ACORN, the Working Families Party and Political Corruption, Part I

[Ed Note: Recently, City Hall in New York published an amazing multi-part investigative piece on possible corruption, illegal activities and general shadiness within the multi-pronged Working Families Party in New York. For those of you searching for examples of what investigative journalism used to be like, this series is a good place to start. Under the direction of lead reporter Edward-Isaac Dovere, the series explored the tangled web the Party in New York. Big Government readers will note that one of the co-chairs of the Party is Working Families Party is Bertha Lewis, CEO of ACORN. So, for those keeping score at home, this is the second organization headed by Lewis is that marked by opaque and confusing interrelationships and ethically-challenged legal boundaries. Hmm, what are the odds? Today begins Part I]

In August, City Hall published an investigative report explaining the operations of the Working Families Party’s for-profit company, Data & Field Services. In early September, after conducting its own review, the New York City Campaign Finance Board officially declared that “DFS exists as an arm of the Working Families Party.” Over the last three months, City Hall has continued the investigation, relying on dozens of interviews with people within and outside the organization, in addition to a review of tax, lobbying and campaign finance records, as well as confidential internal documents.

Following weeks of in-depth inquiries from City Hall, the Working Families Party announced on Nov. 6 that it was hiring the law firm of Skadden, Arps, Slate, Meagher & Flom to conduct a review of its practices, with the effort to be led by Judith Kaye, the former chief judge of the New York Court of Appeals.

“It has always been our intent to engage in a thorough post-election analysis of our structure,” read an open memo from the Party’s executive director, Dan Cantor, and two of the co-chairs of the executive committee which contained several paragraphs previously provided in answers to City Hall inquiries. “Now that Election Day is behind us, the firm will begin that review and recommend any necessary changes, improvements or modifications that Judge Kaye and her colleagues believe necessary to ensure maximum transparency and continued adherence to the highest legal and ethical standards.”

What follows are the findings of City Hall’s investigation into what few seem to realize: the political party and Data & Field Services are not the only two arms of the Working Families. There are, in fact, four arms: a political party, a for-profit and two different kinds of non-profits, each of which is separate and distinct under the law.

This five-part examination by City Hall into the Working Families Party’s accounting methods and finances has shown that together through these four arms, the Working Families has the benefits of a political party (legitimacy in voters’ minds, ballot line), a non-profit (tax-exemptions, uncapped donation limits and tax deductions) and a for-profit (no disclosure requirements, ability to collect fees backed by taxpayer-supported matching funds from candidates).

Over the last decade, the Working Families Party has become a dominating force in New York politics by using the state’s fusion voting law (one of only a few in the nation) to give candidates a second line to run on and, more importantly, by throwing its weight behind candidates in Democratic primaries all over the state at a time when the state Democratic Party has been suffering.

And never was the Party stronger than in this year’s elections: come inauguration day on Jan. 1, New York City will have a public advocate, city comptroller and almost a fifth of the City Council who owe their seats and their control over city finances and legislation in large part to its efforts.

This has led to a new reality in New York politics: winning the support of the Working Families Party is now arguably the most important step to getting elected, because it has become the key to winning Democratic primaries. The Party offers what many fans call the “progressive Good Housekeeping seal of approval,” a certification in the minds of voters that they are the stand-out candidates, good people who are out to do good.

But in interviews with dozens of politicians, political operatives and seasoned observers of New York politics (most of them Democrats whose political views align largely with the Working Families’), about what has been discovered over the past three months–by way of the City Hall stories, the Campaign Finance Board ruling and the recent lawsuit against Data & Field Services–City Hall has found concerns raised about the Working Families. And, they say, after being presented with the information on tax, lobbying and campaign finance records that were part of this investigation, more concerns were raised.

While standing for ethics in government and campaign finance reform, Working Families has non-profits groups and a for-profit entity that lack donation caps, disclosure requirements (in terms of frequency and detail) and other regulations that political parties face. Leading politicians, political operatives and other experts complain that Party-supported candidates are as a result given an unfair advantage over their rivals. These people, who asked not to be identified for fear of alienating the increasingly powerful party and who were wary of speaking on the record about legal issues, believe that what they know of the novel Working Families way of doing business contradicts the reforms the Party and its candidates tend to support.

City Hall has also obtained the organizational rules, a confidential explanatory memo and other materials about the internal Working Families voting process which detail a system of weighting votes based on money for endorsements and nominations. These indicate that the more money a union contributes to the legally separate, non-profit (the Working Families Organization), the more votes the union gets in the Working Families Organization’s New York City Coordinating Council–which multiple interviews, emails from a top party staffer and the Working Families Party’s own press releases identify as the decision making body for the Working Families Party in deciding which candidates to back.

