Head of Foundation Bailed Out Nonprofit Group After Its Funds Were Embezzled
By STEPHANIE STROM
Published: August 16,
When the embezzlement of almost $1 million by the brother of the founder of the Association of Community Organizations for Reform Now, better known as Acorn, surfaced last month, the organization announced that an anonymous supporter had agreed to make it whole.
That supporter was Drummond Pike, the founder and chief executive of the Tides Foundation, which channels money to what it describes as progressive nonprofits, including some Acorn charitable affiliates.
Mr. Pike is a friend of Wade Rathke, the founder of Acorn and its leader until the scandal broke, and he agreed to buy the promissory note that required the Rathke family to repay Acorn the money that Mr. Rathke’s brother, Dale, had stolen.
Mr. Rathke is a member of the board of the Tides Foundation and other Tides-related organizations.
Since 2000, the Tides Foundation has provided more than $400 million to nonprofit groups, with much of that money flowing out of donor-controlled accounts it manages in the same way that the Fidelity Charitable Gift Fund or a community foundation does.
John A. Powell, board chairman of the Tides Network, the umbrella organization for various Tides affiliates, wrote in an e-mail message to The Times that Tides had no involvement in the matter and that none of its money was used to buy the Rathke family’s debt to Acorn.
He said Mr. Rathke was on a leave of absence from all Tides boards.
In 2000, Acorn discovered that Dale Rathke had embezzled $948,507.50 from it and affiliated charitable organizations. The management committee that controlled the organization decided not to alert law enforcement officials, and negotiated an agreement with the Rathke family to repay the money.
That agreement was carried on the books of an affiliate, Citizens Consulting Inc., as a loan to an officer. Sometime in June, Mr. Pike bought the loan from the affiliate, according to e-mail messages between senior executives at Acorn that were provided to a reporter by Acorn employees, who requested anonymity because they feared losing their jobs.
Mr. Pike refused to confirm or deny that he had bought the note. “As a rule, I do not comment on my personal finances,” he wrote in e-mail messages in answer to questions about the deal.
But e-mail messages among Acorn’s senior executives discuss how to keep Mr. Pike’s identity secret, even as they acknowledge that some of the foundations and philanthropic advisers that have supported Acorn and its affiliates know that he bought the note.
“Does Drummond know the word is out?” Steven Kest, the executive director of Acorn, wrote on July 4. “If not, shouldn’t someone tell him?”
In a July 12 e-mail message to Mr. Kest, Acorn’s political director, Zach Pollett, wrote: “I talked to Drummond on this yesterday and had Beth Kingsley” — Acorn’s lawyer — “prepare a ‘keep your yaps shut’ confidentiality memo to people at Acorn and CCI.”
Charles D. Jackson, a spokesman for Acorn, said the organization would not comment on the purchaser of the note.
Acorn’s board members and senior executives have signed confidentiality pledges that forbid them from disclosing Mr. Pike’s identity or discussing the purchase agreement, according to three Acorn contributors who asked to see the agreement but were told they would have to similarly pledge confidentiality. They declined.
But a handful of executives at foundations that have contributed to Acorn and Tides have learned through connections at those organizations that Mr. Pike was the buyer.