Politics & Policy

Busted

(David Angerer/Getty Images)
Every Sharpton business known has been dissolved for failure to comply with tax rules.

So far, every for-profit enterprise started by Al Sharpton and known to National Review Online has been shut down in at least one jurisdiction for failure to pay taxes, a review of public records in New York and Delaware reveals.

Records show that Sharpton’s beleaguered for-profit entities often overlap and intertwine, some sharing ties with the reverend’s nonprofit organization, National Action Network. Their financial records are copious, confusing, and sometimes outright bizarre, and together, they depict persistent financial woes for Sharpton, who also personally owes New York State nearly $596,000, according to active tax warrants.

“He clearly appears — based on the information that’s available to us — to have a history of noncompliance with tax obligations,” says Bernadette Schopfer, the director of taxation at New York’s Maier Markey & Justic, a certified public-accounting firm that has had no dealings with Sharpton or National Action Network. “It appears that [Sharpton] does not file [taxes for his businesses], and then opens up something else. At all the entities we see he has opened up, he has not been compliant with the obligations of the owner of a business. . . . He’s either willful in his behavior, or he’s just sloppy.”

Sharpton, who was traveling internationally, was unavailable for an interview, despite NRO’s numerous queries over several days.

Sharpton’s first for-profit company, Raw Talent, probably has the strangest set of tax-debt records. The company was incorporated as a for-profit entity in 1991, the same year Sharpton founded National Action Network.

Raw Talent racked up a lot of tax debt. According to a 2007 lien that appears to remain active, the company owed a total of $580,453 in federal taxes, and state records say it also owes $4,834 in New York taxes.

For some reason, the federal lien says the taxes owed are for the tax period ending in 1950 — long before Raw Talent was incorporated. (Perhaps this is a clerical error, Schopfer says.) The kind of tax debt listed is also strange: It’s listed under the code 4720, which signifies an excise tax on charities, even though Raw Talent was registered as a for-profit entity, not a philanthropic nonprofit. A spokesperson for the Internal Revenue Service could not explain this to NRO, saying privacy laws prohibit the agency from commenting on the tax situations of specific individuals or entities.

New York dissolved Raw Talent in 2002 for failure to pay taxes, but not before Sharpton opened up a new company, Revals Communications, in 1999.

Revals Communications has its own set of oddities. For starters, various records show it shared Battery Park Place and Broadway office addresses with the soon-to-be defunct Raw Talent.

From the very beginning, Revals Communications ran into tax problems. The records indicate the company either failed to file or failed to pay taxes from 1999 to 2002.

The tax debt started off slowly, at $10,585 in total for the first three years. But in 2002, the same year Raw Talent dissolved, Revals Communications’ unpaid balance ballooned by an additional $215,606. Meanwhile, a 2007 New York tax warrant shows Revals Communications also owed the state $175,962. New York finally dissolved the company in 2009.

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Before that, though, the reverend founded yet another for-profit entity, Sharpton Media Group. Unlike the other companies, he originally registered Sharpton Media Group in Delaware, a state where corporations don’t need to disclose much. 

Sharpton then registered the company in New York as a foreign limited-liability company in July 2004, three months after it opened in Delaware. In 2007, Delaware dissolved it for failure to file tax records. At the time, an entity report from Delaware says, Sharpton Media Group owed $7,001 in taxes. But records show the entity remains active in New York.

A representative from the New York Division of Corporations tells NRO in an e-mail that state law “provides that when an authorized foreign corporation . . . has been dissolved, merged out of existence, or had its authority to conduct its business terminated or canceled in its jurisdiction of incorporation, it must file a Certificate of Termination of Existence with the New York State Department of State.” According to state records, Sharpton had made no such filing.

