Oral History/Testimonies

The Fall of ACORN and the Timidity of Progressive Funders

Editors’ Note: As regular readers of HistPhil will know, we ordinarily publish the work of scholars who write, or reflect on, the history of philanthropy. We have occasionally published comments of practitioners or observers who have something important to say to an audience of those interested in the history of philanthropy. The following post is a little different, since it is in effect a new primary source document for the recent history of foundation philanthropy. It has been written by Drummond Pike, the founder and former president of the Tides Foundation, and it brings a new perspective on an important development in the recent past – the tension that arose between grantmaking foundations and more radical grantee organizations. The editors publish Pike’s first-hand account in the belief that it sheds new light on a significant dynamic within our field. But the complex events that it describes demand further analysis and we will be happy to receive and consider responses to Pike’s post.


This is the story of how “progressive foundations” abandoned one of the most successful community organizations ever built in America and let the GOP kill it off, along with the hopes of its half million members in 2010. I played a small role in the drama, which I had tried to keep below the radar…unsuccessfully, as it turned out.

By way of background, I founded the Tides Foundation in the mid-1970’s as the first national sponsor of donor advised funds and as an incubator for start-up nonprofit initiatives that later became the Tides Center. Tides’ purpose was always to support innovative and progressive ideas, social and economic justice, and environmental sustainability.

I’ve waited ten years to write this memoir of one of the most complicated, and sad, stories in the history of “progressive philanthropy.” Now that I am long out of the field, having retired from The Tides Foundation in 2011 after 35 years, I have had a long time to reflect and still find myself confused by the attitudes and motivation of colleagues in the field during the summer of 2008. But first, a disclosure or two. ACORN’s founder, Wade Rathke, has been a close friend since almost the day we met in 1972 when he was slogging through the building of ACORN’s first statewide operation in Arkansas on a hot, muggy day. I was with the Youth Project, an intermediary I had helped form out of the Center for Community Change. We were in the hunt for community-based organizations that engaged young people and ACORN fit the bill. Edgy, focused on low- and moderate-income communities, it drew inspiration from both the Alinsky organizing tradition and from the more recent National Welfare Rights Organization, but had ambitions more akin to the farm labor organizing in the upper Midwest during the early part of the twentieth century.

Even in those days, ACORN had a complicated, strained relationship with the few foundations that would even meet with it—Stern Fund, Norman Foundation, Field Foundation and very few others. This organization, with its multi-racial staff, leadership, and constituencies, was definitely doing classic community organizing—starting neighborhood groups and identifying local issues to fight for—but spoke about building political power and saw a future of multiple state organizations acting in concert. To ACORN, issues of power led to an understanding of class, and that suggests at least one reason taking money from foundations—institutions formed by the upper class—might have been difficult. Despite America’s myth of social mobility, ACORN accurately saw how rare actual change happened for poor and low-income people. The organization sought to make that change happen.

The growth of ACORN is one of the most remarkable civil society stories of the final decades of the twentieth century. During the 1970’s, as conservatives chipped away at Lyndon Johnson’s War on Poverty, targeting agencies like OEO and VISTA, ACORN rallied support for them where it could and expanded out of Arkansas, first to South Dakota, and then to each of the immediately surrounding states of Louisiana, Tennessee, Texas, and Missouri. Through such efforts, ACORN started to see itself as a national group. Through the next thirty years, the organization grew a presence in some 38 states. In all, 1000 organizers supported a half million members. And they did things. They pushed to raise the minimum wage, they worked on the earned income tax credit, and they challenged the banking industry on redlining.

By the early 2000’s, following passage of the CRA (Community Reinvestment Act), they were opposing mortgage lending companies to stop “predatory lending,” high interest rates, and discrimination toward low-income people at major financial institutions like Citigroup, Wells Fargo, Bank of America, and HSBC. And they were edgy. They would literally have busloads of members occupy offices of the likes of Newt Gingrich, Chicago Mayor Richard Daley, and Bill Clinton and demand protection of entitlements, living wages, or fair housing. During this period, they also took over management of Project Vote which had run voter registration programs and get-out-the-vote programs for a number of election cycles. Not infrequently, Project Vote relied on ACORN organizers as their “boots on the ground.” With ACORN as its backbone, Project Vote grew into progressives’ most effective voting-related infrastructure. They had the ability to work with people in low-income communities that the cyclical political operations could not reach, because they worked with them year in and year out and were not building something that would shut down once the votes were counted.

