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Dubious donations: Hasen down the wind

Liberal election law expert Rick Hasen, professor at the University of California Irvine Law School and proprietor of the Election Law Blog, characterizes the revelations of the Government Accountability Institute report on foreign and fraudulent online campaign donations as “much ado about nothing.” Hasen adds in an update: “It is profoundly ironic that these Republican leaning groups are claiming that there needs to be better disclosure of contributions to the Obama campaign under $200, while at the same time the Republican leadership in Congress has opposed even fixing the gaping holes in our existing campaign finance disclosure laws.”

I’m not sure whom Hasen is referring to as “Republican-leaning groups.” Is it the GAI and/or Power Line and Hot Air (to which Hasen links)? I’m opposed to the regime of campaign finance regulation of which Hasen is a fan, but I believe in compliance with the law. This is a distinction that should not be difficult for a professor of law to grasp. To the extent that issues of compliance involve the Obama campaign, Hasen appears to be uninterested in the subject beyond his publication of the Obama campaign’s denial.

The Obama campaign told Hasen this past May: “If a billing address is verified via AVS, then the credit card contribution is processed without delay. Some transactions caught by AVS may initially appear to a donor to have been accepted even though this is not the case. Obama for America employs a manual process to review any transaction flagged by AVS, also taking into account other fraud risk factors, and using fraud detection services provided by our credit card processor.”

Matthew Mosk’s 2008 Washington Post story. Mosk confirmed what we and others had reported in 2008:

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.

Readers this year reported that they had repeated the experiment to the same effect. In the post cited in the Obama campaign statement, John Hinderaker reported his experience making an online contribution and setting up a grassroots fundraising page on the Obama site under the name Illegal Contributor, from Cell 13 of the Stillwater Prison. The Obama campaign claimed that its back-end review managed to unravel John’s scheme, at least after he published it on Power Line. Good work!

The Obama campaign’s online fundraising methodology sounds like it hasn’t changed since 2008, or at least the reliance on back-end review. Here is the response then Washington Post reporter Matthew Mosk received from the Obama campaign to his inquiry in 2008 along with the incident that prompted it:

Lawyers for the Obama operation said yesterday that their “extensive back-end review” has carefully scrubbed contributions to prevent illegal money from entering the operation’s war chest. “I’m pretty sure if I took my error rate and matched it against any other campaign or comparable nonprofit, you’d find we’re doing very well,” said Robert Bauer, a lawyer for the campaign. “I have not seen the McCain compliance staff ascending to heaven on a cloud.”

The Obama team’s disclosures came in response to questions from The Washington Post about the case of Mary T. Biskup, a retired insurance manager from Manchester, Mo., who turned up on Obama’s FEC reports as having donated $174,800 to the campaign. Contributors are limited to giving $2,300 for the general election.

Biskup, who had scores of Obama contributions attributed to her, said in an interview that she never donated to the candidate. “That’s an error,” she said. Moreover, she added, her credit card was never billed for the donations, meaning someone appropriated her name and made the contributions with another card.

Our reader Ashely Tate commented on the Obama campaign statement to Hasen:

The manual validation they are talking about is a Web interface where the payment processor allows them to review (if they choose) transactions where the address did not match what was on file for the credit card. This is provided by all payment processors to allow for optional manual review when automated review is not being done. It works well for low volume systems where the liklihood of fraudulent charges is very low. If you tried this with a major consumer electronics site you would quickly be over your head and out of business. Perhaps they are paying more attention to these now and scanning for really obvious fake charges due to media attention.

The GAI report contrasts the Obama campaign’s treatment of donations with purchases from the campaign’s Web shop, which require conventional credit card security measures including CVV. As Peter Boyer and Peter Schweizer explain in the Newsweek column that is companion to the GAI report, CVV is the three- or four-digit number often imprinted on the back of a credit card, whose purpose is to verify that the person executing the purchase (or, in this case, donation) physically possesses the card. Requiring the CVV is a measure that helps prevent credit card fraud.

Why doesn’t the Obama campaign require donors’ credit card CVVs? The Obama campaign told Boyer and Schweizer that it doesn’t use the CVV because it can be an inhibiting factor for some small donors. How so? That is an “explanation” that is extremely difficult to take at face value, as CVV is the basic requirement of online credit card transactions. Yet foregoing its provision facilitates fraud and circumvention of the limitations imposed by campaign finance law. Isn’t this the likely explanation for what the Obama campaign has done and is doing?

The GAI report also finds “a remarkable array of appeals and solicitations to foreign residents by the Obama campaign,” to quote the legal analysis by Kenneth Sukhia that the FAI commissioned to accompany its report. Sukhia writes:

The GAI report has shown that that Obama campaign actively solicits campaign contributions from non U.S. residents throughout the world. While such solicitations could be explainable if they were received solely by U.S. citizens abroad, they clearly are not. Given the campaign’s failure to employ CVV, its unregulated AVS usage, its solicitation of foreign nationals, and the considerable foreign traffic reaching its websites, there is reason to ask if the Campaign is vulnerable to abuse by foreign interests and individuals seeking to influence the American presidential election.

Sukhia notes further that “the law makes it a crime not only to knowingly receive contributions from foreign nationals, but also to knowingly solicit from them” and that “the law is violated at the moment such solicitations are made, whether or not the person solicited actually follows through by making a contribution.” Sukhia finds a reasonable basis for further investigation “[g]iven the wide-scale and seemingly indiscriminate solicitation for contributions to all those who subscribe to the campaign without regard to their nationality or residence[.]”

Boyer and Schweizer quote the Obama campaign on the question of illegal foreign fundraising:

“We take great care to make sure that every one of our more than three million donors are eligible to donate and that our fundraising efforts fully comply with all U.S. laws and regulations,” says campaign spokesman Adam Fetcher. Campaign officials say they use multiple security tools to screen all online credit-card contributions, and then review, by hand, those donations that are flagged by their automated system. Potentially improper donations, such as those originating from foreign Internet addresses, are returned to any donors who cannot provide a copy of their current U.S. passport photo pages, the campaign says.

Given the GAI findings, I should think that this calls for skeptical follow-up questions and a close look at the evidence. In the meantime, however, it appears to me that the GAI has done the work of serious journalists and professors in its examination of the Obama campaign’s online fundraising techniques.

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