By any reasonable standard, Reverend Al Sharpton is the most powerful black civil-rights leader in New York City, if not the entire nation. So why are the finances of his nearly two-decade-old nonprofit organization, National Action Network (NAN), in such apparent shambles? A number of people, including the IRS, a prominent New York accounting firm and the management of Memphis’ finest hotel, would like to know. Ironically, the group’s troubles, highlighted in a recent investigative report appearing in the New York Post, have occurred despite an infusion of more than $100,000 from a philanthropy driven by one of America’s richest men. One dreads to think what the federal deficit would look like today had Sharpton been elected president in 2004.
For all his clout, “The Rev,” as Sharpton is known, can’t seem to catch a break these days. His rally in Washington, D.C. on August 28th to commemorate the 47th anniversary of Martin Luther King’s “I Have a Dream” speech drew a scant 3,000 persons. That’s a small fraction of what Glenn Beck’s “Restoring Honor” rally attracted down the street that same day. Few could deny this was a severe public-relations setback for Sharpton. But his more immediate problem is the survival of his nonprofit organization. Grim evidence comes from a recent independent audit of National Action Network’s books for 2008 by the Manhattan-based accounting firm of KBL. Dated April 2, 2010, the audit stated that NAN might not survive unless it gets its house in order. “The organization has suffered recurring decreases in net assets – and has been dependent upon advances from related parties and the nonpayment of payroll tax obligations – to maintain continuity,” noted KBL. The auditors noted that a reaching a definitive conclusion was difficult “because of inadequacies in the organization’s accounting records.” And ominously: “These circumstances create substantial doubt about the organization’s ability to continue.”
Given Sharpton’s uncanny ability to corral financial support from major corporations, one would think National Action Network has sound balance sheets. Yet it’s a deeply troubled operation. The warning signs long have been around. During the past decade, the IRS filed dozens of tax liens against NAN. And that’s just federal taxes. By the close of 2008, noted the KBL audit, National Action Network owed a combined $1.348 million in back federal, state and city taxes and penalties. Sharpton’s got other problems as well. The Federal Election Commission in April 2009 fined NAN $285,000 for violations Sharpton allegedly committed during his 2004 presidential campaign, such as transferring NAN funds to his campaign account. In 2004, the FEC had ruled the campaign had to return $100,000 in federal matching funds and forgo another $79,709 for which he purportedly had qualified. Sharpton also apparently has stiffed private creditors. The KBL audit discovered NAN was a defendant in five lawsuits. The historic Peabody Hotel in Memphis, site of NAN’s annual convention during the first week of April 2008, sued the organization for failing to pay an outstanding $70,000 tab from that event. NAN is challenging the suit. The audit also indicates that a Madison Avenue travel agency, Alpha International Travel, in August 2003 filed suit against Sharpton’s organization to recover $50,000 in unpaid hotel and airline reservations. While NAN claims it has settled the case, the original suit indicated Alpha had demanded payment of $193,000, or nearly four times as much. The company had run through Sharpton’s American Express card for purchases during May 2001-August 2002, only to have the transactions declined. In another case, the landlord of National Action Network’s Arizona chapter in Phoenix recently accused the group of skipping on the rent. NAN headquarters disputes the claim.
Why can’t a top accounting firm get accurate numbers? It might be that Sharpton doesn’t want the numbers to be available, especially when an investigation looms. Case in point: National Legal and Policy Center in 2004 filed a complaint with the Federal Election Commission over Sharpton’s campaign finances, triggering an FBI probe. Records sought included an invoice for a questionable $25,000 “consulting fee” paid by Detroit-based restaurant franchisee La-Van Hawkins to Sharpton. Evidence of the transaction somehow disappeared, according to Sharpton. According to the NLPC complaint:
While Al Sharpton has been described in many ways, ‘business consultant’ is not the term that typically is used. This payment by an individual who subsequently became a major donor and then some to Sharpton’s campaign is all the more questionable given the statement by the Sharpton campaign that records for some of his ‘consulting’ work were destroyed in a fire which also destroyed other records about honoraria and income earned by Sharpton.
This “dog ate my homework” story had a familiar ring. Back in 1997, a fire of mysterious origin allegedly destroyed NAN records shortly after Sharpton vowed to disclose the group’s financial data in the face of a probe. Sharpton and his top people insist that the situation has improved. “We determined not to file for bankruptcy but to make NAN solvent, which we clearly have done and will be reflected in [upcoming reports],” remarked Rachel Noerdlinger, National Action Network’s public relations consultant and a close confidante of Sharpton. She added that Sharpton and NAN’s board of directors put up “over seven figures” to begin paying off delinquent taxes. “By the end of the calendar year 2010,” Noerdlinger asserted, “there will be no tax liabilities as per our agreement in ’08 with tax authorities.”
