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FOX NEWS NETWORK

SHOW: THE O'REILLY FACTOR (20:00 ET)

February 1, 2001, Thursday

Transcript # 020101cb.256

SECTION: News; Domestic

LENGTH: 2526 words

HEADLINE: Are Jesse Jackson's Tax-Exempt Organizations Breaking the Law?

GUESTS: Cleta Mitchell, William Lash

BYLINE: Bill O'Reilly

BODY:

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE
UPDATED.

BILL O'REILLY, HOST: THE O'REILLY FACTOR from Los Angeles is on.

Tonight, we have some new information about Jesse Jackson's finances, and "The Washington Post" is reporting that there's a memo to Jackson's

Also ahead, John Ashcroft is in.  Should African-Americans be afraid?

And we'll tell you about a terrible killing of a young woman by a dog in San Francisco.

Caution: You're about to enter a no-spin zone.  THE FACTOR begins in 90 seconds.

(FOX NEWS)

O'REILLY: Hi.  I'm Bill O'Reilly reporting from Los Angeles.  Thank you for watching us tonight.

Big news day for us.  As predicted, John Ashcroft is in as attorney general.

But, first, let's get right to the Jesse Jackson situation in the talking points memo.

As you may know, THE FACTOR has been trying to get financial information from Jackson for more than a year.  We are not accusing him of anything.  We just want to know where Jackson's tax-exempt money is going. By law, the public has a right to know that.

Jackson has set up four organizations.  Two are tax-exempt, and two are not. Millions of dollars annually pour into these concerns.  Where that money goes is very difficult to figure out.

"The Washington Post" is reporting that a document from Jackson's tax- exempt Citizenship Education Fund, addressed to his mistress, Karin Stanford, after she became pregnant, details how she would get money from the fund.  Apparently,
"The National Enquirer" has this document.  Of course, it is illegal to use tax-exempt dollars for private use.  Jackson's people say the document was never approved.

THE FACTOR has obtained tax returns from the Citizen Educationship Fund -- Citizenship Education Fund from 1998 and '99.  In those years, the fund took in nearly 12 million tax-exempt dollars but paid out only $1.5 million in salaries
and wages and spent -- get this -- only $47,000 on education.  Let me repeat that.  Out of the $12 million the Citizenship Education Fund received, just $47,000 went for actual education.

Now Jackson's mistress, Ms. Stanford, worked for the fund, but her salary isn't listed.  Jackson's people will not tell us how much she made, and they will not tell us how many people worked for the Citizenship Education Fund. Jackson himself is not listed as receiving any salary.

By the way, Stanford conceived Jackson's baby sometime around August of 1998 and, subsequently, moved to California to live in a $365,000 home.  Jackson's people tell us Ms. Stanford received $35,000 in severance pay, and published reports say Jackson pays her a considerable amount in monthly support.

Once again, tax-exempt organizations are supposed to be accountable to the public.  So why we cannot find out what Ms. Stanford's salary history is remains a mystery.

Also remaining a mystery are Jackson's travel expenses for the Rainbow/PUSH Coalition in 1998.  He has listed $1,242,854 for travel and conference fees, but the specific charges -- that is where the travel was to -- are not provided.

Another major question is: Why hasn't the IRS looked into Jackson's finances, considering he has reportedly had a history of financial problems in this area?

Here are examples.

One, in 1983, the Chicago office of the Department of Education Rainbow/PUSH.

Two, in 1984, a Federal Election Commission audit of Jackson's presidential campaign showed it under-reported donations of $826,000.

Three, in 1998, PUSH Excel agreed to pay the federal government $550,000 in undocumented expenses of federal grant money!  That's tax money from you and me.

Also in '88, an audit of Jackson's presidential campaign in that year resulted in a record $150,000 fine for accepting excessive campaign contributions.

Once again, Jackson's finances have not been investigated for 12 years, since '88.  The question for the IRS is: Why not?

In 1999, THE FACTOR has learned that Jesse Jackson had a huge year. He accepted the following donations: $500,000 from SBC Ameritech, $375,000 from Bell Atlantic, $625,000 from GTE, $377,000 from Viacom, and $142,000 from AT&T. There are many, many more.

It is obvious to anyone, including our federal government, that there is big money coming in to Jesse Jackson's organizations, and it is obvious that he has had past problems accounting for some of the money.  Once again, THE FACTOR is stunned that there is not more oversight.

We'll continue our investigation.

And that's the memo.

Now for the top story tonight.  Reaction to the Jesse Jackson situation.

