WASHINGTON — North Carolina's ACORN office has had to lay off all eight of its employees in the wake of a scandal that has rocked the national office of the grass-roots organizing group.
Yet many workers have continued the past three weeks as unpaid volunteers for the nonprofit organization, reaching out to low- and moderate-income workers who might need help with issues ranging from landlord fights to high-priced mortgages.
In Washington, hidden-camera videos made this summer by two young conservative activists that appear to show ACORN workers in other states encouraging illegal behavior have led to federal inquiries and inspired Congress to act to cut off much of the national organization's federal funding.
On Wednesday, ACORN sued James O'Keefe and Hannah Giles, who did the taping, and Breitbart.com LLC, whose Web site posted the videos, in Maryland, saying state law requires consent to create sound recordings.
In its national office, ACORN, the Association of Community Organizations for Reform Now, last week stopped accepting new clients. It hired an outside investigator to review the organization.
On Monday, ACORN notified the Internal Revenue Service that it would suspend its work offering free tax clinics next tax season to low- and moderate-income workers. On Wednesday, the IRS announced it was ending its relationship with ACORN in providing such assistance.
Lawmakers on both sides of the aisle are urging the Obama administration to withhold all federal funding from the organization.
Meanwhile, local chapters in North Carolina that have spent the past year registering voters, lobbying the state legislature and helping struggling homeowners with their mortgages are now themselves trying to make ends meet.
The scandal has hurt funding, said state director Pat McCoy. The phone was recently cut off in the Charlotte office. The organization also has offices in Raleigh, Durham and Greensboro.
"We've had a tough time financially," McCoy said. "We've been working very hard to work with our funders to restore more confidence on their part."
McCoy said he expects grant money to begin flowing in the next week that could carry the state organization through the rest of the year.
Meanwhile, he said, the agency's employees continue to work in the community.
In Charlotte, head organizer Hector Vaca spent time this week driving through neighborhoods, visiting homeowners who are struggling with their mortgage payments.
The program, in partnership with Citi, aims to offer free advice to residents who could be facing foreclosure. Vaca, 35, said he hands out fliers and will offer his cell phone, too, to homeowners who want to call for free assistance right away.
Vaca, who said he grew up poor as the child of an immigrant, has been an ACORN organizer for three years.
"I love my job," he said. "I get to help people who have never been able to get the help they need."
ACORN's national organization, along with an affiliated group, ACORN Housing, also received a $2 million housing preservation grant from Charlotte-based Bank of America.
In a statement, the bank said that it doesn't condone the actions on the videos and that it is reviewing its work with ACORN.
Bank of America also said it and other banks have allowed ACORN to help tens of thousands of homeowners facing foreclosure.
"Overall, we believe our investments have been leveraged to further the company's commitments and benefit the country," the bank said in its statement.
Along with working in neighborhoods, ACORN lobbied in Raleigh this year with the N.C. Justice Center to help pass two new state laws protecting tenant rights and encouraging cities to expand public transportation.
ACORN's lobbyist, Michael De Los Santos, organized community meetings of tenants who spoke of the need to have landlords repair heating units, replace cracked windows and clear out insect infestations.
Bill Rowe, general counsel for the liberal N.C. Justice Center, said he didn't detect any hidden agendas among ACORN organizers he met during this year's lobbying effort.
"[They] are committed to making sure that people who generally don't have their voices heard get their voices heard and do the talking," Rowe said. "There was nothing where there was even a hint of unjustified work going on."
In other work, ACORN helped about 600 low-income workers last spring file their taxes from offices in Charlotte and Raleigh, McCoy said. The goal was to encourage many to claim the Earned Income Tax Credit, a tax credit to which the working poor are entitled but which many don't know about.
The tax offices raised questions from Francis DeLuca, executive director of the Civitas Institute, a Raleigh-based conservative think tank that is conducting its own research into the organization.
On the hidden-camera videos released in recent weeks, ACORN workers in other states are seen advising the conservative activists to falsely claim under-aged girls as dependents. Claiming dependents, DeLuca said, is one way to earn the Earned Income Tax Credit.
"You have to wonder whether they're filling out the taxes honestly," DeLuca said. "Since that's one of the big things they do in North Carolina, it raises questions."
McCoy called the questions outrageous.
"That's ridiculous," he said. "I have no knowledge of anything that's transpired at either of our tax preparation sites that would cause anyone to say anything like that."
Last fall, the organization also registered more than 27,000 new voters in North Carolina before the general election, most of them in Durham and Charlotte.
ACORN drew scrutiny after bogus voter registration application cards were filed in Durham and Wake counties. Elections officials criticized ACORN's payment method to its temporary workers and encouraged the group to tighten its quality control supervision to flag problematic applications.
Durham County elections director Mike Ashe said the issues improved after he met with McCoy and a national representative from ACORN.
"It was absolutely, in Durham County, fraud against ACORN," Ashe said. "[Workers] were trying to meet their quota."
McCoy insisted registration workers weren't paid by quotas but rather by wages that began at $8 an hour. He added, though, that supervisors insisted that temporary employees actually prove that they were working.
Gary Bartlett, the State Board of Elections director, said a State Bureau of Investigation inquiry is under way into a handful of workers who turned in the false applications in Durham County. The Wake County issues, he said, were minimal.
Overall, Ashe said, the problems cost little more than the time of elections officials.
"The negative costs so much aggravation, it almost takes away the good work [ACORN] did," Ashe said. "Because they registered a lot of people. But a few bad apples hurt the good work they did."
Editor's note: Charlotte Observer staff writer Rick Rothacker contributed to this report.
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