing 

“money or property” the Memo stated, “Congress specifically accepted McNally’s 

invitation to clarify the definition of ‘property’ when it passed section 1346.”430 §1346 

states: 

For the purposes of this chapter, the term ‘scheme or artifice to 

defraud’ includes a scheme or artifice to deprive another of the 

intangible right of honest services.431 

“[I]ntangible personal property” under §1964 is thus defined to include “a scheme or 

artifice to deprive another of the intangible right of honest services.” The Memo 

concluded, “[t]hus, the property requirement under section 1346 is explicitly an easier 

hurdle than the property requirement under the civil provision of RICO more broadly.”432 

The Memo stated, “If [Americans Coming Together]/ACORN used the mails in any way 

to facilitate the scheme, their conduct should fall under these provisions.”433 ACORN 

would therefore be liable under RICO if it used mail or wire transmissions which 

deprived others of their money or rights. 

While the Memo focused on the use of the mail to further Project Vote’s alleged 

fraudulent voter registrations, the Memo did not discuss whether ACORN or any of its 

affiliates used mail or wire transmissions to further other forms of fraud depriving 

individuals of their money or “intangible right of honest services.” Dale Rathke’s 

embezzlement violated RICO because, according to the Harmon, Curran, Spielberg & 

Eisenberg, LLP (“HCSE”) Memo, it involved a fraudulent wire-based transfer of funds 

violating first, ACORN’s fiduciary duties to its donors, second, ERISA, third, the Internal 

Revenue Code, and potentially fourth, FEC regulations. 

This report cites evidence showing ACORN to have committed two forms of 

misconduct, organizational and purposeful, which have triggered fraudulent and 

 

427 18 U.S.C. §1343 (emphasis added). 428 Memo at 4 (ACORN_004779). 

429 18 U.S.C. § 1963. 430 Id. 431 18 U.S.C. § 1346. 432 Memo at 4 (ACORN_004779). 433 Id. 
Page 86 of 99 

potentially illegal acts.434 According to this report, ACORN’s organizational misconduct 

involved: 

1. Failed to regard corporate formalities and fiduciary duties, 

failed to report Dale Rathke’s embezzlement to the Board; 

2. Wade Rathke lied to the Board about ACORN’s legal counsel 

(Louis Robein); 

3. Wade Rathke filed a fraudulent LM-2 form; 

4. Failed to comply with its own board-created Interim 

Management Committee; 

5. Violated ERISA because Citizens Consulting Inc.’s (CCI) 

removal of money from a charity-sponsored health fund 

(ACORN Fund) is a prohibited loan to a related party under 

ERISA and a large part of the embezzled funds ($215,000) 

were charged through ACORN’s American Express account to 

the ACORN Beneficial Association; 

6. Breached its duty of care to its donors because CCI approved 

the use of donor funds to cover the debt caused by 

embezzlement; 

7. Violated the Internal Revenue Code by failing to report the 

embezzlement to the IRS; 

8. Ignored its bylaws; 

9. Terminated members of its Interim Management Committee 

without cause; 

10. Mismanaged the organization because CCI controls the 

accounts of federally funded ACORN affiliates as well as 

politically active affiliates; 

11. Organized the ACORN Council as a web of affiliates with no 

real boards or oversight; and 

12. Lacked quality control because ACORN lacks hiring standards, 

negligently supervised its employees and lacked a 

whistleblower policy. 

According to this report, ACORN’s purposeful misconduct involved: 

1. Ignored its responsibilities under the Internal Revenue Code; 

2. Engaged in illegal partisan activity because Project Vote, 

ACORN Housing Corporation, the American Institute for 

Social Justice, the ACORN Institute, and the Pennsylvania 

Institute for Community Affairs, Inc. received federal funds, 

yet ACORN lobbied in support of legislation and candidates 

for public office by having endorsed Senator Sherrod Brown 

(D-OH), Representative Albert Wynn (D-MD) and 

Representative Donna Edwards (D-MD) and by using donor 

 

434 Id. 
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records from the Clinton, Kerry and Obama presidential 

campaigns; 

3. Failed to supervise those ACORN employees prosecuted for 

filing fraudulent voter registrations; and 

4. Failed to wall off its political activities from the organizations 

receiving federal funds or tax-deductible charitable 

contributions, thus potentially violating FEC rules. 

If these allegations are true, ACORN financially deprived its donors by wiring their funds 

to cover the debt caused by Dale Rathke’s embezzlement, it deprived federal taxpayers 

and the government of money and the right to honest services by wiring federal grant 

money to political accounts and mailing fraudulent forms to the Labor Department and 

the IRS, and it deprived its former employees of money by mailing them notice of their 

termination in violation of ACORN’s bylaws. 