Joining us from Washington is tax attorney Cleta Mitchell and William Lash, a law professor at George Mason University.

Ms. Mitchell, you've heard the evidence, and you have seen the tax returns for the Citizenship Education Fund for '98-'99.  What say you?

CLETA MITCHELL, TAX-EXEMPT ORGANIZATION ATTORNEY: Well, let's understand some basic principles.  When you look at the tax return for a tax-exempt organization, like the Citizenship Education Fund, and that is - - there are a couple of things to keep in mind.

Number one, the government requires a charity -- and that's what this is. This is a charity, and contributions to this charity are deductible to the donor and, therefore, there are very stringent rules on what the money can and cannot be spent for.  There are specific line items in the tax return that are supposed to be identified, and you are -- the charity is supposed to tell us who received -- anybody who received more than $50, 000 in compensation, if there were consultants -- they list $1.7 million in consulting fees.

O'REILLY: Well, let me stop you there.  I don't want to get too -- too complicated.

MITCHELL: Well -- but the...

O'REILLY: We're talking about the Citizenship Education Fund...

MITCHELL: Right.

O'REILLY: ... lists $1.2 million in consulting fees.  Now remember...

MITCHELL: Right.

O'REILLY: ... this education fund only spent in two years $47,000 on education.

MITCHELL: Right.

O'REILLY: So your problem with the consulting fees is what?

MITCHELL: There's a specific requirement and a schedule in the tax return, in the form, where the IRS requires that you identify by name professional services.  On that part of their tax return, they write "none." So which is it -- $1.3 million...

O'REILLY: They didn't...

MITCHELL: ... or none?

O'REILLY: They didn't identify it as IRS rules state, but -- look...

MITCHELL: Exactly.

O'REILLY: ... we made this point for a year.  The IRS simply is not going to investigate this man.  They know what's going on.  They have to know.  Am I right?

MITCHELL: Well, I think that they need to conduct an audit.  I think that if you compare the tax return to the audit that's filed with the State of Illinois, there are a number of discrepancies.

And I think there's another issue that -- there are two -- another -- two more issues, the itemization so that we can know for sure they're of the' organization frankly borders on political campaigning, which is strictly forbidden for a charity, and there are a lot of red flags, I think, that are raised by that.

O'REILLY: All right.  I don't want to get into the politics of it now.

Mr. Lash, Professor, you -- when you hear this and -- and you see what we've uncovered here on THE FACTOR, what do you say?

WILLIAM LASH, GEORGE MASON UNIVERSITY: Well, I see three different stories, Bill.

The first story is $40,000 as an advance to a consultant.  But looking at the records of Operation PUSH and CEF, she was never claimed as one of the top three employees, so, therefore, her salary had to be under $50, 000.  Now how many consultants -- you have former employees -- get a year's salary up front? That's suspicious.

Second story that comes up as well: It was reimbursement for moving and consulting fees.  Fifteen thousand dollars to move away from your employer? That's also very unusual.  I've had a lot of clients who get paid to move to the employer -- to -- to the work, to the employer, but never $15,000 to go away from work, plus getting fees in advance.

And this final story of -- of, well, this is a severance package because that -- if we look at what is the standard practice for severance packages for non-profits, particularly for this organization, because if it looks like it's a special benefit given to her because of her status with

O'REILLY: Why...

LASH: You cannot have a personal benefit.

O'REILLY: Why hasn't the federal government been all over this and investigating...

LASH: Well...

O'REILLY: ... and -- come on.  This story now has been out for a while.

LASH: Of course.  It's an obvious -- sure.  It's an obvious story, but, again, you know, if you are the Democratic Party and you control the IRS, why mess with your biggest dog?  Why mess with somebody you need for these fights? Why mess with somebody who's always going to be on your side?  So if...

O'REILLY: So are you saying that the Clinton administration told the IRS not to investigate Jackson?

LASH: I think -- I'm not saying that something told them that, but someone would be smart enough to know.  "Why are you bothering our largest supporter? Why are you bothering our most visible, our most useful watchdog?" Yeah, it wouldn't be a logical approach.  I don't know if the Clintons had a memo, but people can read between the lines and realize there's no point in antagonizing someone who's ready to do your dirty work with...

O'REILLY: All right.  Now you're a -- you're a teacher, Professor, and you see $47,000 out of $12 million going for educational expenses, and what does that tell you?

