From the archive of the Boston Globe
SATURDAY, December 6, 1997
By: Diane E. Lewis, Globe Staff
Edition: Third  Section: Business  Page: F1
Word Count: 1,742


   Fallout from the campaign money-laundering scheme that has so disrupted the Teamsters union has spread to include a seemingly unlikely group of liberal consumer activists.


   Last month, Citizen Action closed its national office in Washington and dismissed 20 employees after financial supporters reacted negatively to reports that the group was involved in a scheme to help fund the 1996 reelection campaign of Teamsters president Ron Carey. Carey has resigned, three of his aides have pleaded guilty to conspiracy and other charges, and a federal investigation into the scandal continues even as some former affiliates of Citizen Action attempt to come to grips with what went wrong with the grassroots group and why.


   "Before the Teamsters scandal, there were problems" at Citizen Action, said Edward Kelly, former director of the Massachusetts chapter. "Basically, I saw national go from a nonpartisan, grass-roots organization to a partisan one tied to the Democratic Party. I didn't like that."


    Kelly, who became director of the local chapter five years ago, said he quit in February 1997 following months of growing concern with the direction the group's national office was taking. Members say Kelly wasn't alone.


   In a statement, Hetty Rosenstein, director of the group's board of directors, said the national office closed because it was unable to raise enough money to keep its staff going after the US attorney's office in New York began investigating the Teamsters election.


   Rosenstein acknowledged that the organization underwent some internal struggles over direction, but denied charges that it abandoned its original mission of grass-roots activism. She maintained that the directors of the national group's two biggest affiliates had embarked on a "highly destructive campaign to malign" the national office.


   As for Kelly's assertion that the organization had become tied to the Democratic Party, Rosenstein said: "We have never been in bed with the Democratic Party." She described Kelly as a disgruntled former director who failed to build the Massachusetts chapter into a viable organization.


   "Before the Teamsters issue, there were internal struggles about the direction of the organization, and certainly the Ohio and Indiana affiliates were on one side of that struggle," Rosenstein said. "But let me be clear. state Citizen Action organizations are continuing to carry out their consumer and environmental programs and grass-roots organizing work."


    In fact, the affiliates in Ohio and Indiana, whose 600,000 members accounted for 35 percent to 40 percent of the group's overall membership, have broken all ties, citing as reasons the acceptance by national Citizen Action of money from the nuclear and tobacco industries.


   Other offices -- in Kentucky, North Carolina, Louisiana, and Nebraska -- have closed because of financial reasons, say members. Meanwhile, the director of Citizen Action in Illinois has resigned in the wake of a federal probe of an alleged $2.7 million check kiting scheme that may have involved banks in Illinois and Oregon. Of the organization's 34 affiliates and chapters, about 24 are still operating, Rosenstein said.


   Kelly contends the national organization's problems began several years ago when it lost interest in door-to-door canvassing, and started relying on various special interests, including liberal foundations, for funds.


   "In the early 1990s, during the fight for national health care, it was a pretty viable organization, and what allowed it to get big was door-to-door canvassing," said Kelly. "But over time, national leaders lost interest in canvassing. So, what some of us were beginning to see was a shift from an organization that was committed to building grass-roots power to one that wanted to be a big inside player in Washington, D.C."


    "Once they took that step, they became involved in all sorts of questionable activities," he added.


   Sandy Buchanan, head of Ohio Citizen Action, alleges one of those activities involved an anonymous $50,000 donation to the national office by an association whose members include nuclear companies.


   "We became alarmed in the spring of 1996 because we started getting memos about a national campaign on electrical deregulation," recalled Buchanan. "The content of the memos from national were very similar to the line of the nuclear industry, which is, `Don't deregulate, slow everything down, deregulation is bad for the consumer.'


   "We started asking questions, and found out that $50,000 had been given to national by a public relations firm in Washington that was working for a utility organization that represented several nuclear energy companies," Buchanan said.


   Rosenstein denied Buchanan's claims. "We never took money from the nuclear industry," she said. "All organizations have internal troubles, and disagreements. What troubles me is that neither Buchanan nor Williams ever came to the national board to air their concerns."


   But an October 1996 memo to Citizen Action of New York, as well as Ira  Arlook, executive director of national Citizen Action, and Citizen Action's board members indicates that the affilates had aired concerns. Written by Bob Benge, chairman of the Indiana affiliate's board, the three-page memo urged national Citizen Action to return the anonymous $50,000 grant it had received.