ACORN acknowledged these violations and their connection to the RICO statute. 

In an email from Steve Bachmann to Steven Kest of ACORN, Karen Inman, formerly of 

ACORN, and Elizabeth Kingsley, of the law firm Harmon, Curran, Spielberg & 

Eisenberg (“HCSE”), Bachmann quoted a New York Times article released about 

ACORN and responded to its claims: 

The New York Times stated: 

The brother, Dale Rathke, embezzled nearly $1 million from 

Acorn and affiliated charitable organizations in 1999 and 2000, 

Acorn officials said, but a small group of executives decided to 

keep the information from almost all of the group’s board members 

and not to alert law enforcement.435 

Bachmann commented: 

As I say, check [Wade Rathke]'s blog, and we need to get tight 

on what happened precisely on this matter--WR says he 

recused himself and put it to the management council. I dont' 

[sic] know about the politics of the board, but as to the solution 

to the embezzelement [sic] he told me that Louis Robein was 

going to solve it. Isn't that what he told the management 

council when he supposedly recused himself? I THINK THIS 

THIS [sic] A CRITICAL ISSUE AND WILL HAVE TO 

COME OUT AT SOME POINT...Sidley Austin needs to read 

that WR blog, because--at the risk of repeating myself--if I 

were a rightwing prosecutor I would think "RICO, coverup," 

blah blah blah--and WR is fingering the management council, 

 

435 Stephanie Strom, Funds Misappropriated at 2 Nonprofit Groups, N.Y. TIMES, Jul. 9, 2008, available at

http://www.nytimes.com/2008/07/09/us/09embezzle.html (last visited May 7, 2009). 
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claiming he had nothing to do with it, and not mentioning his 

promises regarding Robein436

Moreover, minutes from a July 2008 ACORN Board meeting reflect the degree to which 

the ACORN’s donors felt their fiduciary duties were violated:437

 

436 Email from Steve Bachmann to Steve Kest, Karen Inman, and Elizabeth Kingsley (July 9, 2008) at 1-4 

(on file with author) (emphasis in original). 

437 ACORN Association Board Meeting (July 13, 2008) at 2 (ACORN_00392). 
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VIII. Appendix 3: Updated and New Information (11/18/09) 

This Appendix updates the July 23, 2009 staff report (“ACORN Report”). The 

Committee’s investigation of the Association of Community Organizations for Reform 

Now (“ACORN”) is ongoing and this Appendix focuses on recent findings concerning 

ACORN’s tax status and clarifies questions that have arisen concerning ACORN 

whistleblowers and the Racketeer Influenced Corrupt Organization Act (“RICO”) 

analysis from the ACORN Report’s original appendices. 

A. ACORN’s tax status and political activities 

In its first release, the ACORN Report claimed, on the basis of congressional 

testimony, whistleblower and employee accounts, and the media, that ACORN was a taxexempt 501(c)(4) nonprofit corporation. The overwhelming majority of policy makers, 

media sources, and legal and political analysts have identified ACORN as a tax-exempt 

nonprofit corporation. The Committee staff has now been presented with information 

that serves to clarify ACORN’s tax-exempt status. Upon further investigation, the 

Committee staff has learned that ACORN, the parent company, is not a 501(c)(4), but 

rather a taxable nonprofit corporation. ACORN is apparently registered in every state 

where it hosts a chapter. 

This is where ACORN’s tentacles become even more complex. The Committee 

staff contacted the American Law Division of the Congressional Research Service 

(“CRS”) to ascertain why a nonprofit would elect to pay corporate income taxes. The 

CRS stated they were aware of only one corporation in the United States structured that 

way: ACORN. But CRS could not explain why ACORN would structure itself this way. 

CRS recommended that the Committee staff call a preeminent nonprofit tax 

lawyer to get answers – which it did. This attorney explained that the ONLY reason a 

nonprofit would want a non-exempt status would be to conduct political activities without 

reporting them to the Internal Revenue Service (“IRS”).438 

1. ACORN and its web of affiliates have slipped under the 

legal radars of the FEC and the IRS 

The ACORN Report found that ACORN conspires to defraud the United States 

by using taxpayer funds for partisan political activities.439 The Committee staff is 

concerned that ACORN has failed to comply with § 501(c) and § 527(f) of the Internal 

Revenue Code (“IRC”) and the accompanying Internal Revenue Service (“IRS”) 

regulations. It appears that ACORN, a taxable non-exempt corporation, has intentionally 

used gaps in the IRC and the Federal Election Campaign Act (“FECA”) to engage in 

 

438 Interview with Bruce Hopkins, Director, Nonprofit Law Center (July 28, 2009). 

439 See Minority staff report, Is ACORN Intentionally Structured As a Criminal Enterprise? COMM.

OVERSIGHT AND GOV’T REFORM (2009) at 3-6, available at: 

http://republicans.oversight.house.gov/media/pdfs/20090723ACORNReport.pdf. 
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activities that would be subject to either prohibition or taxation under any reasonable 

application of FECA and the IRC. 