The year 2000 was complicated for many reasons: remember Y2K and the fear that corrupted embedded code would throw society into dysfunction? That year also ushered in a restoration of the Bush family to the Executive branch. During the administration of George Bush (’88-’92), ACORN had been subjected to unrelenting pressure and investigation by the grand juries triggered by the Bush Labor Department because of ACORN’s labor union (Local 100). And after 1994, the Gingrich Congress itself went after ACORN as well. None of this produced anything of merit—no exposure of malfeasance, no misused funds, nothing. Eight years later as George W. Bush loomed large on the national stage, Karl Rove seemed to have a mission to damage the group as much as possible for the simple reason that they were effective—part of his “de-fund the left” strategy. This background is important because it was in the spring of 2000—before the election—that ACORN first learned of a scandal that would rear its ugly face publicly eight years later.

While close to the organization and its founder, I never knew about any of this until early June 2008, when the shocking news arrived in a voicemail that Wade Rathke, the remarkable founder of ACORN, had resigned as rumors of financial impropriety began to circulate both within and outside the organization. As the story eventually unfolded, Wade had learned from a bookkeeper eight years earlier that there were irregularities with ACORN’s corporate American Express account. His brother, Dale, who had overseen the organization’s finances for many years, had diverted some $960,000 for personal or non-organizational uses in a relatively short period of time. This had been devastating news to the few inside the organization who learned of it as the 2000 Presidential campaign raged on.

By early 2000, when the discovery was made, ACORN had achieved remarkable scale. It had developed a unique structure—combining 501c(3) training organizations, c(4) advocacy groups, non-profit housing groups, and, at its base, a membership organization that was not tax-exempt. With central financial and managerial services, it was as unusual as it was effective, and lent itself to a complicated revenue structure: government grants, membership dues, fees for service (like help with tax preparation), CCHD grants (the big Catholic fund for low-income initiatives), and, of course, support from the more daring progressive funders in the foundation community. When the malfeasance became known internally, there was a lot on the line.

Rathke’s response at the time, we all later learned, was to inform the Executive Committee of ACORN’s 50+ person board and hire outside counsel and forensic accountants to sort out what happened, but to otherwise keep the information very close to the vest. As I was not party to any this, I do not know what the conversations were like in the Rathke family, but years later we found out that, as the discovery process went forward, the Rathkes had agreed to annual payments backstopped by a pledge of Dale’s future inheritance to repay the loss. Such a private restitution is not unusual in the commercial world where companies seek to preserve brand identity, etc. But in the non-profit world, not so much. In this case, the loss became a receivable, regularly recognized in annual external audits, and the organization moved on. In the next eight years, it continued to grow, all the while irritating those in power with its increasingly effective blend of voter activation/registration/GOTV efforts with issue advocacy, often centered on the shaming of financial industry practices, like predatory lending, that led to the Great Recession.

In the late spring of 2008, when another pivotal national election was generating heat, both Barack Obama and John McCain were racking up primary victories, and Project Vote was hard at work, rumors began to circulate within funding circles—including those investing in Project Vote’s work—that there was an unrevealed scandal in ACORN. In typical foundation-world style, facts were few but curiosity deep.

It was a faxed query from Needmor Fund’s executive director that began the unraveling of the organization during their May staff gathering in New Mexico. Dave Beckwith had taken several of his board on a site visit to the New Orleans national office when an unhappy staffer shared what he knew, so Beckwith contacted Steve Kest, the senior person who handled ACORN’s foundation fundraising responsibilities.

Almost immediately, the large national ACORN board and dozens of staff became engrossed in the conversation—what happened? When? Who knew? Was grant money involved? Deep conflicts emerged about the restitution agreement reached years earlier. As the Board debated and fractures deepened, Wade Rathke, the founder who had made it all happen for 38 years, resigned to the ACORN Executive Committee in order to take responsibility, a stunning development to many observers.

What happened next is most interesting, especially in the context of the national political climate at the time. Foundations, from little ones like Needmor and Streisand, to larger ones, like Cummings and Atlantic, formed an ad hoc committee and effectively froze the funding for all the voter work connected to ACORN/Project Vote while they looked into the scandal. For weeks, the organization struggled to deal with an unexpected change in leadership (Rathke was eventually replaced with Bertha Lewis—an outspoken New Yorker and no particular fan of Rathke), and, even more importantly, a crisis of frozen funds.

