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Jesse Jackson & The Politicized IRS

All this talk about Lois Lerner and the IRS targeting conservative groups brought me back more than a decade ago, when the IRS did not audit Jesse Jackson’s left-of-center organization, the Citizenship Education Fund, whose tax returns were a massive red flag. I was surprised to see that today, the CEF is still rocking and […]

All this talk about Lois Lerner and the IRS targeting conservative groups brought me back more than a decade ago, when the IRS did not audit Jesse Jackson’s left-of-center organization, the Citizenship Education Fund, whose tax returns were a massive red flag. I was surprised to see that today, the CEF is still rocking and rolling and raising money. If there are any Congressional hearings into the IRS targeting — or refusing to target — 501(c)(3) organizations because of their political orientation or connections, Republicans would do well to dig into the sordid history of Jackson’s CEF, which he treated like a slush fund. It would be useful, perhaps, to see if there’s evidence showing that certain organizations got a pass because of their political mission or political connections.

I find it difficult to locate online all the columns I wrote about Jackson, his shakedowns, and his finances for the New York Post back in 2001. The Chicago Sun-Times also back then ran a series of excellent investigative stories on Jackson’s finances and various shenanigans, all of which were coming to light, if memory serves, because it had emerged that Jackson had his mistress on his non-profit payroll.

Here is one of the columns I wrote in 2001. It gives you a good idea of how messy CEF’s tax filings were:

It has been 18 years since the IRS has audited any of Jesse Jackson’s organizations. So at my request, an expert examined the 1998 and 1999 IRS filings of the Citizenship Education Fund, a tax-exempt arm of his Chicago-based Rainbow/PUSH Coalition, as well as supplemental forms submitted by the charity. The papers are public record.

“There are red flags all over this,” said Cleta Mitchell, a Washington lawyer who specializes in tax laws regulating nonprofit organizations.

“You can’t help but be struck by the fact that, reading those tax returns, there’s a lot of money being spent in ways that aren’t clear,” said Mitchell, a registered independent voter whose clients are predominantly Republican.

Among the biggest questions suggested by the documents:

* The 1999 filing says CEF, whose president is Jackson, spent $1.3 million for travel. But it does not itemize. “Was any of that travel paying for Jesse Jackson to go speak for candidates?” Mitchell asked. “If so, that is illegal, and they should lose their tax-exempt status.”

More than $1 million was spent by CEF in 1999 on consulting fees. Who were these consultants? What did they do for the money? “The law says you have to list your five biggest independent contractors. They list none,” said Mitchell. “You don’t have $1 million in consulting fees without having contractors.”

* CEF spent $1.1 million on conferences and meetings in 1999, according to its tax filing. What were these events?

* The 1999 return states that CEF spent nothing on lobbying and “grass-roots communications.” But elsewhere on the form it “suggests” that $2.3 million went for grass-roots lobbying related to the charity’s tax-exempt purpose, Mitchell said.

There are also discrepancies among various forms submitted to the feds and the state of Illinois. Some list key employees and officers whose names are not on other documents.

A meaningless technical oversight? Could be. But sloppiness like this gives ammunition to those who suspect that Jackson uses creative accounting to treat CEF like a slush fund.

“Because the IRS doesn’t look very carefully at these [filings], and nonprofits know that, they don’t tend to fill them out completely and accurately,” says Stacy Palmer, editor of the Chronicle of Philanthropy, a journal that covers charities.

There’s lots more to ask, but it all comes down to one thing. “The overall question we’re facing here is whether or not tax-deductible dollars are being spent for political purposes and personal inurement” – a legal term meaning “benefit” – “both of which are forbidden to a [tax exempt] charity,” says Mitchell.

It’s fair to pose these questions, and fair to expect a complete and credible answer from this and any honestly run charity – particularly a tax-exempt one.

On Monday, I spoke with Billy Owens, the chief financial officer of CEF and the Rainbow/PUSH Coalition, who asked me to put these and other questions in written form and submit them via e-mail. He promised to respond by 10 a.m. yesterday. He neither called nor e-mailed, nor did he respond to another phone message I left for him yesterday afternoon.

Owens and Jackson may not have a thing to worry about, if a former U.S. Justice Department official who worked in the tax-fraud division knows his stuff. “They hate going after religious organizations, and it’s unlikely that they’re going to go after an African-American organization led by a clergyman,”said the ex-official, who asked that his name not be printed.

Does the IRS care? Do stockholders in the big companies – Verizon, AT&T, Viacom, SBC/Ameritech and others – who donate heavily to CEF have any regard for how Jesse Jackson spends their money? Will treasurer Billy Owens ever give an explanation?

If you submitted tax returns like these, don’t think for a minute you wouldn’t be asked to give an accounting. Why should Jesse Jackson get special treatment?

I found that text in a long formal complaint the conservative National Legal and Policy Center filed on Feb 28, 2001, with the IRS asking for an investigation of CEF. All these potential crimes and abuses are detailed in the complaint, and documented. What was the response, I wonder? I don’t recall hearing of any CEF audit. Was there one? If not, why not?

These abuses by the tax-exempt organization headed by the politically connected Democrat Jackson were not mere allegations. They were documented, and published in my newspaper, the Chicago Sun-Times, the Chicago Tribune, and aired on Fox News. Jackson subsequently said CEF would amend its tax returns, at least in a limited way:

The Rev. Jesse Jackson said Thursday he would amend tax returns by his organizations which omitted a $35,000 payment to a staff worker with whom he had an extramarital affair.

He called the omission a mistake and said the money paid to the woman was severance pay.

The news conference was the first time Jackson had released financial records for his groups, including the Rainbow/PUSH Coalition and the Citizenship Education Fund.

Jackson defended his groups’ operations as sound and rejected suggestions that he uses threats of economic boycotts or protests to pressure companies to contribute to his organizations.Jackson denies personal gain from groups

Jackson also disputed accusations that he uses donations to his groups for his personal gain.

“Our record of service, our financial records reflect discipline, dignity, integrity and results and legal propriety,” Jackson said.

Jackson conceded that 1999 tax returns filed in connection with the operation of the Citizenship Education Fund failed to reflect $35,000 paid to former staff member Karin Stanford. In January, Jackson revealed that he is the father of a child with Stanford.

There was far, far more wrong with those tax filings than omitting payment to his mistress. At that same press conference, Jackson denounced the center that brought the complaint as a right-wing outfit. It certainly was, and is, a right-wing outfit, but that has nothing to do with whether or not CEF violated the law.

Whatever became of NLPC’s request? Did the IRS investigate CEF? If so, what did it find? If not, why not? Who made that call within the IRS bureaucracy?