ACORN files Form 1120 corporate income tax with the IRS, has no tax-exempt 

status with the IRS, and is registered in multiple states as a nonprofit corporation. 

FECA440 generally prohibits corporations from making a contribution or 

expenditure in connection with any election to any political office441 and from using 

Treasury funds to pay for electioneering communications.442 However, there are several 

exceptions to FECA’s general prohibition on corporations making contributions or 

expenditures. Under 2 U.S.C. § 441b(b)(2), corporations may make expenditures: (1) to 

communicate with stockholders and executive or administrative personnel and their 

families; (2) to engage in nonpartisan voter registration or get-out-the-vote campaigns 

aimed at stockholders and executive or administrative personnel and their families; and 

(3) to establish, administer, and solicit contributions to a separate segregated fund for 

political purposes. 

FECA’s exceptions, however, would not apply to ACORN, or any state-registered 

taxable nonprofit corporation. It appears that these exceptions apply only to nonprofits 

classified as “qualified nonprofit corporations (“QNCs”).”443 The FEC defines a QNC as 

a tax-exempt § 501(c)(4) corporation whose (1) only express purpose is the promotion of 

political ideas, which (2) does not engage in business activities, (3) has no shareholders 

or other persons with an ownership interest or claim on the organization’s assets, and (4) 

was not established by and does not accept donations from business corporations.444 

 The Committee’s Ranking Member, Darrell Issa (R, Calif.), has requested that the 

FEC identify how it classifies ACORN or any of its affiliates, especially whether 

ACORN or any of ACORN’s affiliates are qualified nonprofit corporations (“QNCs”) 

under FECA. 

While questions remain about ACORN’s legal status, it is also important that the 

activities of ACORN’s 501(c) affiliates like Project Vote, the American Institute for 

Social Justice (“AISJ”), ACORN Housing Corporation (“AHC”), ACORN Institute, 

Service Employees International Union (“SEIU”) Local 100 and Local 880, Communities 

Voting Together (“CVT,” also known as “Community Voices Together”), ACORN 

Votes, Elysian Fields Corporation (“EFC”), the Association for the Rights of Citizens 

(“ARC”), and the Working Families Party (“WFP”) do not escape the regulatory 

attention of the IRS and the FEC. 

In enacting § 501(c), Congress intended nonprofit political activity to be 

interpreted broadly.445 According to this interpretation, a nonprofit influences legislation 

 

440 2 U.S.C. § 431 et seq. 441 2 U.S.C. § 441(a). 442 2 U.S.C. § 441b(b)(2). 443 11 C.F.R. § 114.10(d)(2). 444 11 C.F.R. § 114.10(c). 445 Christian Echoes Nat’l Ministry v. United States, 470 F.2d 849, 856 (10th Cir. 1972). 
Page 91 of 99 

whenever it makes “appeals to the public to react to certain issues.”446 If an “essential 

part of the program” is “to promote desirable governmental policies consistent with its 

objectives through legislation” then a substantial part of the corporation’s activities are 

“influencing or attempting to influence legislation.”447 “[A]ttempts to elect or defeat 

certain political leaders” reflect an “objective to change the composition of the federal 

government.”448 

Section 527(f) of the IRC subjects § 501(c) organizations to taxation if they make 

an expenditure for a § 527 “exempt function.” Lobbying, or the “influencing or 

attempting to influence the selection, nomination, election, or appointment of any 

individual to any Federal, State, or local public office or office in a political organization, 

or the election of Presidential or Vice-Presidential electors . . . ” would constitute a § 527 

“exempt function” under the IRC.449 

According to the IRC, if a § 501(c) organization sets up a separate segregated 

fund, the fund will be treated as a separate § 527 political organization for tax 

purposes.450 However, a § 501(c) organization cannot set up a fund to conduct activities 

it cannot do – e.g. a §501(c)(3) organization, which is prohibited from engaging in 

campaign activity under the tax laws, cannot set up a fund to engage in those types of 

activities.451 

Treasury Regulation § 1.527-6(b)(1) states that FECA-permitted expenditures are 

taxable only to the extent provided by regulation. The Treasury Department has not yet 

promulgated a regulation stating what that extent is.452 

For purposes of applying FECA, the FEC does not distinguish between taxexempt nonprofit corporations, like Project Vote, and taxable nonprofit corporations, like 

ACORN. However, the American Law Division of CRS has informed Committee staff 

that “for the purposes of determining whether a corporation is exempt from certain FECA 

prohibitions, the tax-exempt status of a corporation is relevant.”453 These ambiguities 

increase the concern that ACORN is exploiting the situation to improperly claim IRC 

exemptions to engage in improper lobbying activities. 