LASH: Well, it's funny.  It gets back to Cleta's point.  They are supposed to be engaged in education, not lobbying.  So the fact that the money is going -- not going for pure education, it's going for advocacy, other programs, again, which may be well and good, but not to entitle them to tax-exempt status, that the donors could lose...

O'REILLY: All right.  Now...

LASH: ... the tax-exempt status.

O'REILLY: Let's take a break, and when we come back, we're going to hold Ms. Mitchell and Professor Lash over, and we'll continue our discussion about Jesse Jackson's finances in just a few moments.

(COMMERCIAL BREAK)

O'REILLY: Continuing now with tax attorney Cleta Mitchell and Professor William Lash from George Mason University.

I want to tell the audience as well there was a lot of information in the talking points memo that we gave you.  We are going to post that memo broadcast.

Ms. Mitchell, let's go back to you.  We have $1,307,393 for consultants for the Citizenship Education Fund, once again, a tax-exempt concern.  Some people believe that this money has been used to help this is a big pile of dough for consultants.  I've never seen anything quite like it, have you?

consultants.  There's nothing illegal about that, but one cannot on the one hand say, "We spent $1.3 million for consultants," and then fail to itemize, as required by law, exactly who's receiving those...

(CROSSTALK)

O'REILLY: Well...

MITCHELL: ... contracts.

O'REILLY: And, once again, we want to tell the audience just joining us that, when they said "Who were these consultants?" on the tax return, they put down "none." Is...

MITCHELL: They put -- that's exactly right.  There's a form, and you contractor contracts.

O'REILLY: This is what I don't get, though.  You saw that, I saw that, and I don't know anything about tax returns.  I mean, I hire my guys to do mine, but you're an expert.  That should have been a red flag immediately, and this is 1999.  It's now 2001.  So I think the authorities are derelict here.  I think they're not doing what they should do.  Am I wrong?

MITCHELL: Well, no, you're not wrong, but let me tell you that one of the things that has been of great concern to conservatives over the past eight years during the Clinton administration was not only something like this where the IRS
is not reviewing and asking the questions it needs to about an organization such as this one, but that, instead, there have been a number of targeted conservative organizations which have been through extensive...

O'REILLY: OK, but, again, I want to stay out of politics.  I understand that, but...

MITCHELL: Well...

O'REILLY: It's not the time, Ms. -- it's really not the time.

MITCHELL: OK.

O'REILLY: All right?

MITCHELL: OK, but it's...

O'REILLY: We've got $222,000 in miscellaneous.  Miscellaneous for $222,000?

MITCHELL: That's right.  That's right.
 
O'REILLY: What's that?

MITCHELL: Well, we don't know, and they're supposed to tell us. Again, the rule of law is the IRS requires that charities -- that's what this is, a charitable organization -- is supposed to itemize.  There are very specific line items, and they are supposed to tell us exactly how much it is.

O'REILLY: All right.  So we've got a -- we've got a tax return here for the Citizenship Education Fund that's totally out of control.  I'm going to give Professor Lash the last two minutes here.

Now, Professor, I think the audience knows that I'm -- I'm pretty much plaming the -- placing the blace -- blame for this on the government at anything wrong at this point, but we certainly can prove that the IRS and the State of Illinois and the State of New York have been derelict in their duty to really look at these tax returns because there are so many red flags.  Do you see it that way?

LASH: Absolutely.  Again, you can't have $1.37 million saying consultants. Why write down -- take out consultant work.  We've got $1. 37 office supplies. It doesn't matter if I don't itemize what's happening.

But we're saying if you're coming up with a number, show your work, like they say in grammar school.  Show where the money went.  Follow the money.

When you're dealing with the -- you know, with the people's trust, when you're dealing with charities, you're getting tax-exempt authority, you have to -- it comes with the contract.  You've got to do your part of the work and be
accountable, and the state government and the federal government have looked the other way, frankly, for political reasons.

O'REILLY: Yes, they have.  They flat out have looked the other way. It's -- it's the most disgraceful thing I've seen in 25 years of investigative reporting.  I've never seen anything this blatant with so much money -- so much money -- and we didn't even tally up all the money that goes to the Wall Street Project.

All right.  Thank you very much, Professor.

And, Ms. Mitchell, we appreciate your time.

And we are going to stay on this investigation.  We have other stuff that's going to come out, and we'll continue to keep you informed.

Directly ahead, the Congressional Black Caucus meets with President Bush. We'll talk with Congressman Albert Wynn from Maryland when we come right back.

(COMMERCIAL BREAK)

LOAD-DATE: February 2, 2001