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Acorn on Brink of Bankruptcy, Officials Say

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BALTIMORE — The community organizing group Acorn, battered politically from the right and suffering from mismanagement along with a severe loss of government and other funds, is on the verge of filing for bankruptcy, officials of the group said Friday.

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Bertha Lewis, Acorn's chief executive, blamed “relentless, well-funded right-wing attacks” reminiscent of the McCarthy era.

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Acorn is holding a teleconference this weekend to discuss plans for a bankruptcy filing, two officials of the group said. They asked not to be identified because they were not authorized to speak to the news media.

Over the last six months, at least 15 of the group’s 30 state chapters have disbanded and have no plans of re-forming, Acorn officials said. The California and New York chapters, two of the largest, have severed their ties to the national group and have independently reconstituted themselves with new names. Several other state groups are also re-forming outside the Acorn umbrella, and will not be affected if the national organization files for bankruptcy.

This week, the Maryland chapter announced that it would not reopen its offices, which were shuttered in September in the wake of a widely publicized series of video recordings made by two conservative activists, posing as a prostitute and a pimp, who secretly filmed Acorn workers providing them tax advice. In the videos, Acorn workers told one of the activists, James E. O’Keefe III, how to hide prostitution activities from the authorities and avoid taxes, raising no objections to his proposed criminal activities.

After the activists’ videos came to light and swiftly became fodder for 24-hour cable news coverage, private donations from foundations to Acorn all but evaporated and the federal government quickly distanced itself from the group.

The Census Bureau ended its partnership with the organization for this year’s census, the Internal Revenue Service dropped Acorn from its Voluntary Income Tax Assistance program, and Congress voted to cut off all grants to the group.

A network that once included more than 1,000 grass-roots groups, Acorn, which stands for Association of Community Organizations for Reform Now, was created in 1970 and has fought for liberal causes like raising the minimum wage, registering the poor to vote, stopping predatory lending and expanding affordable housing. The organization helped roughly 150,000 lower-income families prepare their tax returns and obtain $190 million in tax refunds between 2004 and 2009, Acorn officials said.

But long before the activist videos delivered what may become the final blow, the organization was dogged for years by financial problems and accusations of fraud. In the summer of 2008, infighting erupted over embezzlement of Acorn funds by the brother of the organization’s founder. Some chapters were also found to have submitted voter application forms with incorrect information on them during the lead-up to the 2008 presidential election, leading to blistering charges from conservative organizations linking Acorn’s errors to the Obama campaign.

“That 20-minute video ruined 40 years of good work,” said Sonja Merchant-Jones, former co-chairwoman of Acorn’s Maryland chapter. “But if the organization had confronted its own internal problems, it might not have been taken down so easily.”

The national organization’s housing affiliate, long one of the best-financed offshoots, has been hit especially hard. The group, which changed its name to the Affordable Housing Centers of America this year, now has 17 offices, down from 29 a year ago. The housing group’s annual budget has dropped to $6 million this year, down from $24 million last year.

Some of Acorn’s state chapters have tried to remake themselves in recent months.

Calls to Acorn’s New York City offices, for example, are now met with a recording that says: “Acorn is not providing services in New York. If you’re interested in hearing from local organizations with similar purposes, please press zero.”

The New York chapter has been replaced by a new group, called New York Communities for Change, whose Web site promotes many of Acorn’s goals and many of whose staff and community members are the same.

In Pittsburgh, Acorn officials said they were trying to continue work while they decided whether to stay with the national organization or form a new one. Maryellen Hayden, the volunteer director of Allegheny County’s Acorn, said the group was continuing to counsel people facing foreclosure and had recently sent two buses with dozens of members to Washington to rally for the Democratic health care bill.

Many former Acorn staff members and beneficiaries of its work say that while the group was its own worst enemy in many ways, it was also one of the most consistent advocates for the poor. Acorn’s sudden demise, supporters say, has left a vacuum in services for communities that used to rely on it for free advice on employment, tax and loan matters.

Theo Emery contributed reporting from Washington.

This article has been revised to reflect the following correction:

Correction: March 23, 2010

Several articles since September about the troubles of the community organizing group Acorn referred incorrectly or imprecisely to one aspect of videotaped encounters between Acorn workers and two conservative activists that contributed to the group’s problems.

In the encounters, the activists posed as a prostitute and a pimp and discussed prostitution with the workers. But while footage shot away from the offices shows one activist, James O’Keefe, in a flamboyant pimp costume, there is no indication that he was wearing the costume while talking to the Acorn workers.

The errors occurred in articles on Sept. 16 and Sept. 19, 2009, and on Jan. 31 of this year. Because of an editing error, the mistake was repeated in an article in some copies on Saturday.

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