Commentary: The Foreign-Donor Loophole

by Susan Crabtree


With so much recent finger-pointing in Washington over foreign influence in U.S. elections, it seems as if lawmakers would be doing everything they could to try to close loopholes that allow illegal political donations from China, Russia, and other overseas interests into U.S. campaigns without detection.

A group of GOP House members introduced legislation to do just that as far back as 2015. Their bill attracted significant bipartisan support, but stalled amid partisan sniping over Democrats’ pursuit of the now-discredited Trump-Russia collusion allegations.

The effort picked up some steam in recent weeks when two vulnerable House Democrats folded those provisions into a broader bill aimed at combatting foreign influence in U.S. politics.

Although reformers are hopeful it will pass later this year, powerful forces oppose cleaning up the system.

Most individual campaigns and political action committees have taken a basic step to prevent secret foreign donations: requiring the three- to four-digit customer verification value or CVV on the back of the credit card during donor transactions. Doing so helps verify that the donor is the individual they purport to be, and that the address attached to the account is within the U.S. and its territories. It’s also considered the industry standard that the Payment Card Industry Security Standards Council recommends for all e-commerce.

But there’s at least one big hold-out: ActBlue, the Democratic online fundraising behemoth that raised $3.8 billion for more than 21,000 Democratic candidates, committees, and organizations in the 2020 cycle.

Historically, trying to prevent foreign money from flowing to U.S. elections wasn’t considered partisan. After all, such donations are illegal. ActBlue has changed that calculation. Several years ago, most big fundraising entities, including the vast majority of individual Democratic presidential, House, and Senate campaigns, along with WinRed, a GOP fundraising juggernaut used by numerous conservative campaigns and causes including the Republican National Committee, started using the CVV. ActBlue, however, remains a hold-out.

“We just want to make sure that ActBlue and anyone else requires the same thing that every vendor does when you buy a TV set online or anything else – that it’s not a fraudulent donation or coming from an illegal source like the Chinese,” John Pudner of Take Back Action Fund, a conservative election reform advocacy group, told RealClearPolitics.

ActBlue did not respond to questions about whether it continues to accept donations without verifying their legitimacy. On the ActBlue website donation page, however, there’s no field asking donors for their CVV along with a credit card number and expiration date.

With the onset of the digital fundraising age, soliciting and making political donations online is just a click away, and millions of campaign contributions are racing through international cyberspace on any given week. That’s good news for political fundraisers with the task of raising funds to underwrite campaigns, but bad news for the integrity of the U.S. election system, especially because federal election law hasn’t kept up with this brave new world of online donations.

The Federal Election Commission largely expects campaigns to police themselves for foreign donations, which can be difficult to detect if donors use fake names without any address or any verification process of gift credit cards, which also lack personal information. It’s easy for illegal contributors to fall under the radar if they make small donations because the FEC doesn’t require campaigns to publicly report cash contributions under $200. For donations between $50 and $200, candidates are required to make an effort to obtain accurate identifying information – though they aren’t required to report it. For donations less than $50, campaigns aren’t even required to keep records of identifying information.

That feature of campaign finance law, Pudner and other critics say, opens up an unrestrained spigot for illegal donations. Foreign donors or fraudsters easily can deploy so-called robo-donations, computer programs that use false names to make hundreds of donations a day in small increments to evade reporting requirements. A Missouri woman named Mary Biskup appeared to give more than $170,000 in small credit card donations to Barack Obama’s 2008 presidential campaign, but when asked, she said she never donated a dime. Another contributor had given donations using her name without her knowledge.

There’s plenty of evidence that foreign actors are trying to infiltrate the U.S. political fundraising system. In the 1990s, the Senate led a high-profile investigation into allegations that Chinese officials had funneled money into the Democratic National Committee and President Clinton’s 1996 reelection effort.

In 2008 and 2012, Republicans accused Obama’s campaigns of accepting foreign donations through credit card contributions, but the FEC dismissed the complaints. Still, the Obama presidential campaigns, along with ActBlue, never required donors to verify their credit cards using the CVV system.

