A federal appeals court on Friday threw out a decision that had barred Congress from withholding funds from ACORN, the activist group driven to ruin by scandal and financial woes.
The ruling by the 2nd Circuit Court of Appeals in Manhattan reversed a decision by a district court judge in Brooklyn that found Congress had violated the group's rights by punishing it without a trial.
Congress cut off ACORN's federal funding last year in response to allegations the group engaged in voter registration fraud and embezzlement and violated the tax-exempt status of some of its affiliates by engaging in partisan political activities.
Fueling the outrage was a video that caught three employees allegedly advising a couple posing as a prostitute and her boyfriend to lie about her profession and launder her earnings.
ACORN responded with a lawsuit accusing Congress of abusing its power with what amounted to a "corporate death sentence."
The appeals court disagreed, citing a study finding that ACORN received only 10 percent of its funding from federal sources.
"We doubt that the direct consequences of the appropriations laws temporarily precluding ACORN from federal funds were so disproportionately severe or so inappropriate as to constitute punishment," the three-judge panel wrote.
The Center for Constitutional Rights, which argued on behalf of ACORN, said it was considering asking the appeals court to rehear the case with more judges.
"We cannot let Congress be pushed around by the right-wing media machine into becoming prosecutor, judge, jury and executioner of politically unpopular people or organizations," said Bill Quigley, legal director for CCR.
There was no immediate response to a phone message left for government lawyers.
ACORN, or the Association of Community Organizations for Reform Now, had described itself as an advocate for low-income and minority home buyers and residents. The national organization announced earlier this year it was folding because of falling revenues.
Several of its largest affiliates, including ACORN New York and ACORN California, broke away and changed their names in a bid to ditch the tarnished image of their parent organization and restore revenue that ran dry in the wake of the video scandal. They continued to operate under their new names.
In written arguments submitted to the appeals court, the government said ACORN had acknowledged embezzlement and subsequent cover-up at the highest levels of the organization, including nearly $1 million taken from the group by the brother of its founder in 1999 and 2000.