ACORN lawsuit raises question: Can it survive?

ACORN has been cut off by banks, the government and most of its private foundation funders, severely hampering its housing operations and raising the possibility that it will not survive in its current form, according to a lawsuit the group filed Thursday against the U.S. government.

The lawsuit claims that Congress' decision to drop all funding to the group and its affiliates was unconstitutional because it punitively targeted an individual organization.

In affidavits accompanying the lawsuit, ACORN CEO Bertha Lewis and other employees paint a bleak picture of an organization damaged by a string of scandals and the loss of federal funds.

When the funding measure first passed Congress, "I thought ACORN could survive. But I underestimated the effect ... and its consequences with our other sources of funding," Lewis said. "We want to comply with every investigation, but we cannot comply if we do not have staff and are closing our offices."

ACORN, or the Association of Community Organizations for Reform Now, portrays itself as an advocate for tens of thousands of low-income and minority homebuyers and community residents who are served by offices around the country. Republicans describe it as a pro-Democratic group that violated the tax-exempt status of some of its affiliates by engaging in partisan political activities.

The law that halted ACORN's federal funding took effect Oct. 1 and was extended at the end of the month. On Dec. 18, it will either expire or be extended again.

The lawsuit, filed Thursday in Brooklyn federal court by the Center for Constitutional Rights on behalf of ACORN and two affiliates, seeks reinstatement of the funds.

Exactly how deeply the cuts have hit ACORN remains unclear.

The group has laid off employees, closed offices and "drastically reduced services to low and moderate income people across the United States," according to the lawsuit.

The organization says tens of thousands of families will go without its services because of the cuts.

The court papers don't detail how much of ACORN's members contribute to its $25 million yearly budget, which has been used to fund its community-organizing efforts. More than 400,000 families are members, according to the group's Web site.

It's this membership that has long sustained the organization, said ACORN spokesman Scott Levenson.

"ACORN will, in fact, survive. We have thrived for 39 years because of the commitment and dedication of our members," he said.

But the lawsuit says the funding cuts have led to GED classes being canceled midway, foreclosure-prevention programs being stopped in their tracks and home fire-safety assessments being halted. It says local and state governments, as well as most of its private foundation donors, dropped the group's funding.

Citibank, Chase and Bank of America all cut off mortgage and financing assistance to families at risk for foreclosure who were being served by New York ACORN Housing Company Inc., according to an affidavit. Ismene Speliotis, who heads that group's operations, said banks have advised the group the cuts are to ensure they are not "affiliated" with ACORN, a label that could possibly make them ineligible for federally funded programs.

New York ACORN Housing Company Inc. and ACORN Institute Inc., a New Orleans-based group that collaborates closely with ACORN and has laid off 17 of its 20 employees since September, are also named as plaintiffs.

ACORN has been dogged by allegations of voter-registration fraud and embezzlement.

Several of its offices were the subject of an embarrassing hidden-camera sting in which ACORN employees were shown advising a couple posing as a prostitute and her pimp to lie about her profession and launder her earnings. The videos sparked a political uproar, with Republicans trying to use the group's troubles to portray Democrats as corrupt.

The Congressional Research Service warned in a September report that the law taking away ACORN's funding might not be viewed as regulatory and could be judged punitive and unconstitutional. But some legislators disagreed.

"Cutting off somebody from receiving federal funding does not meet the definition of punishment the way the Supreme Court has laid it out," Hans von Spakovsky, a senior legal fellow at the conservative Heritage Foundation, said Thursday.

Bill Quigley, legal director of the Center for Constitutional Rights, defended the lawsuit. "Congress is supposed to pass a law of general application to everyone," he said.

The lawsuit names the U.S. government, the secretary of Housing and Urban Development, the director of the Office of Management and Budget and the secretary of the Treasury Department as defendants.

HUD spokesman Jereon Brown said the agency does not comment on ongoing litigation. Messages left at the White House and Treasury were not immediately returned.