Lawsuit over ACORN filed in New Orleans Court

by Rebecca Mowbray, The Times-Picayune
Wednesday October 01, 2008, 8:34 PM

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

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

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

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

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

Credit card use

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

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

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

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

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

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

---snip---

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