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Expert: Claims of campaign finance irregularities are dubious

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A well-known conservative provocateur attempted to make a splash in April by alleging that Maryland residents had fallen victim to a money laundering scheme by a national Democratic fundraising organization.

But the allegations are dubious and federal regulations cast further doubt on the claims, which Maryland’s State Board of Elections has declined to investigate. Even so, some Maryland Republicans have seized on the allegations and are hoping they trigger campaign finance reforms.

In an April video, which focuses on Maryland donors, partisan filmmaker James O’Keefe alleges a money laundering scheme involving ActBlue, a fundraising entity that supports Democrats.

O’Keefe said data provided by “citizen journalists” showed some donors may have unwittingly fallen victim to “what appears to be a money laundering scheme.” O’Keefe alleges that the names and addresses of some people are being used without their permission to make thousands of donations totaling tens and sometimes hundreds of thousands of dollars.

But many of the claims in the video are difficult to independently recreate and appear overstated. In some cases, contributions may have been double-counted (or more) because of how federal elections reports treat donations sent to candidates through entities such as ActBlue and WinRed, a Republican counterpart.

O’Keefe, a self-styled guerrilla journalist, is known for his heavily edited videos that present situations out of context for political purposes. His tactics, including surreptitious recordings, fall outside of professional journalism norms.

(For instance: a followup O’Keefe video inferred that longtime Maryland Elections Administrator Linda Lamone announced her retirement in response to the investigation. Lamone, however, had confirmed her retirement plans to Maryland Matters before the media group spoke to her or released their report.)

At the core, the video suggests that prolific Maryland donors likely couldn’t afford the number of donations O’Keefe reports, so something must be amiss.

Adav Noti, senior vice president and legal director for the Washington D.C.-based Campaign Legal Center said “the way that it’s described seems on its face to be, at best, not very careful and at worst deceptive as to the data that’s produced.”

In April, a group of Republican lawmakers asked the State Board of Elections to investigate the claims in the video. But those claims were focused exclusively on federal campaign donations, so the state board declined to pursue them.

“The allegations in the complaint are outside the scope of the enforcement powers of the State Board,” Jared DeMarinis, director of candidacy and campaign finance, wrote in his response letter.

Questioning contributions

ActBlue and committees like it are technically political action committees, or PACs, which don’t support or endorse candidates. Instead, they act as conduits to donate to individual candidates. The companies offer sophisticated fundraising services through the internet and direct texts. The outreach typically includes the ability to make small or micro donations on a recurring basis.

In O’Keefe’s video, an Annapolis resident is alleged to have made more than 3,000 donations to ActBlue totaling more than $32,000 since 2020. The donor did not answer questions about the donations. A check of federal campaign records for the donor by Maryland Matters — using more precise search terms than those shown on the O’Keefe video — showed less activity: that the retiree made 2,213 donations to ActBlue totaling $21,739.64 during the same time period. Despite O’Keefe’s questioning of the donations, they don’t appear to violate any federal limits.

The donor did not respond to requests for comment.

In another instance, O’Keefe alleges an Annapolis resident donated $217,000 over a three-year period. O’Keefe did not identify nor speak to the alleged donor on camera.

When asked if the video provided the kind of evidence to suggest that a sophisticated money laundering scheme was taking place, Noti said: “Not even remotely.”

Noti questioned a point in the video where O’Keefe says one donor made contributions using different combinations of his name or address.

“Well that might be different people and some of the searches that they show are fairly common names. So we would need to know a lot more about what he’s saying is a variation and what they did to determine that is, in fact the same person and not a different person,” Noti said.”Because I will say that even for people who work with the data a lot that is very difficult thing to do — to figure out whether the contribution from John Smith in Annapolis at such and such address Annapolis, Marryland, is the same or different from John M. Smith, also in Annapolis, Maryland.”

Noti, a former general counsel to the Federal Election Commission, said that while the video makes serious allegations, they do not appear to have gained traction.

“I understand the video to be implying that these people are not in fact making these contributions,” said Noti. “That’s an extremely serious accusation that would be a federal felony if that were happening. It’s something that the Department of Justice prosecutes. If there were actual evidence of that sort of violation on that scale the Department of Justice would definitely be interested. I have heard no indications of any such interest.”

Noti said there have been concerns, in theory, over the years about the type of scheme that the video alleges: “That if you were really determined, a bad actor could exploit the system in the way described in the video,” said Noti. “I think that would be pretty difficult to pull off in reality for a variety of technical reasons.”

Inflated figures?

The data used by the filmmaker was submitted to him by Maryland 20-20 Watch. The group’s website bills itself as an independent elections watchdog group.

The organization’s lead research investigator, William T. Newton, is a frequent Republican candidate for state and federal office. Most recently, Newton was nominated to fill a vacancy on the Maryland State Board of Elections. Gov. Wes Moore (D) rejected Newton’s nomination citing concerns about Newton’s rejection of the legitimacy of the 2020 presidential election and a guilty plea to “a crime of moral turpitude.” Newton received a sentence of probation before judgment.

The campaign finance data was part of a tangle of documentation filed in a rambling federal lawsuit that alleged election fraud. U.S. District Court Judge Stephanie A. Gallagher dismissed the case in December. That ruling has been appealed.

