Archive for the ‘Foreign Donations’ Category

Obama to Most Likely Avoid FEC Audit

Tuesday, November 11th, 2008

A new article by Kenneth Vogel at Politico.com explains why Obama will most likely avoid an FEC audit, despite legitimate complaints and documentation of fraud.  While the article doesn’t satisfactorily cover the background of why Obama is in hot water over this (namely turning off online fraud checks), it does provide an excellent write-up on the process by which the FEC determines an audit:

The Federal Election Commission is unlikely to conduct a potentially embarrassing audit of how Barack Obama raised and spent his presidential campaign’s record-shattering windfall, despite allegations of questionable donations and accounting that had the McCain campaign crying foul.

Adding insult to injury for Republicans: The FEC is obligated to complete a rigorous audit of McCain’s campaign coffers, which will take months, if not years, and cost McCain millions of dollars to defend.

Obama is expected to escape that level of scrutiny mostly because he declined an $84 million public grant for his campaign that automatically triggers an audit and because the sheer volume of cash he raised and spent minimizes the significance of his errors. Another factor: The FEC, which would have to vote to launch an audit, is prone to deadlocking on issues that inordinately impact one party or the other – like approving a messy and high-profile probe of a sitting president.

So, by declining public funding, Obama decreased the odds of an audit.  And the FEC may not investigate due to political party affiliations of the FEC commission members.

Seizing on Obama’s reversal on a pledge to accept public financing if his Republican opponent agreed to do the same, as well as his campaign’s refusal to voluntarily release the names, addresses and employers of donors who gave less than $200 each – a group that accounted for about half of the more than $600 million that the campaign had raised through the end of September – the RNC asked the FEC “to immediately conduct a full audit” of all of Obama’s contributions.

It’s very rare for a complaint to trigger an audit, campaign finance insiders say.

And ironically, the historic volume of Obama’s small contributions, which may have made it tough for the campaign to weed out problem donations, may also help spare Obama an audit.

That’s because the byzantine formula the FEC staff uses to determine whether a campaign has engaged in “substantial” violations of federal election rules – the trigger to recommend an audit to commissioners – takes into account the size of the campaign’s coffers, according to David Mason, who served as a Republican appointee to the FEC until this year.

“So if a House campaign makes a $100,000 error, that’s huge and they’re likely to get audited,” he said. “If a campaign the size of the Obama campaign has a $100,000 error, then maybe not. It would depend on what the error is, obviously,” he said, explaining that mere accounting snafus are unlikely to prompt an audit. More serious and systemic problems, such as illegal contributions, result in campaigns getting tagged with more “audit points,” Mason explained. “If you get enough audit points, you get audited,” he said, adding “nobody outside the commission would know how many audit points the Obama campaign has.”

Mary Brandenberger, an FEC spokeswoman, declined to comment on the likelihood of an Obama audit. But she explained that if campaigns adequately answer the agency’s requests for information, it’s less likely they’ll be recommended for an audit.

Even if Obama’s campaign reached the audit recommendation trigger point, it’d be tough to muster the majority commission vote necessary to initiate the audit. That’s because the FEC is comprised of three Democratic commissioners and three Republicans and, as such, is prone to deadlock on partisan issues.

So this leads to several questions for the FEC that we, as members of the public, deserve to have answers to:

  1. What questions did the FEC ask the Obama campaign?
  2. How many “audit points” did the Obama campaign earn and why?
  3. How did the 6 commissioners (3 Democrats, 3 Republicans) of the FEC vote on the audit?  And why?
  4. What is the “byzantine formula” that the FEC uses to determine audits?  Did the Obama campaign know the formula and find a way to exploit it?

We will remain on the case and if it requires Freedom of Informaiton Act requests to get the answers, then that’s what we’ll pursue.

Hat tip: Thanks to reader Jim “the scrutinator” for the referral.

Everything You Wanted to Know About the Obama Online Fundraising Scandal in Less Than 5 Minutes!