Though the reverend could not be reached, a National Action Network spokeswoman said in an e-mail that Sharpton Media Group ceased to operate after a tax settlement. The same spokeswoman did not reply to NRO’s queries about when, exactly, Sharpton Media Group became inactive. But a National Action Network news release says Sharpton Media Group had partnered with another company to produce a TV show, “The Education SuperHighway,” in 2010 — years after it should have been dissolved in New York.

Money from Sharpton Media Group ended up at National Action Network, even though charitable watchdogs say a loan from a company owned by a nonprofit’s leader raises significant red flags and can constitute a conflict of interest. The nonprofit’s tax filings show balances due of $19,174 in 2010; $53,144 in 2011; and $47,302 in 2012.

In 2005, a little more than a year after opening up Sharpton Media Group, the reverend also incorporated a company called Bo Spanky in New York. The story of the company’s unusual name is either sweet or sour, depending on whom you ask: One source close to Sharpton says the reverend chose it from his two daughters’ pet names, “Bo” and “Spanky,” but another source says “Bo Spanky” was the irksome nickname of Sharpton’s mentor and rival Jesse Jackson.

Like Sharpton Media Group, Bo Spanky loaned money to National Action Network; the nonprofit’s tax filings list balances due to Bo Spanky of $187,078 in 2010; $58,079 in 2011; and $87,079 in 2012.

NRO could find no federal tax liens filed against Bo Spanky.  But a $1,645 tax debt to the state proved the company’s undoing, and it was dissolved in 2012 for failure to pay.

On National Action Network’s latest tax filing, from 2013, loans from Bo Spanky and Sharpton Media Group disappear, apparently replaced by a loan directly from the reverend himself, with a balance due to Sharpton of $328,881.

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In an earlier interview with NRO, Sharpton declined to explain what the loans covered or why they were made. He said:

The organization at times had shortfalls, and I loaned the money to keep it going. I believe what the organization is about, and I put my own money in it, in non-interest loans. That should be admired. . . . Nobody creates an operation where they lend more than they get and say they’re doing it for personal, self-serving interest. That doesn’t make sense.

Sharpton also told NRO at the time that the tax debt listed on the publicly available liens was not current, adding that he had been making payments. He called the tax settlements private. “There’s no way I would provide it to you,” he said of National Action Network’s settlement.

“In terms of National Action Network, [the tax liability] would be zero in the next filing, and in terms of my own, it would be just about that as well — in terms of past taxes,” he told NRO in December. “We don’t owe any new taxes.”

Public records show that National Action Network repeatedly filed its 990 tax forms late, a habit Schopfer, the tax expert, calls “egregious.” She adds, “There’s no excuse for that.”

“It’s like failing a class because you didn’t hand in your homework,” she says. “I don’t think you should be embarking on starting a nonprofit if you don’t have the ability to comply.”

Frank Mercado-Valdes, a former entrepreneur who says he used to advise Sharpton on business matters, says that despite the reverend’s brilliance as a political strategist, he has always harbored deep suspicions about business and isn’t savvy about money.

“Carelessness was his hallmark,” Mercado-Valdes says. Was it worse than that? “Carelessness, yes. Complete disregard for the little laws? Yes, some powerful people are like that. . . . [Sharpton] was someone who, because of the nature of his organization, just between his nonprofit and his for-profits and his personal life, just had a very ad-hoc approach to organization.”

Sharpton has had brushes with the law. In 1990, a jury found him not guilty of 67 counts of fraud and larceny, though three years later, the reverend pleaded guilty to a misdemeanor tax charge.

Later, the Federal Election Commission found that National Action Network had inappropriately paid for expenses related to Sharpton’s 2004 presidential campaign.

Last March, Jeri Wright, a former president of the Chicago branch of National Action Network and the daughter of Reverend Jeremiah Wright, President Obama’s former pastor, was convicted of money laundering after participating in a fraud scheme involving another nonprofit.