The IRC, FECA, IRS and FEC regulations require political funds to be separate 

and segregated from tax-exempt accounts. The ACORN Report disclosed an audit by 

ACORN’s outside counsel, finding ACORN and its affiliates lack an adequately 

documented delineation of 501(c)(3) from non-501(c)(3) work,454 ACORN cannot prove 

 

446 Id. 447 Id. 448 Id. 449 IRC § 527(e)(2). 450 IRC § 527(f)(3); Treas. Reg. § 1.527-6(f). 451 Treas. Reg. §1.527-6(g). 452 Treas. Reg. § 1.527-6(b)(3). 453 Id. 454 Memorandum from Harmon, Curran, Spielberg, & Eisenberg, LLP [HCSE] on Organization Review to 

ACORN Beneficial Association, ACORN Housing Corporation, ACORN Institute, ACORN Votes, 

American Institute for Social Justice, Association of Community Organizations for Reform Now, Citizens 
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that 501(c)(3) resources are not being directed to specific regions based on impermissible 

partisan considerations,455 ACORN and its affiliates lack protective walls separating their 

various activities456 and Communities Voting Together (“CVT”), a § 527 organization, is 

“treated like a pot of money available to ACORN to carry out state-level political 

work.”457 

The ACORN Report alleged that Citizens Consulting Inc. (“CCI”), a taxable 

nonprofit ACORN-affiliate, simultaneously managed the accounts of political and private 

donor-funded organizations. If accurate, CCI’s co-management of various tax-exempt 

and non-exempt affiliate accounts, many of which receive federal funds and some of 

which are 527s, would violate § 527(f) of the IRC as well as FECA. CCI co-manages 

ACORN affiliate accounts that are legally required to be separate and segregated. The 

IRC requires the transfer of political contributions and dues meet the three requirements 

that the § 501(c) use procedures that satisfy federal and state campaign laws; the § 501(c) 

organization maintain adequate records to show the transferred monies and political 

contributions and dues; and the transferred monies were not used to earn investment 

income for the § 501(c) organization.458 

Ranking Member Issa has requested that the IRS provide information concerning 

any criminal investigation (“CI”), civil audit, or examination, review of whistleblowerinformant claims, published alerts or abusive tax scheme investor lists concerning 

ACORN or its affiliates. Mr. Issa has also requested that the FEC provide information 

concerning any formal investigation or Commission audit, issued committee report, 

response to complaints, referrals from other government agencies, or issued enforcement 

decision or matter under review (“MUR”) concerning ACORN or its affiliates. 

2. Senior ACORN employees lobby the Federal 

Government on ACORN’s behalf yet ACORN has failed to 

register as a lobbying organization under the Lobbying 

Disclosure Act 

The ACORN Report traced the way ACORN erected a complex corporate 

structure of overlapping nonprofit community initiatives and political lobbying activities. 

Moreover, the ACORN Report revealed the shell-game of corporate financing that 

enables ACORN to commingle funds and potentially divert federal monies into partisan 

activities in violation of federal law. 

Since the release of the ACORN Report, Committee staff has continued to pursue 

evidence of ACORN’s corporate deceit. It now seems that in addition to blurred 

corporate structures and commingled funds, ACORN has attempted to evade federal law 

governing lobbyist disclosures. 

 Consulting, Inc., Citizens Services Inc., Communities Voting Together, Pennsylvania Institute for 

Community Affairs, Inc., Project Vote/Voting for America, Inc. (June 19, 2008) at 7 (ACORN_004933). 

455 Id. 456 Id. at 6. 457 Id. at 8. 458 Treas. Reg. § 1.527-6(e). 
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The Lobbying Disclosure Act of 1995 (“Lobbying Disclosure Act”) states, “[a] 

person or entity whose employees act as lobbyists on its own behalf is both a client and 

an employer of such employees.”459 Steve Kest is the executive director of ACORN.460 

According to ACORN-affiliate Citizens Consulting Inc.’s (“CCI”) 2007 lobbying report 

for ACORN, Steve Kest is also CCI’s executive director.461 Even a broad interpretation 

of the Lobbying Disclosure Act would mandate ACORN, with Steve Kest as its director 

and principal lobbyist, to register with Congress. ACORN has failed to do so. 