Monday, November 3rd, 2008

Since it is apparently too much effort for the mainstream media (National Journal excepted) to be bothered to investigate what is potentially one of the largest campaign finance fraud scandals ever, we thought we’d set the table for them.  Here’s a “Cheat Sheet” if you will on how the story broke and what the important issues are:

  1. In early 2007, Obama tells Silicon Valley mogul, Marc Andreeson, to “watch how I run my campaign – you’ll see my leadership skills in action”.   Which makes the following account all the more concerning.  Can we expect more of the same should Obama assume the seat in the White House?
  2. Rumors begin to circulate that the Obama campaign is accepting foreign and other illegal contributions.  Atlas Shrugs blog breaks the story on July 23 and confirms the rumors.
  3. On October 22, a citizen does his own investigative work and gives an online donation to the Obama campaign with a the fake name of John Galt along with a fake address.  Several bloggers quickly follow up on this story with their own investigative work and find that they too can donate to the Obama campaign with fake names and addresses.  Most disturbingly, foreign citizens were also able to donate using their foreign issued credit cards with fake foreign addresses.
  4. By now, it has become common knowledge that the Obama campaign is the ONLY campaign to NOT disclose their “under $200” campaign donor list.  No substantive reasons are given by the Obama campaign.
  5. On October 24, it is confirmed by the National Journal that the Obama campaign has turned off address verification on their website.  This is highly irregular – in fact, it’s quite unheard of.  Essentially, turning off address verification (known as AVS) enables donors to fake addresses and circumvent donor limits.   This means foreigners can give illegal donations and motivated Obama supporters can exceed the $2300 campaign limit! As Internet and e-commerce professionals, we launch this blog to raise the issue of how highly irregular and potentially unethical it is to turn off online credit card address verification.
  6. In light of the aforementioned and in light of the record $150 million haul Obama brought in during the month of September from over 600 thousand new, mostly unidentified, donors, this blog attempts to size the problem.  We calculated that over $181 million of Obama’s donations fall into the “potentially fraudulent” category.
  7. On October 29, the Obama campaign is quoted favorably in the Washington Post as checking for fraud on the “back-end”. The Obama campaign did not elaborate on what this means and the Washington Post didn’t bother to ask.
  8. Since the Obama campaign turned off the easiest and most obvious way to stop campaign finance fraud, this blog and the National Journal proceeded to explore other ways in which the Obama campaign could prevent campaign finance fraud.   We determined that the Obama camp could use IP addresses (unique identifiers for computers with geographic information) and BIN numbers (unique identifiers of credit cards with geographic information) to prevent fraudulent and foreign donations on the “back-end”. Unfortunately, all records indicate that the Obama campaign does NOT use these simple and cheap methods to prevent illegal donations.
  9. With public pressure mounting on the Obama campaign to disclose his donor list (despite the apathy from the New York Times and Washington Post), Charlie Gibson of ABC News asks Obama why he won’t disclose his donor list.  Obama said it would be too difficult to process. RED FLAG!  Isn’t this the internet generation candidate?  Shouldn’t it be easy for computers to process these records?
  10. It turns out that the answer is “Yes!”.  The liberal online publication, Slate, proves how easy it is to process the donor list.  The National Journal also proves how easy it is by talking to the bank that houses the Obama campaign records.

In summary, the Obama campaign is the FIRST and ONLY presidential campaign to turn off online address verification when raising money online.

The Obama campaign also chooses to not to use free or cheap tools that allow them to screen foreign IP address and foreign credit cards.

Finally, unlike the Clinton and McCain campaigns, the Obama campaign refuses to disclose their donor list.

It’s up to the reader to decide whether or not there is something unethical going on here.  But if you’d like to help create more transparency and have the Obama donor list see the light of day, please do sign the petition.

New Article Demonstrates Ease of Tracking Donors

Friday, October 31st, 2008

While Obama insists that tracking and disclosing his donor database is too difficult, the respected National Journal demonstrates that this simply isn’t the case in a new article entitled, Common Web Tools Make Tracking Donors Doable.

According to Bank of America, one of the two banks processing Obama’s online donations:

A five-minute phone call to Bank of America’s merchant-services department showed how a campaign could sort transactions to identify the credit cards used in donations.

The campaign could download transaction data from the bank’s Web site and transfer the file into a database, such as Excel, said the Bank of America employee. “Then highlight all your transactions and click your sort button,” the employee said.

The implication is that the Obama campaign could use this reporting to discover those multiple donations conducted by individuals faking names and addresses.

In addition, it was discovered that the Obama campaign does in fact track the IP addresses of donors:

Software code on Obama’s online donations page indicates that the site recognizes the IP address of everyone who gives money. It can be viewed by selecting page source from the “view” menu on most Web browsers. The code for donate.barackobama.com includes an “ip_addr” field, which records the visitor’s IP address.

