Questions About Sharpton’s Finances Accompany His Rise in Influence

Russ Buettner, New York Times, November 18, 2014

The Rev. Al Sharpton, who came to prominence as an imposing figure in a track suit, shouting indignantly at the powerful, stood quietly on a stage last month at the Four Seasons restaurant, his now slender frame wrapped in a finely tailored suit, as men in power lined up to exclaim their admiration for him.

Mayor Bill de Blasio and Gov. Andrew M. Cuomo hailed him as a civil rights icon. President Obama sent an aide to read a message commending Mr. Sharpton’s “dedication to the righteous cause of perfecting our union.” Major corporations sponsored the lavish affair.

It was billed as a “party for a cause,” in honor of Mr. Sharpton’s 60th birthday. But more than a birthday celebration, or a fund-raiser for his nonprofit advocacy group National Action Network, the event in Manhattan seemed to mark the completion of Mr. Sharpton’s decades of transition from consummate outsider to improbable insider.

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Obscured in his ascent, however, has been his troubling financial past, which continues to shadow his present.

Mr. Sharpton has regularly sidestepped the sorts of obligations most people see as inevitable, like taxes, rent and other bills. Records reviewed by The New York Times show more than $4.5 million in current state and federal tax liens against him and his for-profit businesses. And though he said in recent interviews that he was paying both down, his balance with the state, at least, has actually grown in recent years. His National Action Network appears to have been sustained for years by not paying federal payroll taxes on its employees.

With the tax liability outstanding, Mr. Sharpton traveled first class and collected a sizable salary, the kind of practice by nonprofit groups that the United States Treasury’s inspector general for tax administration recently characterized as “abusive,” or “potentially criminal” if the failure to turn over or collect taxes is willful.

Mr. Sharpton and the National Action Network have repeatedly failed to pay travel agencies, hotels and landlords. He has leaned on the generosity of friends and sometimes even the organization, intermingling its finances with his own to cover his daughters’ private school tuition.

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Mr. Sharpton’s newly found insider status represents a potential financial boon for him, furnishing him with new credibility and a surge in donations. His politician-heavy birthday party, at one of New York City’s most expensive restaurants, was billed as a fund-raiser to help his organization. Mr. Obama also spoke at the organization’s convention in April, its primary fund-raising event.

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Mr. Sharpton acknowledged his financial troubles in recent telephone interviews. He said all of the debts were being paid, thanks to vastly increased revenues from donors. And he pointed out that he had lent the organization money himself, while at times not taking a salary.

“You can say I’m not a great administrator,” he said. “You can’t say that I’m not committed.”

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Problems keeping his personal and professional affairs in order have threatened Mr. Sharpton’s rise from the streets for decades.

In 1990, he was acquitted of felony charges that he stole $250,000 from his youth group. Then in 1993 he pleaded guilty to a misdemeanor for failing to file a state income tax return. Later, the authorities discovered that one of Mr. Sharpton’s for-profit companies, Raw Talent, which he used as a repository for money from speaking engagements, was also not paying taxes, a failure that continued for years.

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With Mr. Sharpton focused on the 2004 presidential race, National Action Network’s finances were reaching crisis levels, tax documents and other public records show. The group’s revenues totaled just over $1 million in 2004, about half of what they had been two years earlier. Nevertheless, it picked up expenses from Mr. Sharpton’s presidential bid: $181,115 in consulting and other costs that should have been charged to his campaign, the Federal Election Commission later found. The group also faced court judgments for several hundred thousand dollars in unpaid office rent and hotel bills.

To stay afloat, the nonprofit became reliant on money that was supposed to go to payroll taxes, according to its financial statements. The amount National Action Network underpaid the federal government in taxes went from about $900,000 in 2003 to almost $1.9 million by 2006, records show. Mr. Sharpton, making more money from a new radio contract, tried to help by forgoing a salary from 2006 through 2008 and giving the organization a $200,000 no-interest loan.

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In 2009, when the group still owed $1.1 million in overdue payroll taxes, Mr. Sharpton began collecting a salary of $250,000 from National Action Network. The recent Treasury report that called that sort of practice abusive also said only 1,200 organizations in the nation owed more than $100,000 in unpaid payroll taxes, which would put Mr. Sharpton’s group among the most delinquent nonprofit organizations in the nation.

Mr. Sharpton denied in a recent interview that the payroll tax shortfall was intentional. Contradicting the statements by the group’s accountants that this was how the organization was surviving, he said the underpayment stemmed from disagreements over how to classify certain workers, after the I.R.S. began investigating the group in late 2007. The agency demanded that some people who were working as independent contractors be treated as employees, he said, so the organization needed to retroactively turn over their payroll taxes.

“It cost us a lot to go through the investigation,” Mr. Sharpton said. “If we didn’t have the legal fees, we could have paid all the taxes.”

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Today, Mr. Sharpton still faces personal federal tax liens of more than $3 million, and state tax liens of $777,657, according to records. Raw Talent and Revals Communications owe another $717,329 on state and federal tax liens.

Mr. Sharpton said the federal liens resulted from a demand by the I.R.S. that he pay taxes on earnings from speaking engagements that he had turned over to National Action Network. He said he was up to date on payment plans for both the federal and state liens, so, he said, the outstanding balance was much lower than records showed.

But according to state officials, his balance on the state liens is actually $220,000 greater now than when they were first filed during the years 2008 through 2010. {snip}

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National Action Network’s revenue has increased sharply, to more than $4 million in both 2011 and 2012, the year of the group’s most recent tax filing.

Much of that revenue appears to be from large corporate sponsors. A person who handled solicitations at a company that has supported the group said National Action Network often requested $50,000 or $100,000 to sponsor events.

Mr. Sharpton said his birthday party grossed about $1 million, enough that he expected to be able to clear up the organization’s tax debts, removing a cloud that has long hung over the group and himself.

“I think it shows we were able to continue to fund-raise, despite it being challenging,” he said. “We were able to turn it around.”

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