A complicated set of federal rules govern earmarked contributions to so-called conduit entities such as ActBlue and WinRed.

Under federal reporting guidelines, committees are required to report the transactions multiple times. Those contributions appear as a receipt to the conduit committee from an individual contributor. The conduit committee is also required to report that it sent the donation to the intended candidate. Further complicating the reporting is that clearinghouses like ActBlue have 10 days to make the disbursement. This can lead to donations and disbursements having different dates on a report.

Additionally, a candidate’s committee is required to report the donation, attributed to the individual who made the earmarked donation even though it came to them indirectly through the conduit entity. Finally, the intended recipient also reports that the donation came through an entity such as ActBlue or WinRed.

The complicated reporting requirements can give the appearance of abnormally inflated donation activity, according to the FEC.

In the O’Keefe video, donor names are searched in the FEC database without specifying a transaction type or adjusting for any duplication.

“The availability of individual contribution data through FEC is great,” said Noti. “This is why we have transparency so anybody can look up this sort of information. It’s unfortunate that the data gets misused sometimes. But the fact that we have that level of transparency also allows for correction of the misuse. So it’s possible to at least try to reverse engineer or duplicate the same searches that they do with that video and see if there is really something there. It doesn’t look like there is.”

A lack of jurisdiction

The Federal Election Commission regulates ActBlue and WinRed related to federal candidates.

The federal agency declined to comment on O’Keefe’s video or the allegations it contained. The agency requires a complaint to be filed before it will investigate. A spokesman said the agency does not acknowledge the existence of an investigation — including a complaint — until a formal action by the commission is reported.

But Del. Matthew Morgan (R-St. Mary’s), who led the effort by a group of Republicans to seek an investigation, said the fact that the elections are held in Maryland should give some jurisdiction to state elections officials.

“You can’t count on the federal government to fix anything or everything. So ultimately, it’s up to the states,” said Morgan.

Maryland, in fact, treats donations from ActBlue and similar groups differently than federal law.

Maryland treats the PACs as credit card processors. DeMarinis said it is identical to how the state regulates PayPal and other electronic payment processors.

State candidates must keep records of transactions with the PACs for 10 years. Candidates disclose contributions on state reports, with each donation attributed directly to the individual contributors.

The request by Morgan and other Republicans mirrors one made by Florida Republican Sen. Marco Rubio, who also cited the video alleging donation irregularities.

In April, Rubio sent a letter to the FEC asking five questions about the activities of ActBlue based on the video.

In a copy of the FEC response released to Maryland Matters by Rubio’s office, elections officials declined to answer three questions citing confidentiality.

The commission told Rubio it could only consider opening an investigation upon the receipt of a formal complaint.

It is unclear if Rubio has filed such a complaint or is considering doing so. A spokesperson for the senator did not respond to a request for comment.

Recurring donations face continued scrutiny

The allegations cited by Morgan, and Rubio at the federal level, are a new wrinkle in a larger concern relating to methods used by ActBlue and WinRed.

ActBlue and WinRed have come under increased scrutiny in recent years for their use of automatically recurring small dollar donations.

The PACs, as well as other political groups and candidates, use a pre-checked box authorizing recurring donations. Many times — especially in the case of elderly donors — the checked boxes go unnoticed.

“Commission staff are regularly contacted by individuals who have discovered recurring contributions to political committees have been charged to their credit card accounts or deducted from their checking accounts,” the Federal Election Commission wrote in its 2022 legislative recommendations to Congress. “In many cases, the contributors do not recall authorizing recurring contributions. Often, these contributors have attempted unsuccessfully to cancel the recurring transactions with the political committee prior to contacting FEC staff.”

In the case of one of the Annapolis donors identified in the O’Keefe video, all of the donations were small dollar amounts. Many under $10. In a number of cases, the record showed multiple small donations per day.

Such practices are not, strictly speaking, a violation of federal law.

“Some fundraising devices use ‘pre-checked boxes’ to treat a one-time contribution as a recurring contribution. In this way, some committees consider the contributor to have authorized the recurring contributions without obtaining the contributors’ affirmative consent,” the commission wrote in 2022.

“Without express statutory authority…Commission staff do not have much effective assistance to offer these frustrated contributors,” according to the commission report.

In 2022, the Maryland General Assembly passed a bill sponsored by Del. Julie Palakovich Carr (D-Montgomery) that requires companies collecting recurring donations to have the affirmative consent of the donor. That law went into effect in January and applies to state and local candidates in Maryland.

In 2021, Maryland was one of four states to open an inquiry into the practices of ActBlue and WinRed. The Office of the Attorney General in Maryland sent letters to both asking for information and documents related to the issue of recurring donations in the state, according to the New York Times and Washington Post.

A federal judge in Minnesota in a January 2022 ruling, cleared the way for the states to investigate the partisan conduits’ activities after WinRed sought to block them, claiming the attorneys general had partisan political motivations, according to The Nonprofit Times.

Former Attorney General Brian Frosh (D), who was in office in 2021, declined to discuss the letters to ActBlue and WinRed, citing the possible ongoing nature of the review.

A spokesperson for current Attorney General Anthony Brown (D) offered a similar response.

“With few exceptions, the Office of the Attorney General does not confirm or deny the existence of investigations,” said Jennifer Donelan.


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Expert: Claims of campaign finance irregularities are dubious