Archive | April 2, 2001 | Jesse Jackson's empire

Jesse Jackson's empire

By Patrick J. Reilly
web posted April 2, 2001

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?

Sweat glistens on the brow of Jackson as he address the media concerning the Rainbow Push Coalition and its finances during a press conference in Chicago, March 8, 2001. A conservative watchdog group, the National Legal and Policy Center, wants the IRS to investigate the Citizen Education Fund, a charitable organization with links to Push

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?

Corporate Shakedown

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:

When Jackson announced i-DealFlow during January's Wall Street Project conference in New York, he was flanked by businessmen. They included Percy Sutton, chairman emeritus and founder of Inner City Broadcasting Company. Although ICBC was not identified as a partner in i-DealFlow, Sutton was present ostensibly to represent the minority-owned businesses requiring greater access to investors. But Sutton is also a Jackson friend and a member of the Citizenship Education Fund board.

Increased investment in Sutton's ICBC benefits Jackson personally; Jackson and his wife, Jacqueline, have a significant stake in the company. They have invested in ICBC since prior to Jackson's 1988 presidential campaign and held shares worth between $850,000 and $1.2 million in March, according to the Los Angeles Times.

Jackson has helped ICBC in other ways. Last year, President Bill Clinton chose Jackson to lead a trade mission to Africa. Sutton participated and plugged the African Continental Telecommunications Ltd. (ACTEL). Sutton told a congressional committee that he and ICBC have invested $16 million in ACTEL.

Last year, Jackson pushed the Raytheon Company, a $19.8 billion manufacturer of electronic systems for missiles, satellites and air traffic control systems, to select several minority-owned firms to manage its pension-fund assets. One of the managers was NCM Capital Management Group, a North Carolina company with assets of $6.8 billion. NCM chief Maceo Sloan was chairman of Jackson's Wall Street Project at the time.
Last year, New York activist Rev. Al Sharpton called for a boycott against Burger King's New York City restaurants, claiming the company was lacking in minority-owned franchises. The ploy was classic Jesse Jackson, but he wasn't flattered. Jackson stepped in and defended Burger King, arguing a boycott was "premature" and would hurt the minority-owned franchises that already existed. Sharpton countered that Burger King had been funding Jackson's nonprofits for almost two decades. The company put its total donations at $500,000, but Jackson said it was $125,000, according to The New Republic.
In 1999, AT&T reportedly donated $425,000 to the Citizenship Education Fund. Minority-owned Blaylock & Partners donated $30,000 to CEF that same year. Both gifts came after Jackson withdrew his opposition to the merger of AT&T and TCI. To appease Jackson, the companies hired Blaylock & Partners to manage an $8 million bond offering and named Blaylock co-manager of a $450 million bond offering last year. The other lead manager of last year's offering was Utendahl Capital Partners L.P., which has donated "tens of thousands" to CEF, according to the Los Angeles Times.

Jackson also has close ties to AT&T management. Rev. David Jefferson, vice president of AT&T Broadband, is a leader of CEF's 1,000 Churches Connected project to improve economic literacy among black church members.

In 1999, Utendahl Capital Partners L.P. was named co-manager of Pepsi Bottling Group's $2.3 billion initial public offering. This was after Jackson pressured PepsiCo CEO Roger Enrico to involve a minority-owned bank. PepsiCo contributed $50,000 to Jackson's New York conference in January 2001.
In 1999, Jackson negotiated a settlement between Boeing and 13,000 employees claiming racial discrimination. Later, 1,700 of the employees complained the settlement was too beneficial to Boeing. But soon afterward, Boeing reportedly donated $50,000 to the Citizenship Education Fund, the first of several gifts. Boeing also contracted with minority investment banks, some of them reportedly donors to Jackson's nonprofits, to manage Boeing's pension funds. Last year, Boeing named a full-time employee to serve as a liaison to the Rainbow PUSH Coalition.
In 1998, Jackson publicly criticized a proposed merger of telecommunications companies SBC and Ameritech, calling the marriage "antithetical to basic democratic values." The next year, Jackson publicly praised the merger after SBC and Ameritech reportedly gave $500,000 to the Citizenship Education Fund and Ameritech sold part of its cellular business to Georgetown Partners, which had no telecommunications experience but was owned by Jackson friend Chester Davenport. Davenport was named chairman of the new spinoff company.

