Jesse Jackson's empire
By Patrick J. Reilly
Are two of Jesse Jackson's nonprofits violating IRS rules by failing to report payments to Jackson and funneling them through his church?
Did Democratic Party payments to the Rainbow PUSH Coalition fund its partisan activities, including a 1998 voter registration drive intended to help Democrats gain control of Congress?
What did Jackson's political action committee do with almost $7,500 in missing contributions from a Service Employees International Union affiliate? And what role does Dennis Rivera -- treasurer of Keep Hope Alive PAC, co-chairman of the Rainbow PUSH Coalition and president of SEIU's New York local -- play in fetching union donations for the PAC?
These are just some of the new questions arising from the Capital Research Center's study of Jackson's organizations. Recent media revelations have focused on payments to Jackson's mistress, but information uncovered by Organization Trends raises many more questions that amply justify audits of Jackson's entire network by federal and state officials.
Jesse Jackson appeared to have a secure seat of power. After two disappointing runs for president in 1984 and 1988 and years of living in the shadow of his mentor, Rev. Martin Luther King, Jr., Jackson had finally built a successful empire of nonprofit organizations and for-profit companies working to advance his agenda -- and fatten his wallet. Last year, the combined intake of his nonprofit network was more than $17 million. His own annual income is about $430,000, he says, including $120,000 from his church, $260,000 from his show on CNN and the remainder from speaking engagements and writing fees.
But the house of cards collapsed with the discovery that Jackson's former mistress Karin Stanford bore his child in May 1999. The press began asking questions about payments by one of Jackson's tax-exempt groups, the Citizenship Education Fund (CEF), to Stanford and possible faulty reporting to the IRS. Then the National Legal and Policy Center filed a complaint with the IRS, alleging that CEF violated tax-exempt law and financially benefited Jackson and his family. The American Conservative Union also has urged the IRS to audit CEF and another of Jackson's tax-exempt groups, PUSH for Excellence.
But IRS audits are the least of Jackson's worries. His network has survived audits, fines and lawsuits. What is most likely to topple Jackson is neither political embarrassments nor government oversight. It's a steep decline in corporate donations. Corporate money made possible the dramatic growth of Jackson's nonprofits in recent years; if it dries up, so will Jackson's empire.
Up to now, corporate leaders have found it easier to make quiet contributions to Jackson's nonprofits than to engage him in public battles. But as questions are raised about the operations and activities of Jackson's nonprofits -- and as the media spotlight is turned on Jackson's corporate donors -- business leaders may find reason to reassess their giving.
What follows is a review of Jackson's unsavory tactics and a checklist of the nagging questions that plague his nonprofits, including questions about faulty accounting, inadequate disclosure to the public, tangled relationships between organizations and nonprofit ties to political activity. If Jackson's status as a moral and political leader falls into public disrepute, how will corporations justify funding his activities?
Jackson is likely to be most remembered for his efforts to expand minority representation and investment in major companies and encourage the growth of minority-owned businesses. Despite his years of protest politics, this is probably his most important public action.
For instance, this year Jackson joined with AOL Time Warner, Turner Broadcasting, Coca-Cola and others to launch i-DealFlow, a program to link minority businesses to investors. Last year, Jackson convinced Freddie Mac to purchase up to $1 million in mortgage loans made to minority families.
Some of these efforts may deserve praise, but it's Jackson's hard-nosed tactics that earn him notoriety. Critics say Jackson has a knack for inserting himself in the middle of high-dollar business deals that benefit his friends, family and organizations.
Jackson is unapologetic. He told the Los Angeles Times that he is simply trying to ensure minorities "access to capital," the fourth and final goal of the civil rights movement after ending slavery, securing voting rights and desegregation.
"This is as legitimate a phase of our struggle as the phase to end segregation was," Jackson has said.
The key to Jackson's recent success in influencing corporations and soliciting their donations is his Wall Street Project. Begun in 1997, it shames Fortune 500 companies into complying with Jackson's demands for more minority hiring and contracting with minority-owned businesses. Companies have decided that it's better to give in to Jackson. To do otherwise could mean a boycott and nasty public relations battle.
This simple strategy has worked so well that Jackson has moved it beyond Wall Street. He has established the LaSalle Street Project to pressure Chicago-area businesses, the Ninth Street Project in Cleveland, the Wall Street Project West in Los Angeles and the Silicon Valley Project in San Jose. All these programs operate under the auspices of the tax-exempt Citizenship Education Fund, which collects large tax-deductible donations from companies that Jackson threatens or assists.
Jackson's in-your-face methods are often unfriendly to business, earning him a lot of resentment and more than a few outspoken critics. His Rainbow PUSH Coalition owned stock in more than 250 major corporations as of 1999, giving him access to stockholder meetings so "we can go and picket as shareholders instead of sharecroppers," he told USA Today.
