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.

Now that the election is over, we still hope to affect some change as it relates to shedding more light on Obama’s unethical fundraising practices as well online campaign financing as a whole.  Here are a few of the things we plan on pursuing:

1. Report on issues that will press Obama to release the donor list which he refuses to make available to the public eye.  In this spirit, we will deliver this site’s online petition with signatures.  We are determining whether or not to send the signed petition to the so-called “Office of the President Elect” or elsewhere.
2. Continue to investigate why and how the Obama campaign did (or didn’t) manage online fundraising fraud.  Blue State Digital needs to be asked questions and we intend to press for answers.
3. Press Washington, in a non-partisan manner, to close loopholes that prevent unethical online fundraising practives such as those most recently put to use by the Obama campaign.  Online fundraising is here to stay and will only grow.  We need to prevent campaigns and their online enablers, such as Blue State Digital, from violating the letter and spirit of the law.

What was so remarkable about the Obama fundraising story is how little interest the media displayed.  And when the media did cover the story, they completely missed the real issue - that the Obama campaign went around standard fraud prevention techniques and enabled more fraud.  We attributed this poor media coverage to ideological bias, but this doesn’t help explain why outlets like Fox News essentially passed on this story as well.  Ultimately, we believe it was a combination of media bias and laziness that accounted for the lack of coverage.

With the exception of The National Journal, we can’t rely on the media to follow up on this story.  So we’ll continue to stay on top of the Obama fundraising scandal story (wherever it takes us and however long it takes) and we will also be taking ourselves in a more non-partisan direction.  We will keep tabs not only on the Obama story, but will keep our readers informed on how, if at all, the FEC and our representatives intend to prevent such severe violations of campaign finance laws from happening again.

A final note: Some readers have let us know that we shouldn’t distract ourselves with other matters, such as referring to Obama’s transition office as the “Office of the President Elect”, or using the Great Seal of the United States on a blatanlty partisan site with a .gov domain name.  We think that this story helps illustrate a larger point and that is that Obama seems to have a disturbing level of comfort violating the spirit, if not necessarily the letter, of the law.

I recall from a few months ago that there was much concern in the conservative blogosphere over the Obama campaign seal.  I understood what the campaign was trying to do - they wanted the people to get used to the idea that Obama could be president.  Of course, The Weekly Standard opined that this seal was somehow a misappropriation of the seal of the President of the United States, and thus, a violation of 18 USC Sec. 713.  In actuality, it was simply a stylized seal.

The same cannot be said for the seal of the “Office of the President Elect”, pictured in the image below:

According to 18 USC Sec. 713:

18 USC Sec. 713 …
(a) Whoever knowingly displays any printed or other likeness of the great seal of the United States, or of the seals of the President or the Vice President of the United States, or the seal of the United States Senate, or the seal of the United States House of Representatives, or the seal of the United States Congress, or any facsimile thereof, in, or in connection with, any advertisement, poster, circular, book, pamphlet, or other publication, public meeting, play, motion picture, telecast, or other production, or on any building, monument, or stationery, for the purpose of conveying, or in a manner reasonably calculated to convey, a false impression of sponsorship or approval by the Government of the United States or by any department, agency, or instrumentality thereof, shall be fined under this title or imprisoned not more than six months, or both.

Looking at that seal, and the logo present on the change.gov non-government web site, it is clear that the seal presented is actually the Great Seal of the United States.  Take a look at the images below.

The seal on top is from the non-governmental “Office of the President Elect”, the image in the middle is from the Great Seal of the United States, and the bottom image is an overlay of the two.  It’s pretty clear that they are simply using the the Great Seal as their logo.  The important distinction between this “seal” and the earlier campaign seal, is that rather than use a stylized seal, this one uses the exact image from the Great Seal.

As a singular offense, this may not be significant (though still punishable under the law).  However, the use of an official government seal in concert with an official sounding, yet fictitious ”Office” and the .gov domain name, it’s clear that the intent of this site is to convince the visitors to this site that it is somehow an official government site, of the people, by the people and for the people, which it is not.

