Legislation Targets Credit-Card Campaign Contributions

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By Kenneth P. Doyle

Dec. 2 — New requirements to verify online campaign contributions made by credit card would be imposed by Republican-backed legislation set to be introduced in the House Dec. 3.

The new measure, the Stop Foreign Donations Affecting Our Elections Act of 2015, is intended to block illegal foreign campaign contributions from being funneled into U.S. campaigns through unverified credit-card contributions.

Republicans accused President Barack Obama's campaign of receiving foreign money through credit-card contributions in 2008 and 2012, though the Federal Election Commission dismissed the accusations. Backers of the new measure said it was not aimed at Obama, but would affect possibly hundreds of campaign committees in both major parties that now accept credit-card contributions without adequate verification of the donor.

A study cited by the main organization backing the new legislation said nearly half of the incumbent House and Senate members who maintained an online campaign contribution page did not require use of a common verification code to make an Internet contribution.

The nonprofit group backing the measure, called Take Back Our Republic, is linked to several prominent Republicans. The bill is expected to be introduced by Rep. Paul Gosar (R-Ariz.), a conservative member of the House Freedom Caucus.

Introduction of Republican-backed legislation to strengthen campaign finance rules is a significant development because, in the past, Republicans generally have called for loosening campaign finance rules, while most Democrats have supported tougher rules on disclosure, contribution limits and other controls on political money.

Contributions Under $200 Not Reported

Under current rules, the FEC does not require the reporting of the identity of contributors giving federal campaigns less than $200, though campaigns are supposed to track these donors' identities and report them if their total contributions reach $200 or more. Critics of the current system say it potentially allows a single large donor, including a foreign source, to fund a campaign by making multiple credit-card contributions in amounts of less than $200, using different names.

While Republican Party officials and conservative groups have charged that Obama's presidential campaign received foreign money among its hundreds of millions of dollars in online contributions, the FEC dismissed these allegations in enforcement cases involving the Obama campaign. Documents released by the FEC in 2013 included a report from the agency's Office of General Counsel concluding that the allegation that the president's 2008 campaign “knowingly accepted contributions from foreign nationals…is not supported by available information” (07 DER A-15, 1/10/13).

The FEC counsel's report found indications of a few cases in which the Obama campaign received online contributions from people using fictitious names to avoid contribution limits or other restrictions. In the handful of instances in which there were strong indications of possible illegal contributions, however, the campaign generally took action on its own to return the money before being investigated by the FEC, the counsel's report indicated.

There have been few, if any, FEC cases involving campaigns in which illegal contributions were found to be made online, even though the agency has allowed such contributions to be made by credit card for more than a decade.

Bill Would Require Verification

Critics of the current rules say, however, that the rules are inadequate to detect illegal contributions, including foreign money.

These critics note that the systems used by virtually all businesses and other organizations to verify credit-card transactions—known as credit-value verification (CVV) and address-verification system (AVS)—are avoided by many political campaigns. The CVV system uses a three- or four-digit code printed on the credit card to be entered at the time of a transaction, while the AVS verifies the card holder's address with each transaction.

The new legislation would require federal campaigns to use the CVV system to verify each credit-card contribution at the time it is made. In addition, the measure would require that the billing address associated with the credit card be located in the U.S. or, in the case of a contribution made by a U.S. citizen living abroad, that the contributor provide a U.S. mailing address used for voter-registration purposes.

Take Back Our Republic, the group backing the new legislation, said in a research paper posted on its website: “It is time for campaigns for Federal office to ensure they are complying fully with Federal law—and this includes the use of standard industry anti-fraud protections to protect against the danger of illegal contributions from foreign sources.”

John Pudner, the executive director of Take Back Our Republic, told Bloomberg BNA in a phone interview that his group also supports broader measures to require disclosure of campaign money.

The group has been talking to Republicans on Capitol Hill to try to drum up support for new controls on the influence of money in politics. Pudner said the credit-card measure, though narrowly focused, seemed to garner the most support among Republicans.

He added that he also hoped to generate Democratic support for the measure and to have it considered by the House Administration Committee, which has jurisdiction over campaign finance issues.

Republican Support for Regulation Elusive

Pudner is a political consultant who helped Rep. Dave Brat (R-Va.) win a stunning upset victory in a Republican primary in Virginia last year over former House Majority Leader Eric Cantor (R-Va.).

The board of Take Back Our Republic includes other prominent Republicans, such as Mark McKinnon, a leading adviser to President George W. Bush's presidential campaigns, and former Bush administration officials Richard Painter and Juleanna Glover, among others.

Pudner's group, which has been in operation for less than a year, has an ambitious agenda—far beyond regulating credit-card contributions—to curb what it views as a lack of transparency and accountability in a political system increasingly dominated by campaign money (See previous story, 07/27/15).

According to the group's website, Take Back Our Republic favors broad new disclosure requirements, including an end to undisclosed campaign money funneled through tax code Section 501(c)(4) nonprofit groups. Such groups “present opportunities for abuse and for the infiltration of foreign or foreign-controlled money into our campaign finance system,” according to a position paper posted on the organization's website.

Pudner also spoke out in favor of efforts by Ann Ravel, the Democratic chairwoman of the FEC, who has pushed for a rule explicitly outlawing foreign contributions to state and local ballot measure campaigns. Ravel's proposal on this issue was blocked by the FEC Republican commissioners in a party-line vote this fall (See previous story, 10/02/15).

Pudner acknowledged in the interview with Bloomberg BNA, however, that his group has faced resistance in drumming up Republican support for broader disclosure measures on Capitol Hill, where partisan divisions over campaign finance have been entrenched for years.

Democrats have pushed for broad disclosure legislation since the 2010 Supreme Court decision in Citizens United v. FEC, which led to skyrocketing campaign spending by groups collecting unlimited contributions. A Democratic-backed bill known as the DISCLOSE Act, calling for reporting the sources of all money used in campaigns, repeatedly has been blocked by solid Republican resistance.

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com