Steve Kest is an employee of CCI, which is a wholly owned subsidiary of 

ACORN, and Steve Kest’s lobbying activities advance the interests of both ACORN and 

CCI.462 Because ACORN contributes $5,000 or more to Steve Kest’s lobbying activities 

during a quarterly period and actively participates in the planning, supervision, or control 

of his lobbying activities, ACORN must be listed on CCI’s Form LD 1, Line 13.463 

Unfortunately, ACORN is listed nowhere in the Congressional registration database.464

Congress has both civil and criminal penalties for failing to comply with the 

Lobbying Disclosure Act: 

Whoever knowingly fails . . . to comply with any other provision 

of the Act, may be subject to a civil fine of not more than 

$200,000, and whoever knowingly and corruptly fails to comply 

with any provision of this Act may be imprisoned for not more 

than 5 years or fined under title 18, United States Code, or both.465

ACORN, an organization that routinely files forms, pays fees, and writes grants to 

several federal and state agencies, would not have been burdened by the prospect of 

registering Steve Kest as its lobbyist and employee. Registering with both the House and 

the Senate under the Lobbying Disclosure Act is free466 and can be completed in a few 

minutes online.467 But what seems like an easy fix would have enormous ramifications 

for ACORN. Our first report demonstrated that ACORN is prohibited by law from 

managing and controlling the accounts of its tax-exempt affiliates. Moreover, ACORN is 

prohibited from using taxpayer dollars to fund lobbying or electioneering activities. It is 

obvious why ACORN registered CCI as its lobbyist while failing to register itself: the 

 

459 LOBBYING DISCLOSURE ACT, available at: http://lobbyingdisclosure.house.gov/index.html. 460 ACORN WEBSITE, available at: http://www.acorn.org/contactus/national.html. 461 See Citizen Consulting, Inc. (CCI), 2007 LOBBYING REPORT, LOBBYING DISCLOSURE ACT OF 1995

(SECTION 5), at 2-10, available at: http://lobbyingdisclosure.house.gov. 462 LOBBYING DISCLOSURE ACT GUIDE, available at:

http://lobbyingdisclosure.house.gov/amended_lda_guide.html. 463 Id. 464 QUERY THE LOBBYING DISCLOSURE DATABASE, available at: 

http://soprweb.senate.gov/index.cfm?event=chooseFields (hyperlink “Search Filings” ACORN, 

Association of Community Organizations for Reform Now). 

465 LOBBYING DISCLOSURE ACT GUIDE, available at:

http://lobbyingdisclosure.house.gov/amended_lda_guide.html. 466 Interview with HOUSE LEGISLATIVE RESOURCE CENTER, (Sept. 7, 2009). 467 SENATE PUBLIC DISCLOSURE INDEX, available at: 

http://www.senate.gov/legislative/Public_Disclosure/new_filers.htm. 
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negligible cost of disclosing its affairs to the government is too high a price to pay for an 

organization that has covered-up illegal activities. If ACORN was to register under the 

Lobbying Disclosure Act, ACORN’s ability to access public funds would be limited, or 

meet higher scrutiny, and more public disclosure of their activities would be required. 

ACORN’s state and federal lobbying disclosures depict the organization as 

practically indistinguishable from its various affiliates. For example, Citizens 

Consulting, Inc.’s (“CCI”) 2008 lobbying disclosure with Congress identifies its address 

as 1024 Elysian Fields Avenue New Orleans, LA 70117.468 ACORN is listed as CCI’s 

client. In ACORN’s 2005 lobbying disclosure with the New York City government, 

ACORN lists an identical address as CCI: 1024 Elysian Fields Avenue, New Orleans, LA 

70117.469 According to the New York Secretary of State database, ACORN is 

incorporated in New York State under the name “Association of Community 

Organizations for Reform Now.”470 ACORN is currently a client of the Advance Group, 

led by ACORN national spokesman Scott Levenson, which lobbies for ACORN both on 

the federal and city level.471

ACORN’s commingling of funds, detailed in the ACORN Report,472 reflects a 

complex, systemic effort to escape detection. For instance, in its 2006 report, Citizens 

Consulting, Inc. (“CCI”) listed Ronald Sykes as one of its lobbyists.473 In an email dated 

August 13, 2009 from Sykes to the Lobbying Disclosure Act clerk, Sykes stated, “I 

would like this memorandum to serve as record that I have not registered myself as an 

active [l]obbyist nor was I informed that ACORN’s National Legislative Office had 

registered for me. . . . [t]his is a form of [i]dentity theft and I would like to know who 

from [Citizen Consulting, Inc] registered me so that I can proceed with further action.”474

CCI’s 2009 lobbying issues for ACORN includes foreclosure related legislation, 

predatory lending, housing counseling funding, loan modifications, mandatory mediation, 

credit card issues, securitization, TARP, financial re-regulation, voter registration, 

election reform/administration issues, health issues, paid sick days, “Green” jobs, the 