   In December 1966, the Ohio affiliate pulled out. It was joined, in January, by the Indiana affiliate, which was known for its utility rate campaigns and investigations. The directors of the Indiana and Ohio affiliates say they grew even more concerned after learning that national Citizen Action had received money from a group called the Labor Management Committee, a coalition of tobacco company unions.


   Although formerly opposed to cigarette and excise taxes, the affiliates said Citizen Action had changed its position on the issue, and was planning to use the labor committee grant to influence voting on tax policies.


   "It is true that we accepted funds from the Labor Management Committee, but the committee was not just made up of tobacco unions," said Rosenstein. "There were unions on the committee that also represented workers from other firms. The money was never directed by the tobacco industry. It was funding for the purpose of progressive taxation."


   Still, critics claim the change in direction only led to more anger and squabbling within the ranks. "Staff members were so disgusted with the way things were being done that they would not go to meetings in D.C.," said Chris Williams, executive director of the Citizen Action Coalition of Indiana. "A lot of groups just went down the tubes, and were replaced by state chapters that were controlled by the national -- financially and otherwise."


   Founded in the late 1970s, Citizen Action was an outgrowth of several populist organizations around the country, including Massachusetts Fair Share, an in-your-face consumer group whose local campaigns changed the auto insurance system in the 1980s and stymied a plan by the telephone company to raise the cost of public phone calls from 10 to 20 cents.


   In 1983, after auditors found that Fair Share had more than $1 million in debts, the high-profile organization was forced to lay off staff, close offices, and reduce its mailings. In August of that year, Fair Share director Michael Ansara resigned in the face of criticism that he could have prevented the group's financial collapse. When the group folded, organizers from Fair Share formed a chapter of Citizen Action.


   Ansara, a 1960s radical who helped form Students for a Democratic Society at Harvard University, is also tied to the Teamsters scandal -- and has ties to Citizens Action. Ansara, a Somerville telemarketer, pleaded guilty this fall to diverting funds into the Carey campaign through various schemes. One charge alleges that national Citizen Action paid $75,000 to Ansara for private consulting work he never did. Ansara helped co-found Citizen Action in the 1970s.


   Martin Davis, a political consultant hired by the Teamsters, and Jere Nash, Carey's campaign manager, also pleaded guilty to charges that they attempted to funnel money into the union campaign by trading union funds for money from the Democratic Party. Federal investigators also are looking into allegations that the union promised to donate funds to the Democratic Party in return for a $100,000 illegal contribution from a foreign citizen with close ties to Democratic officials.


   Last week, Citizen Action's national office referred all questions about these issues, and the office's shutdown, to a public relations firm called Fenton Communications. The firm responded to the inquiries by faxing Rosenstein's statement.


   Rosenstein denied that Citizen Action had any involvement in the Teamsters scandal. Quoting from a statement by the group's lawyers, she wrote: "No officer or employee of Citizen Action knowingly participated in this scheme or engaged in any financial transactions, including those with Martin Davis' November Group or . . . Michael Ansara's (consulting company), with the knowledge that funds drawn from the Teamsters union treasury were to be fraudulently diverted to the Carey re-election effort."    In Massachusetts, Kelly was doing some soul-searching.


   He said he became disillusioned when he noticed that the organization was becoming more involved with the Democratic Party. "This is an organization that began as a grass-roots populist organization and ended up being an apologist for the Democratic Party," Kelly said angrily. "I say that because at one time the organization was developing issues that it was concerned about, and it was doing it from the grass-roots level."


   But by the fall of 1996, he said, "under the normal guise of nonpartisanship, national was only tracking what the Democratic Party was saying about the Republicans. It was determined to help defeat incumbent Republicans, but the material Citizen Action was putting out was almost indistinguishable from the information we were seeing from the DNC."


   According to the Teamsters federal investigation, Citizen Action received $475,000 from the International Brotherhood of Teamsters last year in support of the consumer group's Campaign for a Responsible Congress, which was developed to help defeat the elections of GOP candidates to the House of Representatives.


   Recent revelations about the Teamsters as well as the shutdown of the national Citizen Action office has left some people shellshocked. "People are pretty demoralized about the whole thing," said a former member. "In Massachusetts, Citizen Action didn't have a huge organization, but the staff was pretty committed. Basically, the national group got bigger money  and the operation changed," he said. "They flew too close to the sun and got singed. It was only a matter of time that something like this would eventually happen."