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Acorn Report

Acorn Report

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Published by: api-16972965 on Sep 21, 2009
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09/28/2013

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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 88
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\u2019s Embezzlement.................16

a) ACORN Violated ERISA..................................................................................................... 22 b) ACORN Breached Its Duty of Care..................................................................................... 29 c) The Embezzlement Is An \u201cExcess Benefit\u201d Transaction Prohibited By The IRS................ 31

2. ACORN Breached Its Corporate Duties by Failing to Abide by its Bylaws....................................31
3. ACORN\u2019s Financial and Structural Mismanagement Has Led to Its Failure to Uphold Its
Corporate Duties................................................................................................................................35
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 Violated 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

#
Page 3 of 88
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\u2019s embezzlement of $948,607.50 as an excess benefit transaction, ACORN
appears to have violated the Internal Revenue Code. ACORN\u2019s 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.

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