Cypress Semiconductors chief T.J. Rodgers calls Jackson's strategy a "shakedown." Rodgers has been publicly outspoken against Jackson since his company was accused last spring of racist hiring policies, despite the company's diverse workforce. Rodgers says Jackson gives business leaders a simple way to "repent" -- cough up money -- to avoid being labeled racist.
Indeed, when Rodgers rebuffed Jackson's hard-ball tactics and publicly defended the diversity of Silicon Valley's workforce, Jackson announced, "We can now officially describe Cypress Semiconductor as a white-supremacist hate group."
But there's more to Jackson's corporate efforts than bullying and bringing in donations. In some instances, Jackson, his family, friends and donors seem to have benefited personally from the transactions he brokered:
Soon after Jackson's extramarital affair was revealed, Jackson announced that a convicted sex offender with strong political connections would be the Rainbow PUSH Coalition's new consultant on prison reform. Former congressman Mel Reynolds, a Democrat from Chicago, was convicted in 1995 for having a sexual relationship with a 16-year-old girl and soliciting child pornography. Until his sentence was commuted by President Clinton, Reynolds also was in prison for bank fraud, wire fraud and lying to the Federal Election Commission about misused political contributions.
But despite Jackson's own public scandal, Reynolds' political connections seem to have outweighed public relations concerns. It's not the first example of Jackson's loyalty to the Democratic Party and his affinity for partisan politics. Some activities beg further explanation to Jackson's donors:
A $10,000 donor to CEF was identified as the "Democratic Congress" in CEF's 1999 report to the IRS. CEF also reported a $30,000 donation from the Democratic National Committee in 1994. The reasons for the gifts are not explained.
CEF violated the tax code if it paid for any Democratic-reimbursed travel on behalf of a candidate. That could cost CEF its tax-exempt status.
Also, it is illegal "for a corporation, nonprofit or for-profit, to spend corporate treasury funds for voter registration in behalf of a political party," Washington attorney Cleta Mitchell told the Washington Times.
A November 7, 1998 press release on the Rainbow PUSH website reported on a rally at the group's Chicago headquarters that day. Democrats who been successful in the 1998 elections -- including Rep. Bobby Rush (D-IL) and Illinois Secretary of State Jesse White -- were at the rally "to return to Campaign Central and say thanks to the voters," according to the press release. It also announced a voter education drive for the 2000 elections and described a Rainbow PUSH Get Out the Vote tour, which included 64 events in 18 states prior to the 1998 elections.
"One of Rev. Jackson's major goals on the tour was to help the Democrats regain control of the House," the release states.
The treasurer of Keep Hope Alive is Dennis Rivera, co-chairman of Rainbow PUSH and president of SEIU Local 1199 in New York City. His staff was unable to explain the discrepancy regarding SEIU's contribution before this report was completed. Keep Hope Alive's assistant treasurer, Katharine Boyce, did not respond to requests for an interview.
The recent support of Zogby and his Arab American Institute is notable because during Jackson's presidential campaigns, the media and Jewish leaders questioned whether Jackson's pro-Arab views were influenced by donations to his nonprofits. During the 1984 race, Jackson was heavily criticized for two $100,000 donations from the Arab League, a confederation of 21 Arab nations. The gifts were made in 1981 to the PUSH Foundation and PUSH for Excellence. Critics cited a 1979 article in the Christian Science Monitor that claimed Jackson promised political support to the Arab cause in return for financial backing of black efforts in the U.S.
Jackson has had other unsavory relationships that produced gifts to his nonprofits. In 1994, the Citizenship Education Fund reported two donations from the Haitian Embassy: a $20,000 gift with the identification "President Aristide," referring to Haiti's president Jean-Bertrand Aristide, and a $15,000 gift with the identification "Jean Casimir," referring to Aristide's ambassador to the U.S.
Who Pays Jesse's Salary?
Jackson well knows the importance of good money management. At the end of the Carter administration, Jackson's nonprofits received $6.5 million in grants from federal agencies, including $5.7 million to PUSH for Excellence (also called PUSH Excel). A federal audit launched in 1979 found PUSH Excel misspent $737,000 and questioned the use of another $1 million in grant monies. The government filed suit in 1984 and later said PUSH Excel owed more than $1.4 million to the Education, Commerce and Labor departments.
In a 1988 settlement negotiated by Ohio attorney John Bustamante, who helped found several of Jackson's organizations, PUSH Excel agreed to repay the government $550,000 in installments over five years, finally completing the payments in 1993. The group's financial statements indicate that it has not received any government grants since at least 1992.
