Tuesday, July 15, 2008

MILLION DOLLAR EMBEZZLEMENT AT ACORN

Stepahnie Strom, NY Times Two prominent national nonprofit groups are reeling from public disclosures that large sums of money were misappropriated in unrelated incidents by an employee and a former employee. The groups, Acorn, one of the country's largest community organizing groups, and the Points of Light Institute, which works to encourage civic activism and volunteering, have dealt with the problems in very different ways.

Acorn chose to treat the embezzlement of nearly $1 million eight years ago as an internal matter and did not even notify its board. After Points of Light noticed financial irregularities in early June, it took less than a month for management to alert federal prosecutors, although group officials say they have no clear idea yet what the financial impact may be. A whistle-blower forced Acorn to disclose the embezzlement, which involved the brother of the organization's founder, Wade Rathke.

The brother, Dale Rathke, embezzled nearly $1 million from Acorn and affiliated charitable organizations in 1999 and 2000, Acorn officials said, but a small group of executives decided to keep the information from almost all of the group's board members and not to alert law enforcement. Dale Rathke remained on Acorn's payroll until a month ago, when disclosure of his theft by foundations and other donors forced the organization to dismiss him.

"We thought it best at the time to protect the organization, as well as to get the funds back into the organization, to deal with it in-house," said Maude Hurd, president of Acorn. "It was a judgment call at the time, and looking back, people can agree or disagree with it, but we did what we thought was right."

The amount Dale Rathke embezzled, $948,607.50, was carried as a loan on the books of Citizens Consulting Inc., which provides bookkeeping, accounting and other financial management services to Acorn and many of its affiliated entities.

Wade Rathke said the organization had signed a restitution agreement with his brother in which his family agreed to repay the amount embezzled in exchange for confidentiality.

Wade Rathke stepped down as Acorn's chief organizer on June 2, the same day his brother left, but he remains chief organizer for Acorn International.

He said the decision to keep the matter secret was not made to protect his brother but because word of the embezzlement would have put a "weapon" into the hands of enemies of Acorn, a liberal group that is a frequent target of conservatives who object to its often strident advocacy on behalf of low- and moderate-income families and workers.

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