I personally had a role in what happened next. I had had some remarkable good fortune in the business world years earlier, having been among the founders of Working Assets Long Distance (now Credo Mobile). I spoke with some of the new leadership at ACORN about whether purchasing what remained of the restitution note, by then reduced by eight years of payments from the family, would help the organization. Troubled by the already high-profile nature of the scandal, I spoke with Tides’ board chair and told him of my intentions to act personally in this matter, but to do so in the most confidential way I could through the services of a lawyer. In early July, I effected the purchase anonymously.

A couple of things happened as a result. The new leadership at ACORN was able to go to the “committee” of funders to say that all the cash was back in the organization and no foundation funds had been “lost.” The panic some had expressed about whether their grants had been stolen years earlier began to subside, and slowly funds became unfrozen and voter work revved back up as Obama was gearing up for the convention in September.

I remember two indelible conversations with colleagues in the field during this period. With my friend Gara LaMarche, a member of the funders committee, I argued about whether the original restitution agreement was an acceptable resolution. In his view, it was not; he believed Dale Rathke should have been publicly identified as the culprit and the matter turned over to the authorities, regardless of the consequences to the organization. A matter of principle trumped the decision of a membership-governed organization. Good governance was good governance regardless of consequences. My argument was simple: if they had done so, ACORN would have been crushed by the political forces of the right—as indeed the organization was a year and a half after Bertha Lewis replaced Rathke.

Wade had been one of our founding board members at the Tides Foundation in 1976, and still served. He was one of the best, most thoughtful board members with whom I have ever worked, and I was reluctant to let this controversy affect his continued service. Despite his brother’s actions, he had never been accused of doing anything wrong other than to participate in the quiet private restitution agreement. But funders felt differently. As the Tides board headed toward the fall and our annual Momentum Conference, pressure built.

For example, Lance Lindblom of the Cummings Foundation suggested that they would likely not fund any Tides Center project or Tides Foundation funding collaborative if Rathke continued to serve on our board. In one short meeting, he tested my personal commitment to a long-time colleague against my organizational commitment to Tides. I have rarely felt such excruciating pressure. During the fall Momentum Conference in San Francisco and associated Tides board meetings, I wrestled with the board over the question of Wade’s future, still advocating for us to stand behind him and suffer the consequences. In the end, the board disagreed, and Chair john powell asked Rathke to step down from the Tides board. It made hosting the stage for our two-day conference among the more bizarre experiences of my life.

During this period, a related matter emerged out of my attempt to anonymously purchase the remaining note. While I had informed my board, I had held steadfast to my right to act as an anonymous individual. This included not telling my own senior staff of around ten people. Once committed to anonymity, one has to honor the decision completely. But the rumor mill had heated up unrelentingly. Many knew of my longstanding support for ACORN and relationship with Wade Rathke and many suspected that I had been the anonymous purchaser. I even had some long-time colleagues like Marge Tabankin at the Streisand Foundation call and ask. To all, I had the same reply: “I do not discuss my personal finances with anyone.” What I had not expected was that the matter would not just go away. New York Times reporter Stephanie Strom had broken the story in June with a follow-up a bit later. She then focused on me for reasons that still elude me. In her mind, it was big news that the personal life of a foundation executive might have been involved in the ACORN matter. She called on more than one occasion for “confirmation” of her source, whoever that might have been, to which I responded as always that I did not comment on my personal financial affairs. Period.

The second memorable conversation happened weeks later when I was driving down to my annual trip as a rafting guide in the Grand Canyon: one with the venerable Pablo Eisenberg, a colleague of many years, who had penned a piece calling for ACORN’s board to be replaced by a board of funder-approved trustees who would guide the organization toward proper governance. I remember vehemently disagreeing and taking the position that if funders wanted to empower community organizations, they had no business dictating governance structures or procedures. Little “d” democracy in membership organizations should be respected. This was not some corrupt union siphoning off pension fund money or something. Instead, an organization’s members should have their votes respected. The underlying concern for me was that funders’ penchant for paternalistic and condescending relations to their grantees risked rising to the fore. It does not strengthen an organization to dismiss its leadership, even when funders don’t admire the decisions made.

As it happened, several days into my Grand Canyon trip, the New York Times’s Strom was given some internal ACORN emails that corroborated her source and she published a small story revealing that I had purchased the ACORN note. This was broadly taken to mean that I had “bailed out” the group and “given” them the cash. In truth, I bought an obligation which has largely been paid down in ensuing years. But the taint on the organization as a result of her reporting was never counterbalanced by reporting about the remarkable impact of their work to register and mobilize hundreds of thousands of low-income voters in myriad states. Reactivated, ACORN and Project Vote had played a role in Obama’s successful campaign for President. Not enough scandal in that, I suppose, to merit Times coverage, but it was by far the more important story.

