Sen. Barack Obama's record-breaking $150 million fundraising performance in September has for the first time prompted questions about whether presidential candidates should be permitted to collect huge sums of money through faceless credit card transactions over the Internet. Lawyers for both the Republican and Democratic parties have asked the Federal Election Commission to examine the issue, pointing to dozens of examples of what they say are lax screening procedures by the presidential campaigns that permitted donors using false names or stolen credit cards to make contributions. "There is so much money coming in and yet very little ability to say with certainty that you know who is giving it," said Sean Cairncross, the Republican National Committee's chief counsel.
While the potentially fraudulent or excessive contributions represent about 1 percent of Obama's staggering haul, the security challenge is one of several major campaign-finance-related questions raised by the Democrat's fundraising juggernaut. Concerns about anonymous donations seeping into the campaign began to surface last month, mainly on conservative blogs. Some bloggers described their own attempts to display the flaws in Obama's fundraising program, donating under such obviously phony names as Osama bin Laden and Saddam Hussein, and reported that the credit card transactions were permitted.
Obama officials said it should be obvious that it is as much in their campaign's interest as it is in the public's interest for fake contributions to be turned back, and said they have taken pains to establish a barrier to prevent them. Over the course of the campaign, they said, a number of additional safeguards have been added to bulk up the security of their system. In a paper outlining those safeguards, provided to The Washington Post, the campaign said it runs twice-daily sweeps of new donations, looking for irregularities. Flagged contributions are manually reviewed by a team of lawyers, then cleared or refunded. Reports of misused credit cards lead to immediate refunds....
[...] Rather than relying primarily on a network of wealthy and well-connected bundlers -- as candidates have since President Bush pioneered that technique in 2000 -- Obama also tapped a list of 3 million ordinary donors, many of whom who gave in increments of $25 and $50. Obama's success with these kitchen-table contributors has set up one of the most lopsided financial advantages in modern presidential campaigning. During the first two weeks of October, Obama spent four times more than McCain, including for an unprecedented $82 million saturation-advertising campaign that blanketed the airwaves in key battleground states.
Campaign finance experts have already classified this contest as one of the transformational elections that will dramatically change the way politicians pay for campaigns in coming cycles. "It's the model of the future," said Rick Hasen, an election law specialist at Loyola Law School. "Gone will be the $2,300-a-plate dinner. That will be replaced by the $30,000-a-plate dinner, the kind of select event Obama had hosted by folks like Warren Buffett. And the rest will be the micro-donors -- entirely Internet-based." [...]
[...] One immediate result of Obama's fundraising showing this fall is that it may render obsolete the current system of public financing for presidential campaigns. Because McCain opted into the system, he was limited to spending the $84.1 million provided to his campaign by the Treasury once he claimed the GOP nomination. Obama, who chose to remain outside the system after initially suggesting that he would participate in it, is expected to raise and spend at least three times that amount in the general election campaign. Obama's advantage, said FEC Chairman Donald F. McGahn II, makes it likely that Congress will rethink whether the program still makes sense.
To many, Obama's fundraising success is good news -- it shows that a White House bid can be financed largely without donors who have ulterior motives or agendas, and diminishes the role of the special interests and large institutional givers that were once the backbone of presidential fundraising. "When you have that many contributors," McGahn said, "it does in a weird way cleanse the system."...
Obama Accepting Untraceable Donations
By Matthew Mosk
Washington Post Staff Writer
Wednesday, October 29, 2008; A02
Sen. Barack Obama's presidential campaign is allowing donors to use largely untraceable prepaid credit cards that could potentially be used to evade limits on how much an individual is legally allowed to give or to mask a contributor's identity, campaign officials confirmed. Faced with a huge influx of donations over the Internet, the campaign has also chosen not to use basic security measures to prevent potentially illegal or anonymous contributions from flowing into its accounts, aides acknowledged. Instead, the campaign is scrutinizing its books for improper donations after the money has been deposited.
The Obama organization said its extensive review has ensured that the campaign has refunded any improper contributions, and noted that Federal Election Commission rules do not require front-end screening of donations.
In recent weeks, questionable contributions have created headaches for Obama's accounting team as it has tried to explain why campaign finance filings have included itemized donations from individuals using fake names, such as Es Esh or Doodad Pro. Those revelations prompted conservative bloggers to further test Obama's finance vetting by giving money using the kind of prepaid cards that can be bought at a drugstore and cannot be traced to a donor.
The problem with such cards, campaign finance lawyers said, is that they make it impossible to tell whether foreign nationals, donors who have exceeded the limits, government contractors or others who are barred from giving to a federal campaign are making contributions. [...] When asked whether the campaign takes steps to verify whether a donor's name matches the name on the credit card used to make a payment, Obama's campaign replied in an e-mail: "Name-matching is not a standard check conducted or made available in the credit card processing industry. We believe Visa and MasterCard do not even have the ability to do this.
"Instead, the campaign does a rigorous comprehensive analysis of online contributions on the back end of the transaction to determine whether a contribution is legitimate."
Juan Proaño, whose technology firm handled online contributions for John Edwards's presidential primary campaign, and for John F. Kerry's presidential campaign and the Democratic National Committee in 2004, said it is possible to require donors' names and addresses to match those on their credit card accounts. But, he said, some campaigns are reluctant to impose that extra layer of security. "Honestly, you want to have the least amount of hurdles in processing contributions quickly," Proaño said....
OK, wait: Amazon and other merchant sites require that layer of security, and aren't legally required to. For the love of Pete, porn sites use that layer of security. And yet campaigns, which are required to publish lists of donors, don't go through that same step. That, I say, is a whole stinkin' pile of bull.
To be sure, the rules and regulations were put in place before cash cards were even a possibility, let alone a reality that could be used to evade contribution limits. And given the sheer amount of money the campaign is dealing with, it probably is worth the processing time to deposit the money into, say, an intermediate short-term escrow account -- hey, the money has to go somewhere while the donation is being analyzed -- and then shoot out the illegal contributions again.
What I'm really curious about now is whether or not either party will be receptive to any revision of the FEC rules regarding card donations, once the election is done. Call this election a learning experience -- nobody could have foreseen how dramatically and more importantly, how quickly the contributions landscape could be transformed (or at least nobody did). The question now is whether the politicians will make any changes. The Democrats have, to put it mildly, very little incentive for change. The Republicans have just been beaten vigorously about the head, shoulders, and wallet with the possibilities of the internet donation mechanism, and with another four years to organize, might find it more in their interest to accede to the system as it currently stands. After all, the Republican donors have traditionally had much deeper wallets than the Democrats; that may have changed this time around, but one election is only a blip. they may be able to spin this to their advantage next time.
Strange, really, how the campaign finance landscape has been dramatically and permanently altered this year. I don't doubt that no candidate for president will again take government financing for their campaign. And yet, you can't argue that Obama's campaign wasn't publicly financed -- 3-4 million donors is inarguably public. What I do wonder is if perhaps the pushback from this might come from outside Congress entirely, from the old special interests that relied on being able to wrangler major donors who would then be able to influence the president to listen to their desires. I expect the system will still remain in place for the House, at least -- any given House district is simply too small for this type of fundraising to work well, especially if the district is either very rural or very poor. The Senate, on the other hand, may be a very different thing; using an entire state for fundraising may work very well indeed, at least in the more populous states. (I'm not so sure how it would work in a place like New Mexico or Mississippi or Montana, with comparatively few people.)
The next two or three elections will be very interesting indeed.
Posted by iain at October 31, 2008 11:04 AM