 

468 Citizen Consulting, Inc. (CCI), 2008 LOBBYING REPORT, LOBBYING DISCLOSURE ACT OF 1995 (SECTION 

5), at 2-9, available at: http://disclosures.house.gov/ld/pdfform.aspx?id=300081580. 469 Office of the City Clerk, City of New York, LOBBYING DISCLOSURE SEARCH, available at: 

http://www.nyc.gov/lobbyistsearch/ (follow “Search” hyperlink). 470 Secretary of State, State of New York, CORPORATION DISCLOSURE SEARCH, available at: 

http://appsext8.dos.state.ny.us/ (follow “Corporation Search” hyperlink). 471 The Advance Group, 2008 LOBBYING REPORT, LOBBYING DISCLOSURE ACT OF 1995 (SECTION 5), at 1, 

available at: http://disclosures.house.gov/ld/pdfform.aspx?id=300043479. 472 See Minority staff report, Is ACORN Intentionally Structured As a Criminal Enterprise? COMM.

OVERSIGHT AND GOV’T REFORM (2009) at 38, 54, available at: 

http://republicans.oversight.house.gov/media/pdfs/20090723ACORNReport.pdf. 473 See Citizen Consulting, Inc. (CCI), 2006 LOBBYING REPORT, LOBBYING DISCLOSURE ACT OF 1995

(SECTION 5), at 2-9, available at: http://lobbyingdisclosure.house.gov. 474 Email from Ronald Sykes (ros8967@me.com) to lobbyinfo@mail.house.gov, Aug. 13, 2009 6:18 PM 

E.S.T. (on file with author). 
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Employee Free Choice Act (“EFCA”), the stimulus, budget, fair housing, and 

immigration issues.475

Because ACORN receives no tax-exempt privileges, it is not required to report its 

political activities to the IRS. The Committee staff has found that ACORN’s abuses on 

the federal level, as described in the ACORN Report, are also occurring within the states 

where it hosts chapters as well.476 

Recent reports claim that ACORN has abused its non-profit status by failing to 

properly separate and segregate lobbying funds from funds used to promote its nonprofit 

purpose. For example, in New York City, city council candidate Mark Winston Griffith 

is one of many candidates who claimed Citizens Services, Inc., a for-profit incorporated 

in New York,477 commingled its finances with ACORN.478 ACORN, through its § 527 

political action committee, allegedly finances the endorsements of these same candidates 

with commingled funds.479

The reports above portray ACORN as a full-time lobbying organization. Several 

members of Congress have expressed their concern that ACORN is nothing more than a 

for-profit lobbying firm.480 

The ACORN Report exposed many instances of lobbying by ACORN and its 

affiliates, including support for specific legislation as well as support for the candidacies 

for several members of Congress and one former Governor.481 The Lobbying Disclosure 

Act requires organizations which engage in a certain amount of lobbying activities 

through personnel compensated to lobby on the organization’s behalf to register and to 

file disclosure reports.482 Lobbying firms or individual lobbyists who are retained and 

compensated over a threshold amount to lobby for ACORN or its affiliates, and who 

engage in the requisite lobbying contacts, are required to file as lobbyists and to identify 

their client organizations.483 There is no general exclusion or exception from the 

disclosure and registration requirements for nonprofit organizations that otherwise meet 

 

475 See Citizen Consulting, Inc. (CCI), 2009 LOBBYING REPORT, LOBBYING DISCLOSURE ACT OF 1995

(SECTION 5), at 2-10, available at: http://lobbyingdisclosure.house.gov. 476 See Minority staff report, Is ACORN Intentionally Structured As a Criminal Enterprise? COMM.

OVERSIGHT AND GOV’T REFORM (2009) at passim, available at: 

http://republicans.oversight.house.gov/media/pdfs/20090723ACORNReport.pdf. 477 Secretary of State, State of New York, CORPORATION DISCLOSURE SEARCH, available at: 

http://appsext8.dos.state.ny.us/ (follow “Corporation Search” hyperlink). 478 Edward-Isaac Dovere, Four Candidates Pour Cash Into Company with Apparent ACORN Ties, CITY 

HALL NEWS, Aug. 26, 2009, at 1-2, available at: 

http://www.cityhallnews.com/news/132/ARTICLE/2105/2009-08-26.html. 479 Id. 480 Letter from Representatives Tom Feeney, Jeb Hensarling and Ed Royce to House Financial Services 

Committee Chairman Barney Frank, June 20, 2008 (on file with author). 