Achieving that goal (among others) will require a serious revenue boost. Sharpton knows at least one place to look: New York City Mayor Michael Bloomberg, a man whose Forbes magazine-listed net worth of $17.5 billion last year made him the eighth-richest person in America. Bloomberg, who made his fortune through the business information service he founded, has come to see Sharpton as a friend and ally. In April 2009, the mayor described Sharpton as a “calming influence on the city,” adding, “I don’t agree with him on everything, but on balance I’ve become over the years, a Sharpton fan.” This seemingly odd coupling failed to result in an endorsement in last year’s mayoral race, Sharpton having thrown his support behind Democratic City Controller William Thompson, a fellow black. Bloomberg, a Democrat-turned-Republican-turned-Independent, won re-election by a surprisingly tight 50.7-to-46.3 percent margin. But there was more to the relationship than would-be endorsements.
Bloomberg’s admiration for Sharpton, one must understand, is genuine. And much of this good will has come about from Sharpton’s focus as of late on education issues. The mayor and City Schools Chancellor Joel Klein now regularly consult with Sharpton. They see the Reverend as a trusted partner in a quest for obtaining equal schooling outcomes by race, especially given the mandates of the federal No Child Left Behind law. Klein was a featured speaker at National Action Network’s annual conference in Manhattan last year. Now the idea of Sharpton as a “calming influence” on any city may seem daft, but it’s a view shared by many opinion-shapers (e.g., Newsweek magazine), convinced he’s mended his bad old ways.
In addition to being partners, Bloomberg and Sharpton also are creatures of self-interest. And back in 2008, though not necessarily operating on the same page, they were mutually indebted. Bloomberg was planning a run for a third term as mayor. He faced an obstacle: New York City voters in 1993 had approved a referendum creating a two-term (eight-year) mayoral term limit. Bloomberg was bent on extending it. In 2008, he persuaded the City Council to enact an extension to three terms. The move survived a court challenge, but it might not have passed in the first place had Sharpton and his allies raised a ruckus. Fortunately, Bloomberg and Klein have been key figures in a new philanthropy called the Education Equality Project. Sharpton, if nothing else, needed money. And Bloomberg had plenty of it. According to a report appearing in the New York Daily News last month, National Action Network in 2008 received $110,000 from the foundation. Indeed, on the day Bloomberg announced his candidacy for the 2009 mayoral race – October 2, 2008 – the first $50,000 of this grant was transferred to NAN. Sharpton’s group received the $60,000 balance a little over two weeks later. But where did the Education Equality Project get its money? Records show that its revenues that year came from two anonymous donations of $250,000 each. Or perhaps they weren’t so anonymous. Mayor Bloomberg spokesman Stu Loeser, while not discussing specifics, confirmed to the Daily News that the mayor had given money to the project in 2008. By definition, then, Bloomberg contributed at least $250,000 and possibly $500,000.
Though Sharpton wound up endorsing Thompson for mayor, he kept an unusually low profile during the campaign. Whispers abounded: Somebody had been keeping Sharpton quiet. Sharpton since has proven an adept political hustler. He denied NAN had gotten any Education Equality Project funds – “not that I know of,” he told the Daily News. He also insisted that he had opposed, and not simply didn’t support, Bloomberg’s successful term-limit gambit. “When the mayor changed term limits, I’ve been on the record against it all along. The mayor has no financial arrangements, before or after, with us.” The Daily News report, however, could find no public statements verifying this claim. Sharpton also stated that he eventually quit the project because he opposed Bloomberg’s successful effort to renew mayoral control over public schools. Moreover, this August 7, Sharpton publicly denounced the mayor’s attempt to make city elections nonpartisan. His effort quickly paid off; Bloomberg abandoned his plan barely 48 hours later.
It’s difficult to tell who’s winning this political cat-and-mouse game. Sharpton got his emergency cash and denied everything afterward. Bloomberg got his re-election. Each remains a mutual admirer. But it is clear Reverend Al desperately needed money in 2008 and still needs it today. National Action Network has anxious creditors waiting in the wings. And rather than downsize, Sharpton instead has opened NAN chapters across the country. Cost-containment doesn’t seem to be a high priority. Then again, it might not have to be. Despite the negative publicity over his being bankrolled by a Bloomberg-connected charity, Sharpton may well go to that well in the future, albeit with less room for detection.