By William Claiborne

Washington Post Staff Writer

Tuesday, March 27, 2001; Page A01

CHICAGO -- When Jesse L. Jackson announced in early 1999 that he would not make a third stab at the Democratic presidential nomination, he said he wanted to spend less time inside the Beltway and more time "tearing down the walls of Wall Street" and ensuring that blacks share in the wealth of corporate America.

As Jackson crisscrossed the country bearding company chairmen and promoting his Citizenship Education Fund (CEF) and its Wall Street Project, the fund nearly quintupled its revenue in one year. Its income went from $2 million in 1998 to $9.8 million in 1999 and more than $10 million last year -- almost all from corporate grants and sponsorships.

Now, in the wake of embarrassing disclosures about the Citizenship Fund's payment of $40,000 to a staff member with whom Jackson fathered a child in an extramarital relationship in 1999, the 59-year-old civil rights veteran is facing questions not only about how his personal and public lives intersect but also about the propriety of his fundraising machine and the methods he uses to get corporate leaders to contribute to his cause.

An examination of the public record and his financial statements shows that Jackson has repeatedly inserted himself into corporate controversies and transactions just when the companies are most exposed -- and therefore most inclined to be generous to Jackson's organization -- such as when they are seeking federal approval for a merger or battling charges of discriminatory hiring practices.

He has also pressed companies to award lucrative deals to his close friends.

Jackson, in two interviews, freely admitted using the threat of boycotts to get the attention of companies he says have long "redlined," or excluded, blacks and other minorities in hiring, contracting and providing access to capital.

"Redlining is economic apartheid, so yes, we say, 'If we are your customer or your worker, stop boycotting us or we will boycott you.' " Then, if the company awakens to its corporate responsibility and contributes money to his movement or awards contracts or sells divested businesses to black entrepreneurs, his threats become even more justified, Jackson said.

But he denied that there was any causal relationship between his withdrawal of boycott threats and the corporate donations or favors, or that he has ever abandoned his principles on black inclusion in order to achieve monetary gain for his organization or benefits for friends.

"What we do has been lost in the 'gotcha' mentality," said Jackson, who described himself as a victim of a "right-wing conspiracy" to discredit him and his movement just as white conservatives sought to discredit the civil rights movement 40 years ago.

Critics Cite Racial Politics

Jackson critics say his tactics verge on using racial politics to extort contributions to his causes or steer deals to his friends.

Gerald Reynolds, an African American regulatory attorney for a Kansas City energy company, called Jackson a "hustler" and a "charlatan" who plays on white executives' fears of racial controversy.

"It's so interesting to watch executives who in another context would make rational decisions willingly capitulate to Jesse Jackson," said Reynolds, who is a board member of the Washington-based Center for New Black Leadership, a conservative policy group.

Jackson has supporters as well as critics in the African American business community. Jim Reynolds, a black investment banker here who has contributed to the Citizenship Education Fund, said, "There was never a hint or a demand for a quid pro quo. It was, 'Tell me what we can do to help you grow your business.' "

Jackson, who has called himself "an enlightened capitalist," recently disclosed annual earnings of about $430,000 a year, including $120,000 from Rainbow/PUSH, $5,000 a week for a CNN talk show he has hosted, and unspecified speaking fees.

No charges of legal wrongdoing have been made against Jackson, although two conservative groups have filed complaints with the Internal Revenue Service accusing him of using charitable funds for "personal inurement" by paying off his former mistress and of straying from the Citizenship Education Fund's tax-exempt purpose by extracting money from corporations and, in effect, providing them with a business service for a fee.

For their part, the corporations -- those that will even comment on Jackson's tactics -- say that there is a strong mandate in federal policy for more minority participation in big business, and that they view Jackson's pressure as an opportunity for them to fulfill their civic responsibility.

Friends Benefit

But, coincidentally or not, the compromises between Jackson and the corporate targets of his ire have benefited or potentially benefited his organization and some of his friends.

For example, when Viacom Inc. and CBS were seeking Federal Communications Commission permission in 1999 for their $91 billion merger, Jackson loudly protested the deal, saying that the law prohibited one company from owning two networks and that Viacom's UPN, which aims much of its programming to black viewers, was considered a network.

Jackson said the merger presented a good opportunity for a spinoff of UPN for minority ownership, and suggested that Viacom sell the valuable property to Percy Sutton, former Manhattan borough president and founder of Inner City Broadcasting Corp., which owns black-oriented radio stations across the country.

Jackson's push for Sutton immediately came under scrutiny because Sutton is a close friend of Jackson's and was finance chairman of his 1988 presidential campaign.