481 See Minority staff report, Is ACORN Intentionally Structured As a Criminal Enterprise? COMM.

OVERSIGHT AND GOV’T REFORM (2009) at 3-6, available at: 

http://republicans.oversight.house.gov/media/pdfs/20090723ACORNReport.pdf. 482 2 U.S.C. § 1603(a)(2), note definitions in §§ 1602(10) and 1602(2). 483 2 U.S.C. § 1603(a)(1). 
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the threshold requirements on lobbying contacts.484 Moreover, because ACORN and 

several of its affiliates received federal funds, the Byrd Amendment requires these 

recipients to declare and certify when they use their own funds to compensate a registered 

lobbyist to influence covered federal actions.485 

An employee engages in lobbying if he or she makes more than one “lobbying 

contact,” and spends at least 20% of his or her time for that employer on “lobbying 

activities” over a three-month reporting period.486 Under the Lobbying Disclosure Act, 

lobbying activities include direct “lobbying contacts and efforts in support of such 

contacts” such as preparation, planning, research and other background work intended for 

use in such direct contacts.487 A “lobbying contact” under the Lobbying Disclosure Act 

is an “oral or written communication (including an electronic communication) to a 

covered executive branch official or a covered legislative branch official” which concerns 

the formulation, modification or adoption of legislation, rules, regulations, policies or 

programs of the federal government.488 The term “lobbying activities” includes 

“lobbying contacts” as well as background activities and other efforts in support of such 

lobbying contacts.489 The Lobbying Disclosure Act requires the organization, rather than 

the individual employee or lobbyist, to register when the organization engages in covered 

“lobbying contacts” through its own staff.490 The organization must file its lobbying 

registrations and reports electronically with the Secretary of the Senate’s Office and the 

Office of the Clerk of the House.491 

The Lobbying Disclosure Act was intended to reach “professional lobbyists,” who 

are compensated to engage in lobbying activities on behalf of an employer or a client.492 

The ACORN Report produced credible evidence that ACORN and its affiliates have one 

or more compensated employees who engage in covered “lobbying,”493 and spend 

$10,000 or more in a quarterly reporting period for lobbying activities.494 If the Report’s 

findings are accurate, ACORN and its affiliates would be required to register under the 

Lobbying Disclosure Act.495 ACORN has not provided the United States Congress with 

accurate information concerning its lobbying activities. 

ACORN’s substantial lobbying portfolio, together with its receipt of federal 

funds, presents a significant risk of fraud, waste and abuse. Because ACORN and several 

of its affiliates are recipients of federal grants, they must use the federal funds for the 

 

484 Jack Maskell, “Political” Activities of Private Recipients of Federal Grants or Contracts, CRS REPORT 

RL34725, Oct. 21, 2008 at 12. 

485 Id. 486 2 U.S.C. § 1602(10). 487 Lobbying Disclosure Act, 2 U.S.C. § 1602(7), P.L. 104-65, §3(7). 488 2 U.S.C. § 1602(8), P.L. 104-65, § 3(8). 

489 2 U.S.C. § 1602(7). 

490 2 U.S.C. §1603(a)(2). 

491 LOBBYING DISCLOSURE ACT, available at: http://lobbyingdisclosure.house.gov/index.html. 492 Jack Maskell, Lobbying Regulations on Non-Profit Organizations, CRS Report 96-809, May 7, 2008 at 

7-10. 

493 H.Rept. 104-339, 104th Cong., 1st Sess. at 2 (1995). 

494 2 U.S.C. § 1603(a)(3)(A)(i). 

495 Id. 
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purposes and programs that were intended to be supported within the statutory scheme 

that authorized the grant.496 As shown in the ACORN Report, ACORN had previously 

used federal funds for partisan purposes.497 Additionally, the ACORN Report produced 

evidence that Project Vote employee Nathan Henderson-James directed an ACORN 

employee to report to the Election Assistance Commission (“EAC”) on ACORN 

letterhead for activities that were carried out by Project Vote, not ACORN – the 

purported grant recipient.498 Concerted activities by individuals that cause federal funds 

from a federal program to be disbursed or used in contravention of the purposes of that 

program, in violation of established regulations of laws, and to be used instead for 

partisan or improper advocacy purposes, could constitute a scheme to “impair[ ], 

obstruct[ ], or defeat[ ] the lawful function of any Department of the Government,” such 

as to constitute a conspiracy to “defraud the United States” in violation of 18 U.S.C. 

§371.499

The Committee’s first report, together with our new findings, reflects (1) ACORN 

commingles its funds, (2) ACORN blurs corporate distinctions, and now (3) ACORN 

shares personnel with its affiliates. These findings render ACORN indistinguishable 

from affiliated organizations that are legally required to be separate. If two organizations 

cannot be distinguished through personnel, finances, or corporate structure, then no 

distinction exists. The missing piece of the ACORN puzzle is the reality that actual 

persons are impermissibly serving dual functions. These findings place another layer of 

transparency upon ACORN’s illegal activities and its complex network of deceit. 