Although there do not appear to be current problems of this magnitude, Organization Trends identified several items in the financial reports of Jackson's groups that are unexplained or appear unusual, raising questions about the organizations' accounting practices and use of funds that might be answered by a thorough audit. Questionable items include:
Why don't CEF and Rainbow PUSH pay Jackson directly? Probably because People United is not required to publicly disclose its finances or activities, hiding payments to Jackson and other transactions in a veil of secrecy. It's unknown whether Jackson gets additional funds from People United in the form of reimbursements or consultant fees.
Jackson's salary is not reported by CEF or Rainbow PUSH on their tax returns, and neither group discloses the salary arrangement with People United in any of their recent filings or financial statements. But if Jackson is providing services to CEF and Rainbow PUSH through People United, the groups' reports should identify Jackson or People United as an independent contractor. Rainbow PUSH is also required to report any compensation to its officers, including Jackson.
Was CEF's reporting failure a simple oversight? Perhaps not. In its IRS reports as far back as 1994, CEF also did not identify employee salaries except for amounts paid to CEF's executive director, which ranged from $44,500 to $95,667.
One employee who probably should have been listed on CEF's 1999 report is Jackson's former mistress, Karin Stanford, who reportedly earned $120,000 before resigning in 1999. But because Stanford directed the Washington, D.C. public-policy bureau for both CEF and Rainbow PUSH, it's unclear what portion of her salary was paid by each organization and whether it was more than $50,000. CEF also allowed Stanford a "draw" of $40,000 against future consulting fees when she departed, according to an internal CEF memo dated September 10, 1999. CEF officials say she actually received only $20,000 in consulting fees and another $15,000 for moving expenses.
In its 1999 financial report to the Illinois attorney general, CEF did report compensation to the three highest paid employees during the year. The reported salaries ranged from about $59,000 to $85,000, and Stanford was not listed.
CEF's practice of not identifying contractors was not limited to 1999. CEF did not identify payments to independent contractors in any of its reports to the IRS from 1994 to 1998, the years for which filings were reviewed by Organization Trends.
Jackson's organizations are often so closely linked that it is difficult to decipher which group is responsible for a particular program. The organizations share board members, employees, facilities and even programs. Recent media reports are riddled with inaccuracies and misidentification of Jackson's organizations and their activities.
For instance, the Wall Street Project is officially a project of the tax-exempt Citizenship Education Fund. But it is often labeled the Rainbow PUSH Wall Street Project, even on its own stationery. Because CEF and Rainbow PUSH share the same headquarters in Chicago, the confusion only worsens.
Rainbow PUSH and CEF share a website (www.rainbowpush.org), and it is not always clear which organization is responsible for which programs. In a section titled "RPC Projects," the site describes the "Rainbow PUSH Coalition's Wall Street Project," the LaSalle Street Project, the Ninth Street Project, the Silicon Valley Project, Wall Street West and the Public Policy Institute -- all projects of CEF.
Jackson himself has contributed to the confusion. In a self-congratulatory 1999 op-ed for the Chicago Sun-Times, Jackson claimed racial discrimination and violence led him "to organize People United to Save Humanity in 1971, now the Rainbow PUSH Coalition." But Jackson well knows that People United still exists as an organization separate from Rainbow PUSH. Media articles have repeated the mistake, assuming People United and Operation PUSH were the same organization merged into Rainbow PUSH in 1997.
There is some talk of an effort "to streamline operations," according to Rainbow PUSH chief financial officer Billy Owens. He has said the Citizenship Education Fund and PUSH for Excellence are considering a merger.
The close relationships between Jackson's organizations are also financial. The groups' public filings report several financial dealings between the groups, raising questions about whether donated funds to a particular group are being used to advance other Jackson organizations. This is an important concern with regard to Jackson's tax-exempt organizations, which are forbidden to use donated funds for non-exempt activities.
Rainbow PUSH reported total rent payments of almost $61,000 in 1999, but it is not clear what portion of that is paid to People United. CEF reported $110,812 for rent expenses in 1999, and PUSH for Excellence reported total occupancy costs of $14,551 that year. Neither CEF nor PUSH Excel identifies any lease arrangement with People United in its financial statements.
Rainbow PUSH also reports paying a "nominal amount… to related parties under contractual agreements." In 1998, Rainbow PUSH made a $16,170 loan to CEF. Rainbow PUSH also paid $76,312 in 1998 and $82,500 in 1999 to CEF as reimbursement for "rent, copier and office supplies." Rainbow PUSH reported $200,000 owed to CEF at the end of 1999.