In 2007, investigators from the Internal Revenue Service and Federal Bureau of Investigation subpoenaed financial records and employees involved with Sharpton’s political campaigns and nonprofit and for-profit entities. Charges never followed, with the New York Daily News reporting in 2008 that federal prosecutors had dropped the criminal probe. The article also references a “tax settlement of between $2 million and $9 million,” though it gives few details about the agreement.

Mercado-Valdes says Sharpton’s tax problems may be more the result of incompetence than wrongdoing:

One of the reasons the IRS investigations always end up with no indictments is because they always start out with the same false premise: “This guy’s a crook, look, he’s operating like a crook, he’s got all these companies, he’s moving money, shelling back and forth,” because it looks like what a crook would do. Except that when you get in there, you realize what a dumb crook this is. He moves all this money around, and he ends up owing more money than he made. You don’t have to believe everything he says, but as a financial “crook,” he does not aggregate “stolen” money well.

Schopfer, the tax expert, says she thinks perhaps New York State and the Internal Revenue Service have not done more to go after Sharpton and his entities because they know he doesn’t have enough assets to pay his tax debt.

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“They have a lien, and that’s as far as they can really pursue it unless there’s money that they can claim under the lien,” Schopfer says. “It’s probably on their [radar], and they’ve taken it as far as they can until there’s an asset they can claim.”

A National Action Network spokeswoman said Sharpton has reached a settlement with both state and local tax authorities on his financial records, though the New York Times reported in November that “his balance with the state, at least, has actually grown in recent years.”

Sharpton now makes a substantial income from MSNBC and his radio show, but before that, his ritzy lifestyle was subsidized by wealthy black supporters, says Mercado-Valdes. A donor covered the cost of Sharpton’s upscale Helmsley-Carlton apartment in Manhattan, he says. Donors also covered the cost of the “whopping bill” from the hospital when Sharpton was stabbed at a protest rally, one source tells me — the reverend didn’t even have health insurance.

Mercado-Valdes says he recalls buying the reverend a bespoke suit in the ’90s through his company, African Heritage Network, because “through his advocacy, direct or indirect, he generated millions for our company and companies like ours.”

“He got a lot of those suits back then,” Mercado-Valdes says.

The tailor would market them for promotional purposes, and a lot of the times, they were then donated to Sharpton. When it comes to money, he loves his new suits, he loved his Rolex, which was given to him. He loved having a driver downstairs. Sharpton liked the trappings of power in that regard, but money was just not something he focused on, especially compared to his peers. As long as you gave Al a seat at the table with some nice silverware, called him “Rev,” treated him nice, he’d overlook all of your sins. If it’s good for Al Sharpton, then it’s good.

Mercado-Valdes adds that after Sharpton’s failed presidential run, he gained both a national audience and a more substantial income, so he has since been able to pay for more of his own luxuries.

Several sources say Sharpton has an obsession with meeting National Action Network’s payroll, and that he often forsakes potentially big money-making opportunities in favor of short-term, low-pay gigs that allow him to meet that obligation. Mercado-Valdes says it was not unusual for the reverend to accept a speaking event, cash a check made out to one of his for-profit entities, and use the money to make weekly pay at National Action Network.

“Sharpton has always made payroll,” a source close to Sharpton says, adding that it’s one of very few financial obligations the reverend takes seriously. “Part of it, he saw himself as the black leader who was going to be different from some of the African-American leaders like Jesse Jackson, who was notorious for not paying his staffers on time.”

Yet the reverend’s financial woes and big-spending lifestyle may be catching up to him, says Carl Redding, a former Sharpton aide who has since publicly criticized the reverend.

“What he’s doing is negligent,” Redding says, adding that he can’t fathom why, after all of Sharpton’s past tax troubles, the reverend continues to make the same financial mistakes.

“Absolute power corrupts absolutely,” Redding says. “I believe that Sharpton has become so powerful it’s diluting everything about him. The African-American community doesn’t trust Sharpton anymore. He’s living in a fantasy world if he thinks he has credibility.”

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity. 

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