As a tactic for generating federal subsidies, “bait and switch” works. Case in point: The now-defunct Association of Community Organizations for Reform Now, or ACORN. The blogosphere has been alive during the past week over the release this past March by the U.S. Department of Housing and Urban Development (HUD) of a grant of nearly $80,000 to Affordable Housing Centers of America, which until 18 months ago operated as ACORN Housing Corporation. Though the grant was a carryover from fiscal year 2010, the revelation notwithstanding raises the possibility that the Obama administration is ignoring a 2009 congressional ban on federal support to ACORN and its affiliates, a ban overturned by a lower court but restored by a federal appeals court.
National Legal and Policy Center on many occasions over the last several years has recounted the disturbing saga of ACORN, a nationwide nonprofit network which came to represent about 1,200 community-oriented organizations with 400,000 dues-paying households. Founded in Little Rock in 1970 as a project of the then-powerful (and defunct since 1975) National Welfare Rights Organization, ACORN, eventually relocating to New Orleans and building a strong Washington, D.C. presence, grew rapidly during the Eighties and Nineties. Its appeal was explicitly political. As a recruiting tool, especially for the Democratic Party Left, ACORN rested on the conviction that for residents of low-income communities to better their lives, they had to seize the reins of power from institutions perpetuating unjust policies. Street agitprop is primary way that the meek become mighty. An effective anti-poverty program, as the group’s Saul Alinsky-inspired worldview had it, must steel itself for aggressive confrontation in the service of political self-empowerment.
National and local ACORN leaders, as a matter of course, cut legal and ethical corners. At various points they used (or justified the use of) vandalism, assault, threat and property invasion to shake down banks, foundations and government agencies for funds. ACORN also employed various forms of deception, including voter registration fraud, tax evasion and embezzlement. Beginning in the middle of the last decade, the ACORN network, which had grown to about 360 subsidiary or affiliate organizations and took in roughly a combined $100 million annually from all sources, underwent deserved and growing public scrutiny. ACORN-affiliated volunteer activists in Missouri, Ohio and several other states pleaded guilty to generating phony voter registration cards. The State of Louisiana filed tax liens against ACORN and an affiliate totaling more than $330,000, while the IRS demanded in excess of $1.5 million in back taxes. ACORN founder and chief organizer Wade Rathke was forced out of his post as chief organizer in June 2008 following the embarrassing revelation that he likely had covered for his brother, Dale, in the latter’s embezzlement of nearly $950,000 in association funds during 1999-2000 – neither was prosecuted.
The federal government took notice starting in 2009, once President Obama, a longtime ally of the group, took office. Though never formally a member, Obama, while a Chicago lawyer, had represented ACORN during the mid-Nineties in its successful attempt to force the State of Illinois to comply with the new federal “motor voter” law mandating loosened voter registration requirements – a law whose existence owed largely to ACORN pressure. Rep. Darrell Issa, R-Calif., Ranking Republican on the House Oversight and Government Reform Committee, supervised a detailed report released in July 2009 concluding that ACORN was structured as a racketeering enterprise. Two months later, a well-publicized multi-city private sting caught ACORN office employees giving a male-female “couple” advice on how to break the law. The result was a public relations nightmare for the group.
In response, the IRS and the Census Bureau cancelled planned partnerships with ACORN; the Federal Emergency Management Agency (FEMA) pulled a nearly $1 million grant to an affiliate known as the ACORN Institute of New Orleans; and Congress, as part of fiscal year 2010 appropriations legislation, barred further funding for the organization and its affiliates. President Obama signed the law, known as the Defund ACORN Act, on October 1, 2009. ACORN and its attorneys promptly went to federal court to block the law from taking effect, first obtaining a preliminary and then a permanent injunction from U.S. District Judge Nina Gershon of the Eastern District of New York. A three-judge appeals court in August 2010, however, overturned the lower court, ruling the new law had not violated the constitutional ban on bills of attainder. At least half of ACORN’s 30 state chapters severed their ties to the national organization, reconstituting their activities under new names. ACORN headquarters, sensing further operation under its moniker was a liability, filed for Chapter 7 liquidation last November, decrying “right-wing attacks” in the process. And this past June 20, the U.S. Supreme Court let stand the appeals court ruling.
