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Feb 09

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How much of the Presidential campaign contributions are illegal?

In a number of prior rulings, the U.S. Supreme Court ruled that foreign parties should not be allowed to control, participate, or finance federal elections. The reasons are fairly obvious. In a January 9, 2012 ruling in re: Bluman v. FEC (case 11-275), the U.S. Supreme Court provided a one-sentence affirmation on this topic. This most-recent ruling agreed it is constitutional for Congress to bar foreign citizens legally living in the United States from monetarily participating in the campaign process.

This is hardly controversial, right? But the problem is that no mechanism exists to enforce or even monitor this ruling. In the 2008 election, the Obama campaign shattered all fund-raising records. Candidate Obama raised approximately twice as much money (approximately $300 million more) than McCain. A surprising amount of this additional money, over $225 million, reportedly came over the internet from U.S. citizens contributing less than $200 per individual. Donations under $200 per U.S. citizen do not have to be itemized in reporting to the federal election commission.

Current technology allows any even moderately savvy person (or government?) to contribute enormous sums using a computer and a credit card to make repeated sub-$200 amounts. The amounts could be contributed electronically from anywhere in the world.

In response to requests for additional information, the Obama campaign claimed that it would be too difficult and time consuming to extract the electronic information associated with contributions that came over the internet. Then President-elect Obama personally claimed that it “would be a pretty hard thing for us to be able to process.” Since the Obama campaign could not figure this out, we offered to do it for both the Obama and McCain campaigns for FREE. We could not think of a better pro-bono project than providing transparency to our nation’s election process.

Unfortunately, to probably no one’s surprise, neither campaign took us up on our offer. Nevertheless, we still think this use of our firm’s technology capabilities would be a great project.

So, in light of the continued unequivocal rulings of the Supreme Court regarding the illegality of (i) undisclosed contributions under $200, and (ii) contributions from other than U.S. citizens, we again extend our offer to the political campaigns of both parties. We will analyze for free what Obama thought was just too tough. We are happy to provide the results in an internet-available database that will allow anyone and everyone to see how much, if any, of the campaign contributions of the presidential candidates are illegal.

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2012/02/how-much-of-the-presidential-campaign-contributions-are-illegal/

1 comment

  1. Daniel Nolte

    In some respects this illustrates how much the field of election finance has changed in the last four years. While it is correct that they still could, today a foreign interest would hardly have to go to the trouble of setting up millions of sub-$200 donations when there are any number of Super-PAC organizations available to not only accept the money but also respect the influence of that money. It is unlikely that there is any publicly traded corporation that does not have a substantial participation by foreign soverign wealth funds. The same with the large private equity funds. Then there are the US Corporations that are simply the US presences of foreign entities, According to the IRS in 2008 Foreign Controlled Domestic Corporations (FCDC) represented 14.18% of all assets and 15.28% of all reciepts on US corporate income tax returns.

    In the Citizens United ruling the court waved off concerns regarding foreign influence on US elections with the following wording:

    Because §441b is not limited to corporations or associations created in foreign countries or funded predominately by foreign shareholders, it would be overbroad even if the Court were to recognize a compelling governmental interest in limiting foreign influence over the Nation’s political process.

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