Earlier this month, two New York state residents were charged with illegally using funds from Chinese and Singaporean investors to donate $600,000 to then-President Trump’s reelection campaign in 2017. The scheme was part of an effort to demonstrate political connections as they sought funds to build a China-themed amusement park in upstate New York, prosecutors said. The Trump campaign was not accused of wrongdoing.

Congress has known about the risk since at least 2012 when the Government Accountability Institute, a conservative nonprofit run by investigative journalist Peter Schweizer, issued a report deeming online donation systems extremely vulnerable to foreigners attempting to violate federal contribution laws and limits.

Owing to their fixation with Russia and the Trump campaign, Democrats have become far more vocal about foreign influence in the U.S. political system in recent years. While former Special Counsel Robert Mueller’s investigation failed to prove a conspiracy or coordination between the Trump campaign and Russia, there’s ample evidence that Russia has tried to manipulate U.S. elections. Although it also failed to prove any collusion between Russian entities and the Trump campaign, a Senate Intelligence Committee investigation found “extensive” Russian interference in the 2016 presidential campaign.

Rep. Paul Gosar, an Arizona Republican, has spent the last several years building a bipartisan coalition to close down the loopholes allowing foreign credit card donations to infiltrate U.S. campaigns. As of last year, Reps. Anna Eshoo of California and Seth Moulton of New Jersey were among several Democrats who had joined his effort and co-signed his bill.

This year, the legislative push broadened with Democratic Reps. Jared Golden of Maine and Katie Porter of California joining a strange-bedfellows alliance with Gosar, a Freedom Caucus firebrand and one of Trump’s most ardent allies in Congress, to take aim at all foreign money legally and illegally entering the U.S. political system.

Titled the Fighting Foreign Influence Act, the bill folds several separate measures together, including one that would require all tax-exempt organizations, including think tanks, to publicly disclose any high-dollar gifts from foreign governments or foreign political parties. The measure also would impose a lifetime ban on former senior U.S. military officers, presidents, vice presidents, and other senior executive branch officials and members of Congress from ever lobbying for a foreign principal.

The bill notably does not bar the children of presidents, vice presidents, and other senior government officials from lobbying for overseas interests. One of the potential criminal charges against Hunter Biden for his Chinese and other foreign business deals is that he never registered under the Foreign Agents Registration Act for advocating on Chinese entities’ behalf.

Gosar’s section of the measure would require political campaigns to verify that anyone making an online political donation has a valid U.S. address, by mandating the use of the three-digit CVV code and the U.S. address. Another related provision would bar foreign agents from fundraising for political campaigns.

Despite their obvious political differences, Golden said working with Gosar on the bill made sense because “fighting foreign influence isn’t a partisan issue – it’s an American issue.”

“One of the biggest problems with our political system today is how corruption is either completely legal or punished with slaps on the wrist,” he added in a written statement. “Right now, foreign governments can secretly fund think tanks to push their agenda, hire former public officials and military officers to lobby for their interests, and have their agents raise millions of dollars for political campaigns. For the good of the country, that needs to end immediately.”

We’ve been here before. John Pudner’s group started circulating a white paper advocating for the extra credit card security on Capitol Hill several years ago. Back then, he says, campaigns for roughly 150 Republicans and 150 Democrats were not using CVV security steps to verify their donations.

“So, it was not intended to help either side, just remove a set up that would make it easy for Chinese programmers to run money under American names to either side,” he said. “We continue to emphasize that our purpose is not for ActBlue to stop raising money but to simply put the same [security process in place] that virtually everyone else in the country uses when you buy anything.”

According to Gosar, it’s an important step in restoring trust in elections, and the bipartisan support demonstrates that the issue transcends party divisions.

“Democrats and Republicans alike agree that Americans should not have to worry about illegal foreign donations that have been prohibited by United States law for over half of a century” infiltrating campaigns, he told RCP.

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Susan Crabtree is RealClearPolitics’ White House/national political correspondent.




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