So we now know that the Obama campaign tracks IP addresses.  Which, of course, begs the question on how foreign  donations are getting through.  And since the front-end AVS fraud filters are turned off why wouldn’t the Obama campaign use the IP information it already collects to help prevent inappropriate foreign donations?  Isn’t this supposed to be the internet generations’s candidate and campaign?!

What else is behind the curtain of the Obama donation website?  Perhaps the good folks at Blue State Digital can shed some light.  BSD provides the Obama campaign with its online fundraising tools and apparently offers online fundraising consulting advice to the campaign as well.  We’d like to know how Blue State Digital advised the Obama campaign on AVS checks, IP filtering and other fraud prevention methods.  Did they recommend AVS fraud be turned off?  Did they recommend best practices and the Obama campaign ignored them?  Unfortunately, Blue State Digital declined to respond to questions from this blog.

Preventing illegal foreign contributions with AVS, BIN#’s and GeoIP filtering

Thursday, October 30th, 2008

While the Obama campaign continues to invite fraud by allowing transactions from outside the US or with credit cards issued from international banks, some readers have asked how easy it would be to prevent these kinds of problems.  The answer is “extremely easy”.

There are two basic approaches to preventing foreign contributions: 1) Preventing transactions on foreign credit cards and 2) preventing transactions from foreign countries

Preventing transactions using a foreign card
This is straightforward, but requires the use of Address Verification System (AVS).  As described elsewhere on this blog, the AVS system returns a series of codes that the merchant can use when deciding to accept a transaction or not.  In addition to verifying the address, the AVS also lets the merchant know if the transaction is international or domestic.  For example a “Code G” signifies that the credit card issuing bank is of non-U.S. origin and does not support AVS.  Recognizing codes like this is standard functionality of most e-commerce solutions.

Alternatively, the Obama campaign could query the BIN number of the credit cards to determine where the cards were issued.  The BIN# or IIN# is used to identify the institution that issued the card.  BIN lists are freely available, even on Wikipedia.

The Obama campaign could argue that by implementing these controls, they might be disenfranchising American citizens living abroad, but this is simply not the case.  The Obama campaign has a separate site to handle contributions from Americans living abroad, which requires a passport number to donate.  They could simply adjust the AVS or BIN # criteria for donors on this site to allow for international cards, while blocking them from the domestic donation site.

Preventing transactions from a foreign country
The second approach, preventing transactions from a foreign country, is also fairly simple to implement.  Companies like MaxMind offer services that provide merchants with a list of known IP addresses in the US, and only allow complying addresses to enter the site.  This software is not perfect, but it has gained fairly broad acceptance and is frequently used in the entertainment industry to protect content from international distribution.  Configuring an Apache web server to support GeoIP filtering is extremely straightforward, and can be implemented with some minor coding on Microsoft servers.  Given the high quality of the Obama site, I imagine implementing this software would not be a challenge for their web team.

It seems to me, that the Obama campaign could use IP filtering to ensure that only American IP addresses can access the domestic donation site, and direct foreign donors to the Americans living abroad site.  This might be a good question for a journalist to ask the Obama campaign – are they using any IP filtering?  It’s easy to set up, it’s cheap, and it’s great at flagging foreign transactions.  If the Obama campaign is not using IP filtering, why not?  Anyone care to ask the Obama camp?  Will the Washington Post?  Will the New York Times?  Anyone?

Obama accepts foreign donations?

Wednesday, October 29th, 2008

A Canadian reader of this site recently donated to the Obama campaign and the donation was accepted. The credit card was issued in Canada and the donation was submitted using a Canadian address on a computer in Canada. Will the Obama campaign refuse this most obvious of foreign donations?  Keep in mind, because this donation used a Canadian address, it doesn’t test the theory of what happens when a foreigner gives a credit card donation with a fake U.S. address.  Stay tuned…

Below is a screenshot from their online banking account showing the donation to Obama for America.  Obama has now taken that money and is free to spend it at will.  Of course, their “back-end verification” may eventually identify this as an illegal contribution and return it, but in the mean time they are receiving an interest free loan from a foreigner that Obama can use on advertising, travel and GOTV expenses.

If there are any other non-U.S. citizens who have successfully given to the Obama campaign, please let  us know so we can report on it.  Send your reports to mike@obamashrugged.com

UPDATE: Morgen at Verum Serum has some interesting findings related to foreign web support for Obama.