GTE, which purchased most of Ameritech's cellular business, and Bell Atlantic later reportedly donated $1 million to Jackson's groups. In 1999, after Jackson publicly endorsed the GTE and Bell Atlantic merger into Verizon, the new company reportedly pledged $300,000 to Jackson's groups through 2002.
In 1998, Jackson publicly supported a merger between Citibank and Travelers, whose CEO Sandy Weill has become a major backer of the Wall Street Project. That year, Citicorp gave $50,000 and Travelers gave $100,000 to CEF.
In 1998, years after Jackson led a boycott of Anheuser-Busch products to protest hiring and promotion practices, Jackson's son Yusef was introduced to August Busch IV by Jackson's friend Ron Burkle -- the wealthy California businessman who last year hired Jackson's mistress Karin Stanford after she left CEF. Yusef and his brother Jonathan were awarded Chicago's largest Anheuser-Busch beer distributorship that same year. The sons reportedly paid for the assets, equipment and two buildings with a $6.7 million bank loan. Anheuser-Busch had spent $10.5 million in 1991 for the land and one of the buildings purchased by the Jacksons.
In 1997, Viacom and two buyers of ten Viacom radio stations donated $2 million to create an Education and Advocacy Fund to end the Rainbow PUSH Coalition's opposition to the sale. The Fund was intended to encourage minority-owned broadcasting. Because Federal Communications Commission rules prohibit companies from buying off opponents of license transfers, Rainbow PUSH was not eligible to benefit from the Fund. So fund administrator Warner Session, a Washington attorney and lobbyist, awarded $680,000 to the Citizenship Education Fund for two conferences.

Political Money-Laundering?

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:

The tax-exempt Citizenship Education Fund and the Rainbow PUSH Coalition spent a total of $614,419 last year for Jesse Jackson's travels. In February, Rainbow PUSH chief financial officer Billy Owens admitted that more than $450,000 of Jackson's travel expenses were paid by several Democratic Party committees for get-out-the-vote efforts. It is not clear what portions of the party payments went to which organizations.

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.

Last year, Keep Hope Alive PAC reported a $5,000 contribution from a Service Employees International Union (SEIU) affiliate made in January 2000. But SEIU's filing with the Federal Election Commission describes a much larger donation to Keep Hope Alive: $12,450 in March 2000.

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 tax-exempt CEF may not lobby or engage in political activities. But CEF and Rainbow PUSH share a web site (www.rainbowpush.org) that includes materials promoting legislation and political candidates. It is not always clear which organization is responsible for the materials.
Last year, Jackson publicly endorsed New Jersey Democrat Jon Corzine for the U.S. Senate. When pressed to release records from his family foundation, Corzine told reporters that the Jon & Joanne Corzine Foundation had granted $50,000 to the Rainbow PUSH Coalition in January 2000.
Since 1990, Keep Hope Alive PAC has made only two contributions to federal campaigns. Last year, the re-election campaign for Jesse Jackson's son, Rep. Jesse Jackson, Jr. (D-IL), received $10,000 and Rep. Bobby Lee Rush (D-IL) received an in-kind contribution of $4,149.
In 1999, the Keep Hope Alive PAC received a $2,000 contribution from James Zogby, president of the Arab American Institute. Zogby was Jackson's key Arab affairs advisor during his 1988 presidential campaign. Zogby helped the campaign attract more than $400,000 in donations from Arab-Americans.

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:

Jackson's annual salary of $120,000 is paid by People United to Serve Humanity. This group is able to keep its finances secret because it is a religious organization exempt from filing state and federal returns. But in February, Rainbow PUSH chief financial officer Billy Owens disclosed that Jackson's salary is not really compensation for work performed for People United. Instead, People United divides the full salary and charges it to two other Jackson groups: the Citizenship Education Fund (58 percent or $69,600), where Jackson spends much of his time with the Wall Street Project and related efforts, and the Rainbow PUSH Coalition (42 percent or $50,400), which Jackson heads as president.

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.

Media reports have made much of the fact that the Citizenship Education Fund did not identify its highest-paid employees on its 1999 report to the IRS, as required. CEF has said that was an oversight, and it will probably amend its 1999 filing to include any salaries that exceeded $50,000.

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.

Media reports also have made much of the fact that the Citizenship Education Fund did not list any independent contractors paid more than $50,000 in its 1999 IRS report, as required. CEF reported more than $1.3 million in consulting expenses that year, and Owens said the amount increased to $1.85 million in 2000. Of those amounts, $878,523 in 1999 and $940,529 in 2000 went to Rainbow PUSH for management and general expenses, according to Owens. It appears that Rainbow PUSH and People United, which is paid for Jackson's work, should have been listed as independent contractors on CEF's 1999 filing.

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.

Critics of Rainbow PUSH and the Citizenship Education Fund have questioned the high travel costs incurred in recent years. In a February disclosure report, Owens claimed total travel costs in 1999 were $739,843 for CEF and $537,022 for Rainbow PUSH. Jesse Jackson's travel accounted for almost a third of those amounts. But Owens' 1999 figure for CEF is significantly less than what CEF reported to the IRS. In its 1999 filing, CEF reported more than $1.3 million in travel expenses, almost 20 percent of the year's total budget.
CEF's reports to the IRS disclose an odd arrangement in which CEF incurred almost $257,000 in accounts payable by the end of 1996. The next year, almost the entire debt ($254,020) was forgiven. The generous party is not identified
For much of the past decade, PUSH for Excellence has operated in the red. At the end of 1999, the group had assets of only $44,538 and owed $114,500 to undisclosed vendors. PUSH Excel has reported $114,500 in accounts payable since at least 1992, the earliest year for which financial reports were available from the Illinois attorney general. None of the organization's financial reports explain how the debt was incurred and to whom.
On its 1999 tax return to the IRS, the Rainbow PUSH Coalition did not itemize its "other income" as required. It appears that the "other income," which totaled $124,658, included a payment from People United to Serve Humanity retiring all or most of its $45,500 debt to Rainbow PUSH. The debt was incurred by Operation PUSH sometime prior to 1991.
In its filings with the IRS, the Rainbow PUSH Coalition reports "volunteer stipends" separate from taxable salaries and wages -- a legal practice as long as the stipends cover actual travel and other expenses related to a volunteer's activities. But the amounts seem extraordinary. In 1999, volunteer stipends totaled $68,504, equivalent to 46 percent of the total wages paid to regular employees.
In 1998, the Jackson Foundation paid the IRS more than $6,000 in penalties and overdue excise taxes on its investment income, which is taxable even for charitable foundations.

