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Auditing Obama

Will the FEC examine the president-elect's campaign finances?

11:00 PM, Dec 10, 2008 • By HANS A. VON SPAKOVSKY
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Sometime early next year, the six commissioners who run the Federal Election Commission will face an interesting dilemma--whether to approve a "for cause" audit of the presidential campaign of a sitting president, Barack Obama.

From a legal standpoint, this should be an easy vote. Serious issues were raised in numerous media reports chronicling the Obama campaign's probable violations of federal law. If the career staff at the FEC follow the ordinary, regulatory model of investigations, they will recommend such an audit to the commissioners. However, the odds are that the three Democratic commissioners will be under enormous pressure to vote "no." Some members of their party may make it clear that their professional and political careers in Washington will be finished if they vote to approve such an audit. Since it takes four votes for the FEC to take any action, at least one of those Democratic commissioners will have to join with the three Republicans to approve an audit.

Given the credible reports concerning the possible receipt of millions of dollars of illegal foreign contributions; untraceable contributions; contributions from fictitious and anonymous individuals; and amounts grossly in excess of the maximum contribution limits, such an audit is obviously required. (A concurrent investigation by the Department of Justice is also warranted.) Among the most disturbing features to come to light is the apparent disregard by the Obama campaign of the most basic security protocols for identifying the actual source and amount of all the contributions it received, which may end up collecting more money than any candidate has ever collected in history--almost $750 million.

Obama's alleged receipt of illegal contributions through the Internet, in fact, may dwarf all of the money the Nixon campaign infamously collected in the 1972 election. The public funding program automatically requires an audit of any candidate that receives public funds, so John McCain's campaign will be audited without question. Since Obama is the first candidate to refuse public funding in the general election since the program started, it would be very odd if Obama avoided an audit because of his ability to raise extraordinary funds from untraceable sources.

The federal campaign finance law requires campaigns to report the name, address, occupation and employer of every contributor who gives more than $200. Yet according to the Washington Post, National Journal and Newsmax, the Obama campaign took (or failed to take) steps to ensure it was not alerted to problem donations.

Some of the acts and omissions are so cavalier, it's hard to believe they weren't intentional. For example, the Post reported that the Obama campaign accepted prepaid credit cards that are untraceable, and National Journal reported that the campaign didn't implement a verification procedure to even match the names of contributors using regular credit cards with the names and addresses of the credit card holders.

When asked about it, the Obama campaign said such matching wasn't "available in the credit card processing industry." That is completely untrue--such verification procedures are offered by companies that service credit-card transactions, as well as by banks and telecommunications companies (and was standard procedure for the McCain campaign).

In contrast to the McCain campaign, the Obama campaign also refused to divulge the names of the millions of small-time donors who contributed (many repeatedly) under $200 to the campaign (totaling $218 million), saying it was "too difficult." However, as Neil Munro of National Journal reported, there are "few technical obstacles to sorting and identifying small-scale donors."

Of course, disclosing that information would have revealed the many instances of fictitious donor names uncovered by the press (like "Doodad Pro"), which the campaign blithely accepted. Media reports show that Obama's campaign apparently lacked even basic software protocols to catch obviously fictitious addresses (like a donor's state being listed as "NA" or "ZZ") or employer names (like DFDFGDFG), or to accumulate small donations made repeatedly by the same individual. If the campaign had done that, it would have had to refuse the contributions, return them when they went above the maximum of $2,300 per election, or identify donors once their contributions top $200.

Compare Obama's campaign to Hillary Clinton's. To avoid the problems with Chinese donors that plagued her husband's campaign, she prudently required Americans living abroad to first fax a copy of their passport before accepting a contribution. In contrast, the Obama campaign had no controls whatsoever to prevent illegal foreign contributions by noncitizens. An investigation by Newsmax estimated that anywhere from $13 million to $63 million may have been received by the Obama campaign from overseas credit cards or foreign currency purchases (a red flag for possibly illegal contributions). The FEC itself has flagged 16,639 potential foreign donations to Obama's campaign. When confronted with this, the campaign started collecting passport numbers from foreign donors, a completely useless procedure since no effort was made to verify those numbers with the State Department to see if they were even valid.

Obama's campaign has claimed that FEC regulations didn't prohibit taking prepaid credit cards or require it to verify credit cards. That may be true, but that doesn't remove the campaign's obligation to accurately report donor information and to verify that a contributor is really eligible to donate money. Given Obama's unprecedented use of the Internet to raise funds, this is impossible unless you take such precautions at the front end. Any reasonable campaign would know that such steps were necessary to actually comply with FEC requirements on donor information and eligibility.

It is ironic that a candidate who in 2007 billed himself a "campaign reformer," who wanted to clean up the corruption caused by money in politics, would run a campaign that reportedly failed to implement any controls whatsoever to prevent these problems. If media accounts of Obama's campaign practices prove true, then it would seem that the decision was made to collect all of the money that came in, no matter what. Once the campaign was won, who would care if years from now the FEC eventually found a violation and imposed a civil penalty, especially when your campaign employs the best campaign lawyers in Washington that money can buy to fight the FEC and obfuscate the issues? Besides, Obama can assume the mantle of "campaign reformer" again in 2009 and sweep any findings by the FEC under the rug as he proposes "new and improved" campaign finance laws.

Campaign reform has been a bipartisan sport in Washington for years, with its advocates promising new laws and regulations would address perceived systemic ills. Those charged with applying the law at the FEC now face a decisive moment. Will they conduct their investigation to the benefit of both parties, or turn a blind eye to credible allegations of wrongdoing, to the long-term benefit of neither?

Hans A. von Spakovsky is a Visiting Legal Scholar at The Heritage Foundation (heritage.org). He is a former Commissioner on the Federal Election Commission.