ACORN May Lose Gov't Funds after Scandal

ACORN calls itself the nation's largest grassroots community organization, with more than 400,000 members.

It helps low-income Americans find affordable housing and it receives tens of millions in government funding. But, as CBS News correspondent Cynthia Bowers reports, that may be coming to an end, thanks to undercover videos that have sparked a huge scandal.

The videos reportedly recorded late July and early August appear to show ACORN employees in several big cities including Baltimore, Washington and New York, advising a couple posing as a pimp and prostitute.

The employees are heard telling the couple how to avoid paying taxes and how to qualify for a mortgage on a home the couple plan to use as a brothel.

"And if anyone asks you your business is a performing artist, which you are, okay, so you are not lying," says one of the ACORN workers caught on the tape. "Performing artist. So stop saying prostitution. Got it."

ACORN says the workers caught on tape were fired but contends the videos were illegally obtained, doctored and deceptive and is threatening legal action against the undercover filmmakers posing as the couple.

"We are experiencing the modern-day version of McCarthyism - 'Are you now or have you ever been associated with ACORN?'" said Bertha Lewis, ACORN's CEO.

But long-term damage to the reputation of the poverty rights organization may already be done. Monday night the Democratic-controlled Senate voted 83-7 to deny ACORN access to millions of dollars in federal housing funds.

"I don't believe it was accidental that this video caught ACORN employees delivering the same message in different cities," said Sen. Mike Johanns, R-Neb. "They magnify a troubling, systemic and a criminal pattern."

Last week the Census Bureau severed its ties with the organization, meaning ACORN workers won't be part of the 2010 census count. And now House Republicans are asking the IRS to cut ties to ACORN as well.

ACORN's brand of community activism was born out of the civil rights era to organize the poor and give them a bigger political voice. Last year ACORN registered 1.3 million new voters and helped hundreds of thousands of families to buy or keep homes, but critics point out it also faces fraud charges in nearly two dozen states.

"It has no business trying to organize voter registration because it has shown time and time again that it cannot be trusted to do that," said Steve Staneck, a research fellow at the conservative Heartland Institute.

According to a Web site for tracking government grants, ACORN has received 53 million tax dollars since 1994. Some are now questioning exactly where those millions wound up.