Founded in 1998 by activists and union leaders eager to give labor and left-wing politics a greater voice, the Working Families Party has long advocated for the kind of agenda liberal New Yorkers tend to support: responsible development, worker protections, greening the economy and tax laws that hit the wealthy more than the middle class. Aiming to pull the Democratic Party away from the center, the Party has developed into a political home for many who believe in bettering society and a new kind of politics. Its support has become so desirable that candidates are willing to fill out extensive questionnaires which ask for their stances on nearly every issue, request that the Party gets consultation power on all local development deals and that campaigns pay for mailers promoting the Party.

Then there is the Working Families Organization, founded in 2006 by the top leadership of the Working Families Party. A non-profit with a 501(c)4 designation that gives it tax exemptions usually reserved for social welfare groups, the Working Families Organization is also the lobbyist with the eighth-highest ranking of expenditures last year in the state–and the only one of those that can offer an increasingly powerful ballot line as an incentive for promoting its agenda on specific issues.

Then there is Data & Field Services, the political consulting company founded in 2007 by the Working Families Party. With the results of the 2009 elections, Data & Field Services has one of the best win records in New York among local political consulting companies and, aside from the consulting companies contracted by the Bloomberg campaign, it was also one of the highest billing. The company sells its canvassing, polling, database, voter file and get-out-the-vote services only to the Working Families Party and its favored candidates.

Then there is the Progressive America Fund, a non-profit that has 501(c)3 tax-exempt designation that bars it from any partisan or overtly political activity. The Fund predates the other Working Families entities. One of the Fund’s two main arms is the Center for Working Families, a think tank. The Center provides many of the position papers that are given to candidates looking to get the Working Families Party endorsements. These are also the policy papers which form the foundation of the Working Families Organization’s lobbying efforts. The other main Progressive America Fund project is the National Open Ballot Project, which is geared toward supporting efforts to get cross-endorsement fusion voting legalized elsewhere across the country, and has helped foster nascent Working Families parties in up to 10 other states.

According to tax, campaign finance and other records, all four arms have been based in one office on the third floor of 2-4 Nevins Street in Brooklyn. The three co-chairs of the Working Families Party–Bob Master, Sam Williams and Bertha Lewis–were, along with now-White House political director Patrick Gaspard (a founding board member of the Party), the initial directors of the Working Families Organization, and their ongoing positions give them control over Data & Field Services. They were also, as of 2005, the respective president, secretary and treasurer of the Progressive America Fund. Dan Cantor, the executive director of the Party and of the Organization, oversees Data & Field Services, and is a former board member of the Progressive America Fund. According to records, they are not alone: nearly every person listed as an employee of one of these entities is also listed as an employee of at least one of the others. People who have visited the offices say they see no clear distinctions between desks, resources, staff and leadership.

When asked about this structure, the Working Families Party denies that there is anything wrong with what it is doing, or that its operations are at all unusual.

“It is extremely common that different organizations organized pursuant to different sets of laws co-exist–often in the same space with overlapping staff working closely together in advancing their various missions,” said Party spokesman Dan Levitan.

Among those entities Levitan cited as a prime example of similar overlaps are the environmental groups under the umbrella of the Sierra Club classified as 501 (c)3, 501 (c)4, Political Action Committee and for-profit. But the Sierra Club cannot give anyone a spot on the ballot, as the Working Families Party can. This is what makes the Working Families different from all the other examples Levitan and other Working Families staff presented, which include NARAL and the Brennan Center.

Tax, election law and campaign finance experts in New York, Albany and Washington, though, say the finances and personnel of the Working Families family appear so intertwined as to raise questions about this structure.

Allen Bromberger, a New York City attorney at Perlman Perlman who has spent 20 years specializing in “hybrid” legal structures that incorporate non-profits with other entities, was struck by the details of the Working Families structure.

“I’ve never seen this kind of a set-up before,” he said.

“In order to pass muster at IRS, as far as I’m concerned, all the accounting and the bookkeeping and the allocation of costs would have to be done in a very diligent manner. Even then I think it could still be problematic,” he added. “It may be okay–they may have designed it carefully and put enough safeguards in place–but the primary purpose of the 501(c)4 cannot be to engage in political activities. So if they’re not able to show some substantial non-political activity by the 501(c)4, I think they’ve got a pretty significant problem.”

City Hall‘s entire Part I of the series can be read here.