Desperate for dollars

WASHINGTON-James O'Keefe has shed his fur coat and sunglasses, the accessories of his pimp costume that helped him embarrass the Association of Community Organizations for Reform Now (ACORN) last fall. In January he donned much less flamboyant garb-an Oxford shirt and khaki pants-for a more flamboyant stunt that has landed him in federal custody and may have inadvertently thrown ACORN a public-relations lifeline.

O'Keefe is the 25-year-old conservative activist who, posing as a pimp and with friend Hannah Giles posing as a prostitute, recorded undercover videos of ACORN's employees offering them advice on how to set up brothels and traffic children. For his next operation, O'Keefe and two of his friends allegedly entered Democratic Sen. Mary Landrieu's New Orleans office recording video and pretending to be telephone repairmen so they could check out her phone systems, which they suspected were blocking calls from constituents.

O'Keefe admitted in a statement, "On reflection, I could have used a different approach to this investigation, particularly given the sensitivities that people understandably have about security in a federal building." Indeed, those "sensitivities" could result in his serving up to 10 years in prison or paying a $250,000 fine.

Following this recent case, O'Keefe has come under more scrutiny than ACORN, the troubled organization he colorfully exposed. Besides the federal charges of entering U.S. property on false pretenses, O'Keefe is facing lawsuits from ACORN in Maryland and Pennsylvania. At the same time, ACORN retained its federal funding through the end of 2009 and declared itself innocent of any wrongdoing.

The head of ACORN, Bertha Lewis, pointed to O'Keefe's arrest as evidence that his exposé on her organization was simply "partisan smears." "Unfortunately, during the rush to judge ACORN, both the media and Congress failed to question the methods, intent and accuracy of Mr. O'Keefe's videos," she said in a statement. "Independent reviews," she continued, "have already concluded that it was O'Keefe, and not ACORN staff, even those fired for acting inappropriately, who broke the law in the undercover videotapes." When I requested an interview with Lewis, I was directed back to her official statement.

When the videos of ACORN employees appeared online last fall, The New York Times waited nearly a week to print a piece about the scandal, headlined "Conservatives Draw Blood From Acorn, Favored Foe." Then the Times printed five pieces in the five days after O'Keefe was arrested for the Landrieu incident, culminating in a front page Sunday story with a headline that read, "From High Jinks to Handcuffs: A Provocative Conservative Movement Born on Campus."

ACORN can clearly declare a media victory-the coverage left media mogul Andrew Breitbart, who helped O'Keefe strategize his release of the ACORN videos, scrambling to explain that he had no role in planning the Louisiana stunt, though O'Keefe was still on his payroll. But beyond a news cycle, ACORN's future is uncertain as clouds of ongoing investigations hang overhead.

"I find it laughable that ACORN would try to escape its well-documented criminal history by pointing to an investigative reporter's completely unrelated lapses in judgment," Seamus Kraft, spokesman for Rep. Darrell Issa, R-Calif., wrote me in an email. Issa has been one of the leaders in Congress seeking to investigate ACORN and cut its funding. "We will continue to do everything we can to make sure taxpayer dollars aren't funneled through shady criminal enterprises like ACORN by election-year allies, whether Republicans or Democrats."

In September, Congress voted by an overwhelming majority to cut all federal funds to ACORN, which derives 10 percent of its budget from the federal government. In December, Judge Nina Gershon (a Clinton appointee) ruled in federal court that Congress' ban was unconstitutional, saying that the body couldn't single out an organization to punish without a trial. But Congress still had cards in its hand-the judge's ruling only applied to the continuing resolution that covered spending through the end of 2009. The appropriations bills that cover the rest of the fiscal year included prohibitions on funds to ACORN.

The Justice Department called for a reversal of the judge's decision. The ban on funds, the appeal reads, "is part of an effort to protect, for a temporary time period, against potential fraud, waste, and abuse of public funds." The Department quoted ACORN's own internal investigation, which noted "longstanding management weaknesses" and "internal potential for fraud," as the tip of the iceberg of "major problems" with the organization.

Even before the videos came to light, ACORN was losing funding from a number of big foundations because the public learned last year that the group had been covering up an alleged embezzlement for almost eight years. The brother of ACORN founder Wade Rathke purportedly funneled nearly $1 million of the organization's money into his own pockets.

And besides finding itself under the gaze of the Justice Department, ACORN is facing investigations at the state level in California, Louisiana, and elsewhere. The state group with the most members, California, has broken off and is forming its own nonprofit under a different name (see sidebar below).

Budget season for the 2011 fiscal year is beginning, and most on Capitol Hill agree that, politically, Democrats can't write in a budget line for ACORN, but they could create federal grant funding that is specifically tailored for an organization like ACORN. The Government Accountability Office-the federal government's internal investigation unit-is in the midst of scrutinizing ACORN and should release the results of its investigation within a few months, which will have a major impact on ACORN's future funding.

"They have weathered a lot of controversies in the past," said Hans von Spakovsky, senior legal fellow at the Heritage Foundation, who has been tracking ACORN's federal funding. "I think of ACORN like Count Dracula-I'll believe they're no longer in existence when a stake is driven through their heart."

The nut cracks

ACORN California, whose 48,000 members comprise a full eighth of the national organization, is breaking out on its own and changing its name after the national group's reputation has become increasingly tarred.

The new nonprofit, Alliance of Californians for Community Empowerment, or ACCE, will keep all of the personnel and duties of ACORN California, but it is severing all financial and legal ties to the national group. ACCE filed for nonprofit status in January and intends to meet its budget by tapping state grants and local donors.

Executive director Amy Schur of ACORN California-and now of ACCE-scoffed at the "vicious, politically motivated attacks" on the national group, referring to the unflattering undercover videos of ACORN employees, but in the same breath said "very real internal mistakes have been made."

"We very much hope that ACORN makes it through this challenging time, but unfortunately, California's low- and moderate-income working families can't wait for that to happen," she said in a statement.

The loss of ACORN's California members means ACORN also loses their dues. While that doesn't constitute huge money, it adds to the organization's financial straits, especially if Congress moves to deny funding to the organization for this upcoming fiscal year as it did last year.