Missing ACORN funds spark lawsuit, power struggle
By MICHAEL KUNZELMAN – 5 hours ago
NEW ORLEANS (AP) — ACORN, the national activist group dogged by a high-profile voter registration fraud scandal, has another bruising item on its agenda when its board of directors meets here this weekend.
Leaders of the Association of Community Organizations for Reform Now are locked in a legal dispute stemming from allegations that the brother of the group's founder misappropriated nearly $1 million of the nonprofit's money several years ago.
The embezzlement case, a recent revelation to some board members, has spawned a lawsuit and set off a power struggle inside ACORN at a time when the liberal group's voter registration practices are the subject of fraud investigations and fodder for presidential campaign attacks.
Bertha Lewis, ACORN's interim chief organizer, called the lawsuit "a distraction from us marshaling our forces to deal with the Republican right-wing attacks" over ACORN's voter registration.
The lawsuit filed in August by two board members accuses ACORN founder and former chief organizer Wade Rathke of either concealing or failing to properly report that his brother Dale embezzled around $948,000 from New Orleans-based ACORN and affiliated charitable organizations in 1999 and 2000.
Instead of reporting the allegations to law enforcement authorities, a small group of ACORN executives allowed the Rathke family to repay the misappropriated money, according to the lawsuit brought by board members Karen Inman and Marcel Reid.
Inman and Reid said the agreement, which called for the stolen money to be carried on the books of an ACORN affiliate as a loan to an officer, was kept a secret from the full 51-member board until earlier this year.
"We need to find out what happened, when it happened and make sure that ACORN is viable," Inman said during a press briefing about the dispute Thursday in New Orleans. Inman also says she wants an independent audit of ACORN's books.
Rathke, who founded ACORN in 1970, defended the decision to keep his brother's actions an "internal matter" and resolve it with "private restitution." Reporting the case to law enforcement could have left the group at risk of financial ruin, Rathke said.
"One choice would have been to go that way, but then we wouldn't have been able to collect that money," he said.
No working phone number for Dale Rathke could be found and a request by The Associated Press to contact him through his brother wasn't immediately answered.
Lewis said the group's board recently hired attorneys to explore whether Dale Rathke's actions warrant a criminal investigation or could be the subject of a civil case.
"Remember, we just found this out in June," she said.
Rathke said he took responsibility for his brother's "mistakes" by resigning, while Inman says he was fired. Rathke blames a "small group of dissidents" for the turmoil that has followed his departure.
"I wish they would have kept the internal affairs of the organization internally," he said.
Inman and Reid filed suit for access to ACORN financial records that staff members allegedly refused to give them.
During their meeting this weekend, board members are expected to discuss the lawsuit and explore ways to resolve it. A state judge presiding over the case has asked for a transcript of the board's discussion.
Lewis said Inman and Reid don't speak for the entire board and didn't have authority to file suit on the board's behalf.
"As you can well imagine, any organization that just fired its founder after 38 years would have internal issues," she said.
Wade Rathke says he stepped down as ACORN's chief organizer in June, but remains chief organizer for ACORN International. A spokesman for ACORN said the two organizations are separate entities, although they have shared office space in New Orleans.
Rathke shrugged off the board members' lawsuit, calling it a "minor matter," and expressed confidence that the voting registration controversy won't consume the group.
"ACORN is a big organization now, and they're big enough to weather this," he said.
ACORN, which says it has more than 1,200 chapters in 110 cities, has become a household name in this year's presidential election. During his debate Wednesday with Democrat Barack Obama, Republican John McCain said ACORN could be on the verge of "destroying the fabric of democracy."
ACORN is accused of submitting false voter registration forms for some of the 1.3 million young people, minorities, and poor and working-class voters it has registered. The FBI has joined nearly a dozen states in investigating.
Some of ACORN's rank-and-file members in New Orleans fear the double dose of bad publicity could have a chilling effect on fundraising and jeopardize the group's work on the city's fragile recovery from Hurricane Katrina.
Vanessa Gueringer, who chairs ACORN's chapter in the city's Lower 9th Ward neighborhood, said the embezzlement case isn't stopping volunteers from gutting homes, registering voters and campaigning for better access to health care in storm-battered New Orleans.
"We look at this as a ripple in the pond — something that happened eight years ago and has been resolved," she said. "Our hope is that people won't focus on the negative and focus on the positive."
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