Political Reform, Politics

For the People or the Elite? -The Trojan Horse of Internet Contributions

Optimism is a good characteristic, but if carried to an excess, it becomes foolishness.

Theodore Roosevelt

Several years ago, my computer was hacked at the Denver International Airport. Shortly afterwards, I started receiving emails addressed to “Ricot Claude” (not anywhere near my name or nickname) from Democratic party campaigns and affiliated groups hounding me for contributions.  Many of them came through a super-PAC called ActBlue.   The experience exposed a major problem in campaign finance regulation that could be a source of the same kind of “dark money” targeted elsewhere in the For the People Act.

The fundamental flaw of the current system is that it brands the contributors, not politicians, as the culprits who need regulation. At the same time, the Federal Election Commission has almost no resources to chase down and enforce violations by errant contributors.  Campaigns and PACs need only use their “best efforts” to determine whether a contribution is legal, which is defined as only requesting the basic identifying information required by disclosure reporting. See 11 CFR 104.7.  The committee can rely solely on the representations by the contributor and no independent verification of the source of the contribution is required. The only exception is the presidential campaign matching fund program. See 11 CFR 9034.2. Candidates may only receive matching federal funds for contributions evidenced by a “written instrument”.  This is specifically defined as a check, a credit card accompanied by a signed transaction slip or, in the case of an Internet contribution, an electronic record transmitted by the cardholder with a copy of the credit card number and the name of the cardholder. Thus, the candidate automatically has sufficient independent information to verify the identity of the contributor.

In 1995, the FEC ruled in Advisory Opinion 1995-9 that contributions via the Internet were subject to the lax reporting standards applicable to most committees and did not need to be independently verified (see the answer to Question No. 4).  This may explain why so few presidential candidates use matching funds anymore and rely so heavily on Internet contributions instead. This opinion also authorized the use of outside financial contractors to solicit and manage the contribution process.  Since then, a cottage industry of third party vendors unregulated by the FEC has arisen to solicit, raise and manage contributions on behalf of political committees (see this example of Paypal’s service). Only these vendors have the information about the credit card or other source of a contribution.  They have no obligation to cross-reference the name on the credit card or Paypal account or other source against the name reported to the committee or report any discrepancies to the committee.  

Thus, I could have used the system to make illegal contributions under the name “Ricot” with very little likelihood of consequences.  A corporation or foreign national could have done the same.  The potential for abuse was documented in a forensic audit of ActBlue’s contributions by former Kansas Attorney General Phil Kline, who reported that fully 48% of ActBlue’s contributions came from the unemployed while its Republican counterpart WinRed had only 4%.  It also showed how gift cards can be used to game the system. 

This loophole needs to be plugged before it becomes a floodgate of foreign and other dark money into political campaigns.  One way would be to impose on all political committees the documentation and verification rules required under the presidential matching funds program.  In the alternative, the FEC should have the power to regulate outside vendors that manage contributions for committees and impose the same kind of verification rules applicable to the private sector.  A model for such a program can be found in the Federal Trade Commission’s Identity Theft Prevention Rules, which require certain creditors to check transactions against red flags of identity theft.  In the absence of congressional legislation, the FEC should require political committees to use such mechanisms to verify the source of the contribution or require their vendors to have such a system and actively audit the vendor to insure it is enforcing the program.

Internet contributions have been hailed as the average American’s answer to the influence of corporate contributions and dark money.  As Theodore Roosevelt said, we should not let that optimism cause us to repeat the mistakes of the Trojans in the Iliad and unwittingly unleash the same kind of abuses we want to prevent.  The For the People Act or any similar campaign finance reform should be amended to control against this threat.  Otherwise, we may find that the plugging of one dark money loophole will simply cause it to spring up in a more corrosive and damaging form.     

Political Reform, Politics

For the People or the Elite? – The Good

The best parts of the For The People Act are found mainly in the section called the DISCLOSE Act, which plugs various holes in our campaign finance reform laws. In particular, the act attempts to roll back the pernicious effects of the Supreme Court’s Citizens United decision and the effects of undisclosed dark money in political campaigns by requiring any entity spending more than $10,000 per election to disclose all donors who gave above $1,000.  Corporate political contributions outside of registered PACs would have to be approved by shareholders.  Candidates would have to immediately disclose any contribution above $5,000 received in the 20-days before an election.  It also controls coordination between super-PACs and candidates by, for example, providing that if the staff of a Super-PAC has any actual tie to a candidate, it will be considered a coordinated expenditure and thus subject to the limits applicable to the candidate’s committee.  Finally, HR 1 would change the structure of the Federal Election Commission to reduce the Commission from six to five members but provide that no more than two can be from one party. This practically means one must be an independent.  Members would be picked from a group vetted by a blue-ribbon panel. To control any bias in their actions, the act provides for stronger judicial review of FEC enforcement decisions, including decisions to dismiss a complaint without investigation.

