Web contributions require new laws

While the mainstream press continues to ignore the audacious decision by the Obama campaign to allow false names and addresses to be submitted with web credit card donations, the San Antonio Express has chimed in with a fair and balanced editorial.

…But the amounts are now so large and the contributions so numerous that even campaigns committed to abiding by finance laws are hard pressed to do so. Anyone intent on circumventing the law can — at least for a while — do so successfully.The game changer has been the Internet. The revolution in Internet fundraising makes it easier for more people to contribute. The historic number of small donors who have given to Barack Obama and John McCain in 2008 reflects this fact.

Obama, in particular, has capitalized on a huge network of online donors, according to media reports.

The Internet also makes it easier for people to game campaign finance regulations. Federal law requires the disclosure of donor information for contributions in excess of $200, capped at $2,300 per candidate for the primary and general election. But if you can make a series of smaller donations under false names, you could potentially donate an unlimited amount and avoid scrutiny.

About half of Obama’s more than $600 million in contributions are less than $200 and do not have to be identified under the law, the Associated Press reported. McCain’s Web site is listing all contributors, including those who gave less than $200, the wire service noted.

There is much that is unprecedented here.  According to the AP, $300 Million of the money Obama has raised does not need to be disclosed to the public because these donations fall under the $200 threshold.  The Obama campaign refuses to disclose this list (unlike the McCain and Clinton campaigns which have offered full disclosure on below $200 donors). And, from what we know, Obama is also the first and only Presidential candidate to turn off fraud checks on his website, thereby creating all sorts of loopholes for campaign finance fraud.   While Obama may be techically obeying the letter of the law, he is certainly violating the spirit of the law.  Why???

6 Comments to “Web contributions require new laws”

  1. AnonyMousey says:

    The Federal Elections Commission requires name and address verification of credit card donations…for matching funds. Obama chose to not seek federal matching funds, so that rule is not applicable.

  2. Peter Warner says:

    Thank you good people for establishing this worthy web site.

    Here’s a question that’s been bothering me about this entire issue, I hope you can clarify it for me:

    1) John Q. sends numerous donations to the Obama campaign, using different (and false) names, totaling over the $200 limit for the reporting requirement, maybe even over $2,300 individual limit.

    Q1) Won’t the account records of the bank transaction (from his credit card account to the Obama campaign account) show the actual and valid name and address?

    2) Perhaps he even resides overseas, and his credit card account is in a foreign bank.

    Q2) Ditto the above: Won’t the account records of the banks involved show the true source of the donation?

    Q3) If so, regardless of the single donation reporting limits, wouldn’t a data review of the actual final account transaction records reveal multiple/ foreign/ over-limit donations?

    I can see how disabling the verification system would allow making the donation. However, it seems to me that the actual account transaction records would show the correct names and addresses regardless of the fraud used to initiate the donation.

    Q4) Surely the credit card companies have those records, don’t they?

    What am I missing here? I don’t see how the fraud can be concealed, at the bank level.

    Best regards, Peter Warner.

  3. John says:


    These are excellent questions, and I’ll do my best to answer them as concisely and accurately as I can.

    Let’s address the first scenario, where John Q. makes numerous contributions with his credit card, but uses fake names and addresses. When the Obama campaign receives the payment through their merchant accounts, they only see summary data about the transaction (for example, the Transaction Type, Date Funded, Reference # , Description of Transaction and Net Amount Funded). There is nothing that will identify the individual or the originating bank.

    The second scenario is similar, there is no way to identify the transaction as coming from a foreign bank durning account reconciliation – the campaign would see it as just another credit card transaction. The identification and rejection of foreign credit cards something that is configured by the merchant – and is typically part of the AVS process. Since the Obama campaign has chosen to disable AVS, they are unable to identify the transactions as originating from a foreign card. Anecdotal evidence points to this fact.

    To answer your 3rd question, the data review of the transaction reports would not tell the Obama campaign anything about the location or identity of the contributor – simply that a transaction went through on a given day for a given purpose. I’m looking at a merchant account settlement statement right now, and it is pretty much useless to anyone but an accountant.

    The basic problem is that In the credit card industry, you are treated as a number. Yes, if you were committed, it would be possible to track a credit card transaction back to an individual, but it requires quite a bit of work, and cooperation from the merchant bank, the processor, and the originating bank.

    Of course, if the individual is paying with a Visa or Mastercard “Gift Card”, there is no information stored anywhere, so it will be impossible to track back to any specific individual, no matter how hard you try.

    I hope this response was helpful,


  4. Peter Warner says:

    Thank you, John.

    Your explanation is very clear and helpful. If I may follow up:

    Q5) Does this mean that the accurate names and account numbers are indeed seen (only) at the bank level?

    Q6) If so, doesn’t this then imply that the credit card companies are in collusion with this scheme? It should be easily apparent to them what is going on.

    One commentator (perhaps Confederate Yankee or at National Review Online, I don’t recall exactly) wrote that one tip-off that the donation was from a foreign account was the amount would be shown in irregular exact amounts (like $137.84) as a result of going through an exchange rate calculation. That seems like useful information.

    The Gift Card issue is another red flag.

    Troubling thought: were these guidelines and reporting parameters established by Mccain-Feingold arrangements? It would be painfully ironic if the structures designed by the McCain law actually provided the loopholes to fund his opponent’s campaign.

    Best regards, Peter Warner.

  5. lmh says:

    It’s easy to find a LOT of under $200 contributions to Obama on the FEC site. What’s puzzling to me is what explains that portion. Are these the ones that actually matched?

  6. John says:

    No problem, Peter.

    You are correct, the names and account numbers exist at the bank level, but I wouldn’t say that the banks are colluding with this scheme. Credit cards exist so consumers can make purchases without having to use cash, and in most cases, the name of the consumer is irrelevant to the financial transaction – you are just a number. They have safeguards to protect against fraud, and the banks can initiate chargebacks to get the money back if a fraudulent transaction occurred, but if the person making the transaction does not report the fraud, then the bank is under no obligation to take any action.

    I saw the post about transactions ending in irregular amounts, and I’m wondering if that might be sales taxes or shipping charges on items purchased from the Obama campaign and called a “donation”. When I went to the store to buy a lapel pin, the charge was $18.68 including shipping. I don’t know how all of that is being reported.

    Whether McCain or Obama win, it looks like fundraising reform will be in the offing for the next Congress, and I’d like to see changes that reflect the reality of the Internet economy. There are tools available that can verify that an address entered in the site is an actual address in the US, and that the credit card used matches that address. It’s not that difficult to implement, so making it the law that those tools are used would be an excellent way to prevent these abuses in the future. Combine this with a policy to refuse anonymous payment mechanisms for online transactions (gift cards), and we might be able to prevent, to some degree, this type of fraud from happening in the future.


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