B. Clarifications concerning ACORN’s insiders 

After the ACORN Report was released, former members of ACORN’s board and 

current members of a reform group called “ACORN 8” asked the Committee to clarify to 

the public the distinction between ACORN 8 and the Interim Management Committee 

(“IMC”). 

The ACORN Board established an Interim Staff Management Committee (“ISM” 

Committee) to elect three members (the Interim Management Committee “IMC”) to 

serve on the Committee and report to the Board every month.500 The IMC was a boarddesignated committee temporarily charged with managing ACORN in Wade Rathke’s 

absence. Karen Inman, Carol Hemingway, and Marcel Reid were selected to the IMC.501 

Karen Inman and Marcel Reid were terminated from the ACORN Board. Several 

members of the IMC joined with former ACORN employees and board members to form 

the ACORN 8, a tax-exempt organization whose purpose is to reform ACORN. The 

 

496 United States Government Accountability Office, Office of the General Counsel, 2 PRINCIPLES OF 

FEDERAL APPROPRIATIONS LAW, at 10-71 (2006). 

497 See Minority staff report, Is ACORN Intentionally Structured As a Criminal Enterprise? COMM.

OVERSIGHT AND GOV’T REFORM (2009) at 63-64, available at: 

http://republicans.oversight.house.gov/media/pdfs/20090723ACORNReport.pdf. 498 Id. at 61. 

499 See Dennis v. United States, 384 U.S. 855, 861 (1966). 500 IMC Allegations (Jan. 7, 2009) at 10, 14, 16, 23 (ACORN_004866-004890). 501 Id. 
Page 98 of 99 

ACORN 8, former IMC board members, and former employees of any of ACORN’s 

affiliates are separate sources. 

C. Clarifications concerning the RICO analysis 

In February 2009, the Republican National Lawyers Association (“RNLA”) 

released a report by Asheesh Agarwal concerning ACORN and voter registration 

fraud.502 In March 2009, after the House Committee on the Judiciary held hearings on 

voter registration fraud, the RNLA issued a press release linking to Asheesh Agarwal’s 

report. On March 30, 2009, the Committee staff contacted Mr. Agarwal to discuss his 

RNLA report, and, because Mr. Agarwal had formerly been an attorney with the 

Department of Justice (“DOJ”), inquired whether the DOJ had investigated voter fraud 

during his time there. On the basis of this conversation, Mr. Agarwal sent the Committee 

a memorandum analyzing whether Project Vote could be sued under the civil provisions 

of the Racketeer Influenced Corrupt Organization Act (“RICO”). Mr. Agarwal sent the 

memo to the Committee staff from his personal email account. The memo was untitled 

and without an identifying letterhead. These documents and the Committee’s 

conversation with Mr. Agarwal constituted the basis of the information presented in the 

report. After the release of the ACORN Report, Mr. Agarwal contacted Committee staff 

stating he did not identify the memo to the Committee as the work product of the DOJ’s 

Civil Rights Division. Mr. Agarwal stated he received the memo from a McCain-Palin 

campaign special counsel. Mr. Agarwal would not name this individual or identify the 

date or circumstances of the memo’s creation. On November 5, 2009, Mr. Agarwal 

provided the Committee staff with the original memorandum. The memorandum was 

authored neither by Asheesh Agarwal nor the Department of Justice. The Committee 

staff contacted Beth Stewart, whose name appeared as the author of the memorandum. 

Because of her obligation of confidentiality and the protection of attorney-client 

privilege, she could not comment on the memorandum. 

 

502 REPORT, available at: http://www.rnla.org/ACORNw-pfinal.pdf. 
Page 99 of 99 

About the Committee 

The Committee on Oversight and Government Reform is 

the main investigative committee in the U.S. House of 

Representatives. It has authority to investigate the subjects 

within the Committee’s legislative jurisdiction as well as 

“any matter” within the jurisdiction of the other standing 

House Committees. The Committee’s mandate is to 

investigate and expose waste, fraud and abuse. 

Contacting the Committee 

For information regarding this report:

 

Daniel Z. Epstein, Counsel 

 (202) 225-5074 

 

For press inquiries:

Frederick R. Hill, Director of Communications 

 (202) 225-0037 

For general inquires or to report waste, fraud or abuse:

Phone: (202) 225-5074 

Fax: (202) 225-3974 

http://republicans.oversight.house.gov 

Committee on Oversight and Government Reform 

Ranking Member, Darrell Issa (CA-49) 

B350A Rayburn House Office Building 

Washington, DC 20515 

Phone: (202) 225-5074 • Fax: (202) 225-3974