While we still plan on continuing to apply pressure on Obama to release his complete donor records, something else caught our eye today - the new Obama transition web site www.change.gov for the “Office of the President-Elect”.  We also came across this picture of Obama giving a speech behind a lectern with a plaque labeled “The Office of the President Elect” accompanied by an official looking seal.

Only one problem - there is no such thing as the governmental “Office of the President Elect” and constitutionally, Obama only becomes the President elect once the electoral college has voted.

As it turns out, the “Office of the President Elect” is the invention of the Obama-Biden Transition Project, a 501c(4) organization.  This private organization is overseen by three co-chairs selected by Obama, and is staffed by non-government employees.  So, if this is a private organization, how did it get the .gov domain name?  That’s a great question.

The GSA oversees the .gov domain and is pretty specific about who can get these domains:

Registrations that qualify for a .gov domain

• U.S. Governmental departments, programs, and agencies on the federal level
• Federally recognized Indian Tribes (-NSN.gov domain)
• State governmental entities/programs
• Cities and townships represented by an elected body of officials
• Counties and parishes represented by an elected body of officials
• U.S. territories

It’s clear that based on these requirements, there is simply no reason that the private Obama-Biden Transition Project should have been issued this domain name - but that’s not the most concerning part.

The Obama-Biden Transition Project is an extension of the Obama campaign, and there are several problems with their .gov website:

1. It features a fictitious government agency name and seal
2. It features campaign material including attacks on the McCain plan
3. The site collects email addresses under the guise of official government business
4. The site itself is hosted by Blue State Digital, the very firm that is responsible for providing his suspect online fundraising tools and methods!

Several questions now emerge:

• How did the Obama-Biden Transition Project get the .gov domain name if it is not a government agency?
• Why does the Obama campaign use what appears to be a fictitious title of office and corresponding seal (which actually appears to be based on the Great Seal of the United States)?
• Where do the email addresses collected on the change.gov site go and for what purpose are they collected?

UPDATE: Keith Thurston from the GSA, the agency responsible for supporting the Presidential Transition, was kind enough to respond to our inquiries with the following email:

This is in response to your question concerning www.Change.Gov submitted to the Gov Domain registrar.   The Office of the President-elect is specifically recognized by federal law, specifically  – The Presidential Transition Act of 1963, as amended (3 USC 102 note). It is a unique entity that is entitled to government support while still retaining characteristics of a private organization.   Section 3 of the Presidential Transition Act  authorizes the General Services Administration to provide services and support to the Office of the President-elect beginning the day after the election until 30 days after the inauguration.  Based on the federally recognized status of the Office of the President-elect, and GSA’s responsibility to support the Office, we have determined that it is appropriate for them to use a .gov domain.  This is the same conclusion that we reached in the presidential transition of 2000-2001.

Below is a listing of other functions that we perform for president-elects as they enter office.  We also support the departing president with certain functions after they leave office.

According to Keith, the domain name was issued in accordance with the Presidential Transition Act of 1963. Only one problem, nowhere in the 1963 Act (as amended) does it mention the “Office of the President Elect”.  The code  does mention that the GSA provide “Communications services found necessary by the President-elect or Vice President-elect”, but it says nothing about establishing an “Office of the President Elect” nor does it mention providing a .gov domain name for services that are hosted by a private company, for use on a site that contains campaign materials.

The problems here are significant, yet they are generally being ignored by the media.  The usage of the title, the seal and the .gov domain name confers a sense of legitimacy and accountability to a private organization that is, sadly, not required to follow the same disclosure rules that a legitimate government entity is required to follow.

For this article, we researched the following documents and found no reference to the “Office of the President Elect”:

• The Presidential Transition Act of 1963 (3 U.S.C. 102)
  
• The Presidential Transition Act of 2000
• George W. Bush Executive Order: Facilitation of A Presidential Transition

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.