The ACORN brand name no longer exists, but it has been reconstituted under new names. ACORN Director of Strategic Writing and Research Development Nathan Henderson-James, in a lengthy e-mail nearly a year and a half ago, readily admitted as much. The Chicago-based ACORN Housing Corp. (AHC), which formally reorganized itself in Florida in January 2010 as Affordable Housing Centers of America Inc. (AHCOA), plays the name game well.
ACORN Housing Corp., a 501(c)(3) nonprofit group, founded in the mid-Eighties, was arguably the most crucial branch in the ACORN tree, even more than ACORN itself. Most, if not virtually all, of the $53 million in the ACORN network’s federal funding during 1994-2009 went to AHC, courtesy of the U.S. Department of Housing and Urban Development (HUD), much of that to provide pre- and post-purchase counseling for lower-income homebuyers. Since 1997, AHC in turn had routed more than $5 million to other entities within the ACORN fiefdom. The foreclosure crisis of 2008 prompted a shift in its resources to foreclosure prevention counseling.
ACORN Housing Corp., like ACORN, had credibility problems of its own. Last September, eight months after morphing into Affordable Housing Centers of America, HUD’s Office of Inspector General (OIG) released the results of its audit of the group. The report concluded that most of the combined $3.25 million that AHC received during fiscal years 2008-09 went for ineligible or otherwise unsupported expenditures. This sum did not include more than $27 million from non-HUD sources, mainly the congressionally-chartered nonprofit entity, NeighborWorks. Until the group’s problems are rectified, concluded the OIG, HUD’s Office of Single-Family Housing should consider placing AHCOA on “inactive status,” providing technical assistance as needed.
Apparently, it was a quick turnaround. On March 1, 2011, HUD announced the awarding of more than $40 million in grants to more than 100 organizations to combat housing and lending discrimination. The money, drawn from fiscal 2010 appropriations, represented a nearly 50 percent increase over the previous year. One of the recipients listed under the category, “Education and Outreach Initiative Grants,” was Affordable Housing Centers of America. Total amount: $79,819. This may seem a piddling sum compared to previous years. But AHCOA, with offices in 19 cities, 14 states and the District of Columbia, has little intention of letting opportunities slip by. The group believes that all Americans, regardless of financial circumstance, should have the right to own a home. The group’s mission statement includes the following position:
Underscoring our mission are our values and commitment to social justice. We believe that everyone should have the opportunity to own and maintain a home when they are ready. Life’s stumbling blocks, such as unemployment or sickness, should not be barriers to the American Dream of homeownership. We also remain committed to ridding our communities of predatory lenders who prey on unsuspecting homeowners.
Now the idea of a right to own a home, though few have understood this, lay at the heart of the ongoing mortgage meltdown that began in 2008. By intimidating the banks and other mortgage providers into extending credit to unqualified (“underserved”) and especially minority borrowers, ACORN and other nonprofit activist groups, along with Congress and regulatory agencies, exposed the industry to high rates of default and foreclosure; the securities backed by these mortgages likewise took a huge hit, a collapse that reverberated throughout the globe. Much of the housing “counseling” these groups provide is politically motivated, resting on the idea that a rejection of application for a mortgage loans may constitute an act of illegal discrimination. “Predatory” lending was an outgrowth, however egregious, of the entitlement mentality.
Affordable Housing Centers of America, aside from being old wine in a new bottle, raises credibility questions. For one thing, its main office is located at 209 West Jackson Boulevard, Suite 301, Chicago, IL 60606, the same address as its predecessor. Yet it has a Florida charter. Why didn’t the group seek its charter from the State of Illinois? Second, the $79,819 HUD grant announced this March might well contravene the ban on the use of federal funds for ACORN. Literally, of course, it doesn’t. Though the law prohibits funds for “ACORN and any ACORN-related affiliate,” ACORN no longer exists. Yet the name change is part of a systematic hustle. By setting up hundreds of seemingly independent tax-exempt and taxable organizations, ACORN and its allies managed to hide its internal flow of funds while minimizing tax liability. The erasure of the ACORN brand name fools only the naïve. The social-political networks that facilitated ACORN’s rise remain in the “on” position. And so will the federal money.
It is instructive that this past January the Obama administration rescinded a $461,086 HUD grant to AHCOA for local self-help urban homesteading programs previously reported as current by the federal government’s www.USAspending.gov database. The money represented an unspent block of funds from fiscal year 2005. So what changed between January and March? Perhaps Congress can address this issue before HUD or other federal agencies issue further grants.