Tag: forthepeopleact

Political Reform, Politics

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

Bob Claude |

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 Manchin Compromise

Bob Claude |

Theodore Roosevelt’s maxim is the essence of successful politics since it accepts the reality of compromise.  Thankfully, Sen. Joe Manchin of West Virginia appreciates TR’s maxim and prevented the ideologues on both sides from torpedoing necessary electoral reform.  He has proposed only a set of principles at this point but they adopt many of the good provisions endorsed in my previous post and add new ones that improve on the more extreme provisions. 

First, the campaign finance section includes the DISCLOSE Act and Honest Ads act sections of the bill that would open dark money contributions to the light. No longer could large last-minute contributions be hidden from view until after the election.  He also strengthens enforcement of the Foreign Agent Registration Act and would address cybersecurity risks in election machinery. He also would make Election Day a holiday so more Americans would be able to participate in the process.

Sen. Manchin also takes the best of the voting rights provisions of the bill and adds a voting identification requirement that would allow utility bills and other less onerous methods to be used to verify identity. He would mandate a two-week early voting period that is already the practice in many states as well as automatic registration through drivers license offices. At the same time, states would be allowed to police their voter registration rolls by utilizing current interstate and federal mechanisms.

The two most controversial provisions deal with partisan gerrymandering and resuscitating the Voting Rights Act to control discrimination.  The original bill would not only ban partisan gerrymandering, but would impose compulsory one-size-fits-all processes in all states. For example, my home state of Montana just gained a congressional seat and now will have two seats. Drawing the lines for those two districts will be much more straightforward than in my former home of Texas, which will have 35 seats.  Manchin’s process for preventing gerrymandering is not yet clear, but envisions using objective computer models to reduce the ability of parties and incumbents to game the system.  

Rather than impose detailed prescriptive regulations, Manchin proposes a more flexible way to prevent voting rights violations through a revised version of the John Lewis Voting Rights Act, named after the late civil rights activist and congressman.    It would impose federal pre-clearance of electoral changes on any state and local jurisdiction with more than 15 voting rights violation in the previous 25 years. At the same time, he would require sufficient judicial review before any such finding could be made and create a way for a jurisdiction to end the pre-clearance process.  This would create a realistic enforcement mechanism against any significant future abuses. 

A copy of Sen. Manchin’s proposals is attached below and another analysis of their implications can be found here.  The senator’s compromise is a step in the right direction, though it still could be improved in some areas. My next post will discuss why contributions solicited over the Internet are subject to abuse under current law and what could be done to prevent it.

Sen. Manchin’s CompromiseDownload

Political Reform, Politics

For the People or the Elite? – The Good

Bob Claude |

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.