In January 2009, with Senator Mitch McConnell vowing to do everything he could to make Obama a one-term president, Fox News launched the Glenn Beck show, and thus began years of malicious and false reporting on the “great left-wing conspiracy” to topple American free enterprise. Photos of George Soros, Wade Rathke, Van Jones, SEIU’s Andy Stern, and, yes, even my own ugly puss, went up regularly on his board, in an attempt to expose a sinister left-wing conspiracy. Soros, of course, became the “puppet-master” (a veiled anti-Semitic meme), though how an enormously successful capitalist could be seen as fomenting a communist revolution is still beyond me. But one result was clear: in no small part because of the earlier financial scandal, ACORN was too hot to fund, even for the more thoughtful foundations. In a sea of requests, why would one want to risk showing up on Glenn Beck’s bulletin board when much safer options were begging for help.

By late 2009, ACORN was in dire shape. With impeccable timing, the right-wing video provocateurs James O’Keefe and Hannah Giles constructed a highly-edited videotape purporting to show ACORN staffers advising a pimp on how to avoid taxes. Though later debunked, the video showed up many times on Fox News, and the death knell for the organization started to toll. It was excruciating to watch: the country’s largest and most effective advocate for poor and low-income people was squashed because of a right-wing lie—and the reluctance of prior supporters, numerous foundations among them, to defend it. It wasn’t until the following year that the New York Times public editor explained how the paper had missed the mark in its reporting of the “sting,” but by then, the die was cast. By November 2010, as Tea Party Republicans retook the House, ACORN declared bankruptcy. Various of its state operations reformed and continue the work—albeit without the strategic clarity and heft of a national organization. Successors abound, but like Camelot, they are still moved by the promise of what once was.

Addendum

In 2010, as I began my 35th year as CEO of Tides Foundation (and related entities), I decided it was time to step down. It was two years after all the ACORN issues had come and gone, and I had completed a structural re-integration of the organization that was my last goal. As the summer stretched out, and the Board was hard at work in the search process, we were confronted by the most bizarre event. On a late Saturday night—actually early Sunday morning—a swerving pickup truck was pulled over on Interstate 580 as it approached the Bay Bridge to San Francisco. The driver, Byron Williams, in full body armor, immediately began firing at the California Highway Patrol officers in an incident that went on for nearly an hour. Eventually, after injuring two officers, he was winged on an unprotected ankle and gave himself up. Early that next Monday, on what was to be my last full board meeting with Tides, news trucks pulled up and camera crews set up. Called out of the meeting, I was asked why someone would want to shoot up our offices. I was, needless to say, mystified. Outside of Glenn Beck and Stephanie Strom, we were pretty much “below the radar.” It turns out Mr. Williams was a devotee of Beck’s show and wanted to start a revolution to stop Soros and Tides. Over 600 rounds were exchanged before he was subdued. Had he not been stopped, it is likely it would have been his white pickup, not the news vans, that showed up at our office early Monday morning.

Glenn Beck’s show is long gone and his internet “empire” has withered away and Byron Williams is locked up for life. Stephanie Strom has migrated to covering the food business at the Times, while Wade Rathke continues to organize with ACORN International in Europe, Africa, Canada, Latin America, and Asia. Gara LaMarche runs the Democracy Alliance and influences national Democratic politics with both grace and impact, while Pablo has retired and is less a presence now in public discussion on philanthropy, to our detriment. And America lives on without the strong, vibrant voice of ACORN, with very few hints of what might replace it.

My last act as CEO of Tides was to host a dinner for the officers and dispatchers who had collectively saved our lives. The lesson for me in all of this reveals why some of us do this work. Though largely a field that protects and defends the status quo, philanthropy boasts resources that can and should be used to try new things, push the boundaries, and support the powerless. Occasionally, it can support the kind of remarkable force that ACORN became. But it is also true in the American experience that when you succeed as progressives, it’s a good idea to keep your head down and count your friends very carefully.

-Drummond Pike

Drummond Pike founded Tides Foundation in 1976, the first national sponsor of donor advised funds. He continued developing progressive, social justice-focused infrastructure including Tides Center in 1996, the Tides Advocacy Fund in 1994, Groundspring.org in 1999, Tides Inc. in 2003, Tides Shared Spaces in 2004; and Tides Network in 2006. He served as Chief Executive of all until November 2010 and retired in March 2011. He now consults with several principals on philanthropic and financial matters and is an active investor in social impact companies.

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