-Caveat Lector- > > Feature April 2, 2001/Vol 6, Number 28 > > Follow the Money > The Jesse Jackson story > By Noah D. Oppenheim > > On March 8, the Reverend Jesse Jackson held a press conference in > Chicago. All the country's major newspapers sent reporters, and all > three cable news networks covered the event live. Jackson had > promised > to explain the byzantine finances of his nonprofit empire-in > particular, the omission from tax forms of payments to employee Karin > > Stanford, the mother of his illegitimate child. > > Jackson would eventually get around to offering his explanation-a > simple accounting oversight, devoid of "improprietybut only after > most > TV networks had tuned out, apparently bored by the testimonials from > a > long parade of Jackson's friends. > > The most memorable of these character witnesses was Jim Reynolds, > owner of Loop Capital Markets, a Chicago investment bank. Before > singing Jackson's praises, Reynolds described how, after 20 years in > the world of finance, he had founded his own firm. Reynolds boasted > of > Loop, "We're the number one underwriter of public securities . . . in > > this city and state. We've been at business approximately three > years." And Reynolds explained his firm's meteoric rise: "A > significant part of the access that we've enjoyed . . . has only been > > made possible through the tireless efforts of Reverend Jackson." > > In the weeks since his press conference, Jackson's dealings have come > > under heightened scrutiny. Questions have arisen about more than the > personal embarrassment that originally sparked the public's interest. > > Even more troubling than the apparent misuse of charitable dollars to > > conceal an extramarital affair are Jackson's "tireless efforts" on > behalf of minority businessmen such as Reynolds. While Jackson says > he > is working to tear down the walls of "economic apartheid," his > tactics > bring to mind an old-style protection racket. > > Thanks to the reporting of Tim Novak, Chuck Neubauer, and Abdon M. > Pallasch in the Chicago Sun-Times and Eric Slater and Myron Levin in > the Los Angeles Times in the past two months, a clear pattern can be > traced in Jackson's dealings with corporate America: Under the guise > of "civil rights activism," Jackson coerces companies into conducting > > business with his friends and, very often, donating large sums of > money to his own organizations. Rather than threaten broken kneecaps, > > Jackson threatens boycotts and the stigma of being labeled racist by > this country's most prominent black leader. > > Some of Jackson's shakedowns: > > * In 1997, Viacom announced its intent to sell 10 radio stations to > > two other companies for $1.1 billion. Jackson's Rainbow/PUSH > coalition filed a petition with the FCC, seeking to block the > deal. After negotiating with Jackson, Viacom and the two buyers > set aside $2 million to "promote minority ownership of broadcast > properties." Jackson dropped his opposition to the deal. His > Citizenship Education Fund received $680,000 to organize two > conferences. > * In May 1998, telecommunications firms SBC and Ameritech reported > their desire to merge. Jackson declared the merger "fundamentally > > undemocratic" and proclaimed, "Consumers, workers, women, and > people of color are being excluded and left behind." As their > fight with Jackson dragged into the following year, SBC and > Ameritech contributed $500,000 to his Citizenship Education Fund. > > Ameritech also sold a portion of its $3.3 billion cellular > business to Jackson's friend Chester Davenport. Soon thereafter, > Jackson pronounced the merger "in the public interest." > * In January 1999, Jackson flew to Seattle, where thousands of > Boeing employees had filed a racial discrimination lawsuit. > Negotiations had been going on for over a year. Jackson met with > Boeing head Phil Condit and reached a settlement in days. Less > than a week later, Boeing made a $50,000 donation to the > Citizenship Education Fund-the first of several. In the following > > months, Boeing also directed hundreds of millions of dollars in > pension funds to be managed by minority-owned banks, many with > connections to Jackson. Meanwhile, almost 2,000 of the original > 13,000 minority plaintiffs in the Boeing suit formally protested > to the court that the proposed settlement was inadequate. > * In May 1999, the Pepsi Bottling Group was preparing a $2.3 > billion > public offering. Jackson pressured Pepsico CEO Roger Enrico to > involve a minority-owned investment bank in the transaction. > Against the objections of his top financial officers, Enrico gave > > in to Jackson at the last minute, naming Utendahl Capital Markets > > as co-managers of the offering. Utendahl has since donated tens > of > thousands of dollars to the Citizenship Education Fund. > * In October 1999, Clear Channel Communications sought to merge > with > AMFM Inc. Jackson raised concerns about the merger, arguing that > minorities should be able to buy any radio stations made > available > if the deal materialized. When the saber-rattling was over, Inner > > City Broadcasting, operated by longtime Jackson friend Percy > Sutton, bought nine of those stations in major cities. Jackson > and > his wife Jacqueline are part-owners of Inner City. Their stake, > originally worth $10,000, is now worth between $850,000 and $1.2 > million. > * Also in 1999, Jackson agitated against the merger of AT&T and > TCI. > He dropped his opposition after the companies hired Blaylock & > Partners, a minority-owned investment bank, to float an $8 > billion > bond offering. AT&T subsequently gave $425,000 to the Citizenship > > Education Fund. Blaylock gave $30,000. > > All told, Jackson's charities currently take in approximately $15 > million a year in tax-exempt donations, most of that money stemming > from Jackson's intervention in corporate transactions, according to > Slater and Levin's analysis of financial records released by the > groups. The tax-exempt status of these donations deserves emphasis. > Not only is the shareholder being fleeced, but by extension the > government is being robbed. Of course, Jackson's raids on the public > coffers are not always so indirect. > > This past summer, the state of Illinois awarded Jackson's > Rainbow/PUSH > Coalition $763,000 to enroll poor children in the KidCare health > insurance program. For months, Jackson had been attacking governor > George Ryan for his failure to increase KidCare participation. > Jackson's complaints stopped as soon as the contract was awarded. > > The grant was unusual in two respects. No other organizations were > allowed to bid for the work. And, while all other community groups in > > Illinois are paid $50 for every child they enroll, PUSH's money came > in a lump sum with no strings attached. Since July 1, when PUSH > received the grant, 37,000 children in Illinois have been signed up > for KidCare. PUSH has been responsible for signing up only 151 > families. The state might have achieved the same result by paying > another group just $7,550, a savings of about 99 percent. > > Besides the obvious waste to taxpayers, the KidCare case highlights > the question: Who benefits from Jackson's exceptional ability to > extract money from corporations and the government? Jackson has > claimed the $763,000 his organization received from Illinois was > necessary to pay a staff of "maybe two or three," travel costs, and > overhead. But records examined by the Sun-Times indicate most of > PUSH's KidCare outreach efforts were integrated into regularly > scheduled events held at the organization's headquarters. While other > > groups were signing up thousands of children, PUSH signed up hardly > any. It seems fair to say that Illinois's poor kids gained little. > Where did the money go? And what of the millions each year Jackson > reaps by leaning on American business? Toward what good works do his > organizations direct those funds? > > Any investigation of these matters is made difficult by the > complexity > of Jackson's empire. He is nominally the head of several charities, > including the Rainbow/PUSH Coalition, PUSH for Excellence, the > Citizenship Education Fund, and People United. He also runs the > political action committee Keep Hope Alive. There are indications > that > funds are often transferred between the nonprofits, but their IRS > filings are egregiously sloppy, making their precise workings > difficult to pin down. Jackson did not respond to requests for > comment > for this story, but his suspicious record-keeping is currently the > subject of a complaint to the IRS filed by the American Conservative > Union. To cite just one inconsistency among many: On a 1999 form, > Jackson is listed as president of the Citizenship Education Fund; on > another form for the same year, he is omitted from a list of the > group's officers. > > Still, some facts can be ascertained, even beyond the $35,000 that > the > Citizenship Education Fund paid to Jackson's mistress as part of a > severance and relocation package. In 1999, PUSH spent about $1.3 > million on unidentified consultants. Jackson pays himself a salary of > > $120,000, and maintains a security detail that costs about $62,000. > (He earns an additional $260,000 as a talk show host on CNN, and an > undisclosed amount from speaking engagements.) > > One of PUSH's largest expenditures is for travel-particularly for > Jackson, who personally spent $614,000 jetting around the country in > the year 2000. Jackson estimates he travels about 250 days a