There are other connections between the men. Sutton is a director of the Citizenship Education Fund, and Jackson and his wife, Jacqueline, were original investors in Inner City Broadcasting and reportedly still own shares worth about $1 million.

Nothing has materialized yet in the proposed UPN spinoff, and Viacom spokeswoman Susan Duffy said last week that the FCC is considering making an exception to the two-network rule, which would allow Viacom to keep the network. "If that happens, we're keeping it [UPN]," Duffy said.

Regardless, in the middle of the attempted deal-making, Viacom became a major supporter of Jackson's CEF, contributing $377,500 in 1999, according to CEF records. Jackson has not released figures for 2000.

Jackson, in an interview, denied that he exerted improper pressure on Viacom. He noted that in 1998, minority broadcasters owned only 337 of 11,524 full-power commercial radio and television stations and that Sutton, like many black businessmen, had tried to buy scores of stations but failed. Often the doors were shut to blacks because of a lack of access to capital.

Jackson also played a role in the $74 billion merger of telecommunications giants SBC and Ameritech in 1999, which at first he bitterly opposed as "antithetical to basic democratic values" and urged the FCC to reject.

However, after SBC and Ameritech contributed $500,000 to the CEF and agreed to sell 7 percent of the $3.3 billion cellular telephone business to a black businessman, Jackson withdrew his opposition and declared the merger to be in the public's interest.

The businessman was Chester Davenport, head of the Georgetown Partners investment firm in Bethesda, a close friend whom Jackson also proposed for the UPN deal. After selling his auto-emissions testing business, Davenport had an estimated net worth of $100 million. Davenport was also a member of Jackson's trade mission to Africa last year and is a regular contributor to Rainbow/PUSH groups.

Jackson vehemently denied there was any quid pro quo for his decision to no longer oppose the merger. He said blacks had long been excluded from the cellular business and that Davenport was a deserving candidate for ownership of part of the divested operation.

Viacom spokesman Bobbi Hennessey said last week: "Mr. Davenport was introduced to Ameritech by Rainbow/PUSH, but ultimately we decide who we do business with. We saw an opportunity for minority participation and we took it."

Anger Over Citigroup Deal

In 1998, as federal regulators prepared to approve the $751 billion merger of Citicorp and Travelers Group Inc. into the nation's largest financial services company, many black leaders, including New York's Al Sharpton, vigorously opposed the deal. They argued that the new company, Citigroup, was pledging $115 billion for community investment, compared with the $350 billion in community investment pledged by the Bank of America and NationsBank as part of their merger.

But Jackson angered Sharpton and other community leaders by applauding the new company for its "leadership position." They were further angered when they heard later that Jackson had flown to a meeting in New York with then-Travelers head Sandy Weill on Weill's private jet.

When they learned that Citicorp and Travelers had agreed to donate $150,000 to Jackson's CEF, some African American community leaders complained that Jackson had sold his support of the merger to the two corporations. Jackson denied the charge, saying there was no quid pro quo and that the merger benefited minority communities.

Jackson opponents invariably raise the $82 million workplace discrimination lawsuit filed by nearly 13,000 black employees or ex-employees of Boeing Co. Boeing executives unsuccessfully tried to reach a settlement of the suit for nearly a year. In early 1999, Jackson flew to Seattle and within days negotiated a $15 million settlement, which 1,600 minority employees quickly challenged, saying that Jackson had become too cozy with management and had pushed his own agenda to their detriment.

After the settlement terms were announced, Boeing donated $50,000 to Jackson's CEF and announced it was steering two multimillion-dollar pension funds to black-owned investment firms that have financially supported Jackson's organizations.

Jackson said his role in settling the discrimination lawsuit had nothing to do with Boeing's support of his movement, but merely reflected his progress in pressuring companies to be more inclusive of minorities. A Boeing spokesman, Peter Conte, said company chairman Philip M. Condit "came to recognize and appreciate Reverend Jackson's viewpoint."

Jackson also figured prominently in Pepsi Bottling Group's $2.3 billion initial public offering in 1999 when at the last minute he pressured PepsiCo Inc.'s chief executive, Roger Enrico, to restructure the transaction and make a black-owned investment bank, Utendahl Capital Partners, co-manager of the offering. The deal, which gave Utendahl a cut of the $19 million management fee, had been adamantly opposed by Enrico's own chief financial officer.

A Pepsi spokesman denied that Jackson had bullied Enrico into cutting Utendahl into the deal. Enrico issued a statement that said, in part, "Rev. Jackson makes a very compelling case for minority business interests."

After the deal, Utendahl and PepsiCo contributed tens of thousands of dollars to Rainbow/PUSH groups.

© 2001 The Washington Post Company

-- Anonymous, March 27, 2001