It also should be noted that the act would more closely regulate websites like this one. Specifically, if a website mentioned a federal candidate within 20 days of the election, it would be required to fully disclose its ownership. To comply with this requirement, I have expanded the disclosure about the ownership of the site in the “About – The Editor” page of this side to include my address.

HR 1 also controls foreign influence in our elections by authorizing new civil and criminal penalties for violations of the Foreign Agent Registration Act. It would be clear that foreign agent includes an agent for a foreign business. It also requires voting machine manufacturers be owned or controlled by U.S. citizens and report cyber-security incidents.

Ethical guidelines for members of Congress and the executive branch would also be strengthened under the act.  Government officials would be required to refrain from participating in matters in which a prior employer had an interest. It reduces the revolving door between business and government by increasing the cooling-off period before a former official can lobby his previous agency from one to two years. It also outlaws a disturbing practice of private sector bonuses to employees who join the government, an especially common practice in the financial services industry. Finally, congressmembers will be required to reimburse the Treasury for any awards or settlements for employment discrimination suits against them.

Even the controversial voter registration and voter integrity sections of the bill contain some important protections. First, it requires states to share voter registration information to reduce duplicate cross- state registrations.  A voluntary system for this already exists called the Electronic Registration Information Center.  It also prohibits the deceptive practices regarding the time, place, and manner of voting. Duplicate paper ballots and risk-limiting audits of election results would be used as a check against the reliability of electronic machines.  A risk-limiting audit is a process whereby officials manually recount enough paper ballots to ensure the electronic tally is correct. Finally, the bill requires an early voting period for two weeks prior to the general election and would make Election Day itself a national holiday, thus encouraging citizens to become involved in the election process other than simply by voting.

These changes would help realize Theodore Roosevelt’s goal of reducing the influence of special interest money in our elections and making them more fair and accurate. However, the act could have been much better. In the next post, I will discuss the bad of the Act; that is, the provisions that would damage the election process but could be reformed or improved to still achieve it.

General, Political Reform, Politics

For the People or the Elite?

“If our political institutions were perfect, they would absolutely prevent the political domination of money in any part of our affairs. We need to make our political representatives more quickly and sensitively responsive to the people whose servants they are. More direct action by the people in their own affairs under proper safeguards is vitally necessary… It is particularly important that all monies received or expanded for campaign purposes should be publicly accounted for not only after election, but before election as well. Political action must be made simpler, easier, and free or from confusion for every citizen.”     

This quotation from Theodore Roosevelt’s New Nationalism speech about the need for electoral reform is as urgently relevant as it was in 1910.   It neatly summarized the goals such a reform should have:

  • The reduction of the influence of special interest money and power
  • Increasing voter participation, while also
  • Creating more confidence in the electoral process and outcomes
  • Strengthening ethics and conflicts of interest rules for political leaders

The Senate will soon be considering a package of political and electoral reforms called the For the People Act (HR 1) passed on a party-line vote by the Democratic majority in the House of Representatives.  It is a massive mash-up of changes in election law in the following areas:

  • Voter Registration and Rights
  • Election Integrity and security
  • Campaign Finance Transparency
  • Lobbying Regulations
  • Ethics Reform

The bill contains some necessary changes to achieve the four goals mentioned above. However, it also contains provisions that would actually reduce confidence in our democratic institutions and potentially increase the influence of foreign money and special interests. I will highlight the good, bad and ugly provisions over the next few posts. The ugliness of some of the changes will require significant amendments to the bill for it to achieve TR’s vision.

Unfortunately, I have to lead with one of it ugliest failings – the bill’s length.  It is an 886-page legislative monstrosity whose length and complex mandates makes any thoughtful consideration of its effects very difficult. While biased in favor of the bill, the Brennan Center for Justice at the NYU Law School provides a good annotated description of all of the bill’s changes. Ironically, it also illustrates why such an omnibus bill was unnecessary because the descriptions under each title refer to previous bills or current laws that address related issues.  It shows how the bill could easily be broken down to a series of  amendments to past reforms. Instead, the Senate must consider changes to the most fundamental democratic rights we have in a process of legislative chaos. It is chaotic because many changes have a knock-on effect on the rest of them.

At the very least, the Senate should resist the siren call of liberal globalists to vote on the bill without first sending it to committee for open hearings and the consideration of necessary amendments. A bi-partisan bill could then be crafted or it could be broken up into a series of bills. It would also be an opportunity to educate the public about the underlying issues and thus insure that one of TR’s primary goals of increasing confidence in the electoral system is achieved.

There is no question that our political system is broken and needs reform. However, a bill that lacks legitimacy and reasonable input from the American people will automatically be doomed to failure.  My next post will concentrate on those provisions of the bill that enact true reforms, primarily regarding campaign finance and governmental ethics.