year, > bringing his average daily expenses to about $2,500. At the very > least, it would appear that Jackson does not stay at the Holiday Inn. > > Over and above the apparently generous per diem he allows himself > while on the road, Jackson estimates that his income approaches > $430,000 a year. Still, he insists, "We've always made the choice to > live rather modestly." > > Jackson and his allies argue his sizable income and expensive upkeep > are beside the point. The Reverend Al Sharpton recently lectured a > critic, "It is legal for Reverend Jackson to be paid. Slavery's > against the law, sir." Sharpton and others prefer to shift the focus > away from Jackson and toward the progressive causes he champions. But > > the justice of those causes is even less clear than PUSH's accounting > > methodology. > > Jackson describes the purpose of his PUSH travel as "voter education > [and] voter registration." But, while PUSH purports to be a > nonpartisan organization, there is ample indication that Jackson's > message is no general call to civic involvement. In a separate > complaint filed recently with the Federal Election Commission, the > American Conservative Union alleges that many of Jackson's public > appearances last year were coordinated with the Gore-Lieberman > campaign, and many involved explicit advocacy on behalf of Democratic > > candidates. (Certainly Jackson's speech to the Democratic National > Convention fit this description.) The Democratic National Committee > reimbursed PUSH for much of Jackson's travel during the election, > belying the supposedly nonpartisan nature of his work and provoking > concern that party soft money had been spent illegally on a political > > campaign. > > The merits of Jackson's crusade against "economic apartheid" are even > > more dubious. The beneficiaries of his work are not the black > underclass, or even the booming black middle class. Chester > Davenport, > who was given a piece of the SBC-Ameritech merger, was already worth > close to $100 million when Jackson encouraged his inclusion. Inner > City's Percy Sutton is similarly well-off. Why such men deserved the > support of a civil rights group remains a mystery. Jackson's > explanation for focusing on large telecommunications mergers: "It's > where the most money was." He says the success of men like Davenport > and Sutton inspires the entire community. > > Jackson also claims that forcing companies to do business with > minorities is "a win-win situation." We already know what Jackson and > > his friends win. It's less obvious what's in it for the companies. > When asked why Davenport was included in the sale of Ameritech's > cellular business, a company spokesperson explained, "Primarily they > brought to the table the opportunity for us to do business with a > minority firm." One wonders how the value of that opportunity is > reflected in quarterly reports. > > Of course, the cost of refusing to bow to Jackson can be quite real. > Boycotts can hurt a company's bottom line. Perhaps worse is the > potential damage to its reputation. When T.J. Rodgers, CEO of Cypress > > Semiconductors, disputed Jackson's suggestion that Silicon Valley was > > a bastion of racism, a Jackson-allied group announced, "We can now > officially describe Cypress Semiconductor as a white supremacist hate > > group." > > Jackson himself does not shy from casting such aspersions when > assailing his critics. At his March 9 press conference, he lashed out > > at those concerned about the mismanagement of his charities: "These > groups-they were against us marching for public accommodations. They > were against us marching for the right to vote. They were against us > marching for open housing. They were against us fighting to free > Mandela in South Africa. . . . They are fundamentally extremist, > right-wing groups." > > If Jackson's critics are right-wing extremists, is it right-wing > extremism to question the respect Jackson continues to be afforded in > > our public life? After receiving Jackson's endorsement in last year's > > presidential election, Vice President Al Gore declared it "a high > honor" to have earned the confidence of "a true national leader." > George W. Bush, too, treats Jackson with deference, including him > among the former presidents and other dignitaries he telephoned > following the Supreme Court's decision in Bush v. Gore. And Bush > (like > Bill Clinton, Barbra Streisand, Jerry Falwell, and other notables) > called Jackson with words of encouragement after his affair was > reported. Yet all the politicians' groveling cannot hide from the > rest > of us that Jackson is really a talented extortionist, debasing the > cause for which he claims to fight. > > By Noah D. 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