Prior to its merger with Operation PUSH, the National Rainbow Coalition made at least two donations to the Citizenship Education Fund, according to CEF reports: $49,750 in 1993 and $55,000 in 1996.
How accountable are the nonprofits in Jackson's network? Presumably donors to the organizations can obtain financial information upon request, a requirement for nonprofits registered in most states. But does the public have access to such information, especially when the groups solicit donations?
Not in our experience. Obtaining financial reports filed by Jackson's organizations with the IRS and state governments was a long and burdensome task with mixed results. Some reports simply don't exist, others have been archived by the states, and still others are unavailable for public inspection.
Reports filed with the IRS by tax-exempt organizations are usually sufficient to get a broad picture of a nonprofit's finances. But the Rainbow PUSH Coalition is not tax-exempt, perhaps because of a fear of public disclosure. Rainbow PUSH accountant Henry Creel told the Chicago Tribune that the group didn't want to answer to the IRS, although Jackson claims Rainbow PUSH is considering an application for tax-exempt status.
"They've got some restrictions that you've got to deal with, and we don't want those restrictions in there," Creel said.
But even tax-exempt groups find ways to avoid public scrutiny. Despite IRS regulations that require nonprofits to make their annual reports to the IRS (Form 990) available to the public, Organization Trends was unable to obtain copies from the Citizenship Education Fund.
A request for copies of CEF's Form 990 and its application for tax-exempt status was delivered by overnight courier to the CEF office in Chicago on February 10. We also provided a $25 check to cover the cost of photocopies and postage. But CEF violated IRS regulations by failing to provide the forms within 30 days of receiving the request. Indeed, the forms had not arrived by the time this article went to press, but the $25 check was cashed.
Another source of information is state governments, which often require organizations and companies that are incorporated in the state to register annually. But at least two of Jackson's organizations don't appear to take these reporting requirements seriously:
Organization Trends was unable to obtain reports filed by the Rainbow Coalition prior to its merger with Operation PUSH in 1997. In Delaware, where it was incorporated, most nonprofits do not need to report to the state.
Other states don't keep their records updated. According to state records, independently incorporated chapters of the now-defunct National Rainbow Coalition are still active in Arkansas, California, Massachusetts, Minnesota, Pennsylvania, Tennessee, Texas and West Virginia. But we could not find contact information or financial records for any of them.
Likewise, some states have maintained active files on Operation PUSH chapters, even though the national organization no longer exists. The Tennessee secretary of state still considers Operation PUSH of Chattanooga active, but we could not locate the group. We also could not find Operation PUSH in Minnesota despite its active status with the state. The Jersey City chapter of Operation PUSH still owns property in New Jersey valued at almost $1 million, according to state property records, but we couldn't find a phone number to contact them.
We did, however, manage to locate one Operation PUSH chapter in Memphis that is still formally active. But Tennessee officials have no record of the group.
Financial information on nonprofits is usually available from states through their attorneys general, who monitor their solicitation activities. Organization Trends obtained financial data for several of Jackson's groups from state attorneys general. But here we also encountered difficulty:
But the greatest obstacle to getting financial information from state attorneys general was the failure of Jackson's organizations to register for charitable solicitations. State requirements vary, so depending on how each of Jackson's nonprofits raises its funds, it may not be required to register in every state. Still, a review of state registrations for charitable solicitations turned up much less than seems appropriate:
Unworthy of Support
There are many other questions donors should ask of Jackson and his nonprofits.
Judicial Watch has questioned why two of Jackson's associates received last-minute pardons from President Clinton in January. They include John Bustamante, the attorney who established several Jackson nonprofits. He was found guilty of defrauding an insurance company in 1993. A second pardon was issued to Dorothy Rivers, a Rainbow PUSH board member convicted in 1997 of stealing $1.2 million in government grants intended for her Chicago Mental Health Foundation.
And New York Post columnist Rod Dreher asks how the Citizenship Education Fund retains its tax-exempt status while reporting only $15,699 in education and research expenses in 1999. CEF's largest expenses that year were for travel ($1.3 million), consultants ($1.3 million) and conferences probably related to CEF's Wall Street projects ($1.1 million).
These questions won't be answered without sufficient explanation from Jackson's organizations and a thorough external audit of their finances and activities. But one thing seems clear. Jackson's groups are unworthy of corporate funding, especially from companies that once donated out of respect for his intentions or fear of his protests.
Patrick J. Reilly is editor of the Capital Research Center's Organization Trends and Foundation Watch newsletters. Substantial research assistance was provided by Capital Research Center staff members Karen Jones, Joseph Ura and Christopher Yablonski. Lee Walker, CEO of the New Coalition for Economic and Social Change in Chicago, also assisted with this report. Reprinted with the kind permission of the Capital Research Center.
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