Tangled Web

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.

People United to Serve Humanity owns the Rainbow PUSH headquarters building in Chicago, which also houses the Citizenship Education Fund and PUSH for Excellence. Owens said 90 percent of the building costs are charged to Rainbow PUSH and CEF. PUSH Excel appears to be getting a free ride.

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.

The Rainbow PUSH Coalition reports sharing "administrative operating expenses" with the tax-exempt Citizenship Education Fund. CEF paid Rainbow PUSH $878,523 in 1999 and $940,529 in 2000 for "management and general overhead expenses," according to Owens.

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.

PUSH for Excellence financial statements from 1991 to 1996 report that the tax-exempt group and Operation PUSH "closely associated? both financially and programmatically." The same language is used to describe the relationship between PUSH Excel and the Rainbow PUSH Coalition from 1997 to 1998. The language was dropped in PUSH Excel's 1999 financial statement. The financial statements provide no details beyond reporting that Rainbow PUSH owed $8,000 to PUSH Excel at the end of 1999.
In December 2000, the "National Rainbow Coalition" (presumably the Rainbow PUSH Coalition) paid the Keep Hope Alive PAC $7,820 for rent, books and postage, according to the PAC's filings with the Federal Election Commission. Keep Hope Alive had carried the debt since sometime before 1993, the earliest year for which we obtained FEC reports.
For many years, the Rainbow PUSH Coalition and Operation PUSH appear to have carried a large debt owed by People United to Serve Humanity. Beginning sometime before 1991, People United owed $45,500 to Operation PUSH, according to Operation PUSH's financial statements. The statements provide no explanation for the debt. Operation PUSH reported the debt until 1996, when its financial statement indicates that more than half of the debt was reduced. Nevertheless, the full $45,500 debt reappears on statements filed by the Rainbow PUSH Coalition after the merger of Operation PUSH and the National Rainbow Coalition in 1997. Rainbow PUSH reported the debt until the end of 1999, when most or all of the debt appears to have been paid.

Missing Reports

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:

The Citizenship Education Fund is incorporated in Ohio. The Ohio secretary of state has issued at least three letters over the years demanding that CEF submit overdue annual reports. Ohio even canceled CEF's incorporation in 1993 for its failure to comply with reporting requirements, but the incorporation was reinstated in 1994.
PUSH for Excellence, also incorporated in Ohio, has received at least three written demands for annual reports from the Ohio secretary of state, and its incorporation was voided twice in 1990 and 1996 but later reinstated.

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:

For some years, the attorneys general were missing required reports, and their files weren't always up to date. It appears the states are not always aggressive in ensuring compliance with reporting requirements. Rainbow PUSH failed to submit an audited financial statement for 1999 to the Illinois attorney general, as required. The state mailed a written request for the statement in October 2000, but Rainbow PUSH had not responded and Illinois had taken no action as of the writing of this article.
State reporting requirements vary, and not all collect sufficient information to monitor a nonprofit's activities. The Illinois attorney general changed its reporting requirements in 1993, scaling back its annual disclosure form to include only basic financial data. Although Illinois also collects nonprofits' audited financial statements and IRS returns, the reports are not especially useful when a group like the Rainbow PUSH Coalition is not tax-exempt. The federal income tax form (Form 1120) does not include much of the financial information reported on the Form 990 for tax-exempt organizations. And Form 1120 provides no information about a nonprofit's activities.

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:

We found registrations for the Rainbow PUSH Coalition in only four states: Florida, Georgia, Illinois and New York. This is especially unusual given the organization's physical offices in Cleveland, Detroit, Los Angeles, Silicon Valley and Washington, D.C. Each of the states where these offices are located confirmed to us that Rainbow PUSH is not registered for charitable solicitation.
Despite its fundraising success, we could find only four states where CEF is registered for solicitation: California, Illinois, Ohio and New York. These are the locations of CEF's "corporate accountability" efforts on Wall Street (New York), Ninth Street (Cleveland) and LaSalle Street (Chicago) and in Los Angeles and Silicon Valley (California).
We found no current registrations for solicitation by People United to Serve Humanity. But state records identify chapters actively incorporated in Arkansas and Pennsylvania -- the Philadelphia chapter appears to still own property there -- and the national group is headquartered in Chicago.
PUSH for Excellence is registered for solicitation in Ohio, where it is incorporated. But registrations filed more than 20 years ago in California, Kansas, Louisiana and Missouri have been revoked due to failure to comply with state reporting requirements.

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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