March 01, 2001, Thursday, Final Edition

SECTION: PART A; NATION; Pg. A4

LENGTH: 745 words

HEADLINE: IRS probe of Jackson group sought;
Misuse of tax-exempt status suspected

BYLINE: Jerry Seper and Steve Miller; THE WASHINGTON TIMES

BODY:
A $9 million offshoot of Jesse Jackson's Rainbow/PUSH Coalition was targeted yesterday in a complaint by a public-interest law firm that wants the Internal Revenue Service to investigate suspected misuse of the organization's tax-exempt status.

The National Legal and Policy Center asked the IRS to investigate and audit the nonprofit Citizenship Education Fund because of "apparent violations of the requirements for tax-exempt status" under federal law.

According to a 33-page complaint filed with IRS Commissioner Charles Rossotti, the McLean-based law firm believes accusations of suspected misconduct by CEF "justify" a formal IRS investigation that could lead to a revocation of the organization's tax-exempt status or sanctions against its officers.

IRS spokesman Larry Wright yesterday declined to comment on the complaint.

Rainbow/PUSH Chief Financial Officer Billy R.  Owens said the complaint had no substance.

"All they are doing is taking this stuff right out of the IRS code," Mr. Owens said, flipping through the pages.  "The rest of it looks like stuff they've taken out of newspapers.  Other than that, I can't see anything that they have."

Mr.  Owens said the matter will be referred to the group's legal counsel.

The complaint said CEF, formed in 1984 by Mr.  Jackson, violated federal tax codes by providing business services and facilitating transactions for a fee, and that while offering charitable and educational benefits to the public, it also provided "substantial secondary private benefits to a select group of third parties," including Mr.  Jackson's recently acknowledged mistress.

It also said that CEF may have failed to include required information on its annual tax forms.

"Paying off a mistress is not a legitimate use of the assets of a tax-exempt group," said Peter T.  Flaherty, the firm's chairman.

He claimed that the CEF's payment of $36,181 to the mistress, Karin Stanford, violated federal tax codes that ban the use of funds from a tax-exempt organization for "private personal ends."

Miss Stanford served as the $120,000-a-year director of the Washington bureau of Rainbow/PUSH and headed the coalition's public-policy division for two years. She moved in 1999 to California, where she now lives with her daughter in a five-bedroom house in the Los Angeles area.  She bought the house for $365,000 after securing a $291,950 loan.

Officials affiliated with Rainbow/PUSH assisted Miss Stanford financially with her purchase of the house and Mr.  Jackson has said he is providing her with $3,000 a month from his own pocket to support his young daughter.

Miss Stanford still works for the coalition as a research consultant.

She reportedly also serves as a $10,000-a-month consultant to Yucaipa Companies in Los Angeles.  Yucaipa's managing partner, California supermarket magnate Ron Burkle, has been a longtime financial supporter of Rainbow/PUSH and other Jackson projects.

Mr.  Flaherty also challenged CEF's role in Mr.  Jackson's ongoing efforts to lobby major corporations to steer business and capital toward minority entrepreneurs, such as "The Wall Street Project," a movement to persuade corporate America to invest in minority businesses.

Mr.  Flaherty cited Mr.  Jackson's conduct during the recent merger of GTE and Bell Atlantic as an example of improper conduct by CEF.  He said after Mr. Jackson dropped his public opposition to the merger, the two companies "reportedly provided a million dollars to CEF."

"Furthermore, two of Jackson's sons, both CEF officials, were granted a lucrative Anheuser-Busch distributorship in Chicago, despite the fact they had no experience in the beer industry," he said, noting that the distributorship - worth between $30 million and $40 million a year - was awarded after boycotts against Anheuser-Busch organized by Mr.  Jackson.

The complaint said CEF "may have played a role" in the award of the River North distributorship and, if true, was "used, and is being used, to further private interests of Jonathan Jackson, Yusef Jackson and possibly others."

"We expect a swift, complete and fair investigation of Jesse Jackson and the Citizenship Education Fund," Mr.  Flaherty said.

His firm - founded in 1992 to promote ethics and accountability in government - has taken on the Clinton Health Care Task Force, "Travelgate," the Food and Drug Administration, the Legal Services Corp.  and organized labor.

LOAD-DATE: March 1, 2001