Individuals can contribute large sums of money to political campaigns by programming their home computers to make repeated small donations, and loopholes in federal law allow campaigns to keep this flow of money hidden from public view, a National Journal investigation shows.

Federal law allows political campaigns to accept donations of $50 or less without recording the identity of the donor. This no-record rule was drafted to protect informal pass-the-hat fundraising at political meetings. However, today's technology makes it easy for individuals to contribute unlimited amounts of money via a series of $50-or-less online donations to any campaign willing to accept the cash.

With no rules governing "robot donations," campaign officials can say, "Yippy doo, let's go, no need to check anything," whenever a small enough donation is submitted under a unique alias, said former Federal Election Commission Chairman Scott Thomas.

This rule allowing anonymous $50-or-less donations is different from the more familiar regulation allowing campaigns not to disclose the names of a contributor who gives $200 or less.

"For years, the FEC has ignored the ultimate tough question: Does the campaign have the ability to just accept that cash and accept piles of it in the course of a day or week?" said Thomas, now head of the political law practice at the firm Dickstein Shapiro. If there was a legal challenge, he added, "There is no way the FEC could claim the authority to force campaigns to disgorge themselves of the money."

The FEC would be on weak grounds "both legally and ethically," said Karl Sandstrom, another former FEC commissioner, if it tried to investigate potentially lax practices by campaigns because the commission has not published adequate guidance on how to deal with technologies such as prepaid credit cards and automated donations.

The issue is likely to become more prominent next year, in part because advocates are lobbying for a bill that would have the federal government provide matching funds for small-scale political donations. Without better safeguards, illegitimate robo-donations could be used to fraudulently gain matching funds, said David Mason, a third former FEC commissioner.

In recent tests by National Journal, commercial software was used to rapidly and repeatedly donate money to several political sites, each of which replied with a "thank you" e-mail after each transaction.

For example, the software was used to make 10 donations of $1 apiece to a Web site run by Sen. James Inhofe, R-Okla., five donations to the presidential campaign of John McCain; and five to the Democratic National Committee (as shown in the video above).

There is some inconclusive evidence of robo-donations in the recent presidential election.

The most frequent donor to the McCain campaign was identified as Douglas E. Kroll of Castro Valley, Calif. Between February 2007 and October 2008, he made 51 donations of different amounts, according the McCain campaign's reports to the FEC.

However, records filed by Obama's campaign show some evidence of two robo-donors. For example, "Doodad Pro" made at least 791 contributions from November 2007 to October 2008, amounting to $19,065. Nearly all those donations were for $25, and 313 were delivered on Sept. 26. The donor's address was listed as Nunda, N.Y. The campaign also received 835 donations that totaled $20,225 from a donor named "Good Will" between March 17 and May 12. On March 30, the donor made 92 donations. The donor listed his or her home as Austin, Texas, and employer as "Loving You."

In subsequent reports to the FEC, the Obama campaign said it tried to return both donors' money or reassign it to other fundraising operations outside the campaign. For example, the campaign's cumulative report to the FEC stated that the campaign began returning Good Will's money 10 days after the first donation and continued returning money through September.

"We constantly screened our contributions to look for any issues, and when we could not verify that the contributions were appropriate, we refunded the money" by crediting the amount back to the donor's credit card, said Ben LaBolt, a spokesman for the Obama campaign. The campaign never discovered the identity of Doodad Pro or Good Will, LaBolt said.

The two donors' credit card contributions were processed by credit card companies and banks that identify their customers before awarding them cards. (See NationalJournal.com's Oct. 31 story on this topic.)

The Obama campaign had no legal obligation to identify the donors once their money had been returned.
Roughly $334.7 million donated to the Obama campaign -- out of $656 million raised from individuals -- came from donors who each contributed less than $200. These donors' names have not been disclosed.

For some months prior to the election, the Obama campaign made little or no use of commonplace software to validate the identity of donors. (See this Oct. 24 story from NationalJournal.com.) Unlike the McCain campaign, the Obama campaign accepted funds from donors who claimed addresses that were different from the billing address for their credit cards. The Obama campaign also took donations from prepaid credit cards, which can be purchased anonymously in small increments.

In the weeks prior to the Nov. 4 election, several right-of-center blogs reported that their readers were successfully making small donations to the Obama campaign under obviously fake names and addresses. But unless the Obama campaign releases its records to the public or the FEC, there is no legal mechanism for verifying the validity of the donors who contributed less than $200 or less than $50.

Robert Bauer, the Obama campaign's lead lawyer, told National Journal in late October that the campaign did check incoming donations. "Our focus is making sure we comply with campaign finance requirements," mostly through twice-daily computer-aided review of online donations, he said. A software program flags instances where a single person used multiple credit cards, instances of suspicious addresses, strange words, improper business affiliations or donations that exceed federal limits on personal contributions, said Bauer. "We do a very strong job, both with the technology we use and with this very heavy commitment to comprehensive back-end review."

But if a donor provides less than $50 under a fake name, then campaigns have no legal obligation to record the donation, or to determine the true identity of the donor, or to gauge how much money the donor might have contributed using automated donations under false names, said Thomas.

If a donor gives less than $200 under a single name, campaigns are not required to inform the FEC of the claimed donation or donations. That nondisclosure rule was put in place to shield the anonymity of small-scale donors, who sometimes face harassment from neighbors, co-workers or employers. However, the campaigns are required to record the donor's name, and to make a modest effort to determine the true identity of the donors. Campaigns can satisfy their requirement to identify donors by having the donors declare their claimed name is correct, and by sending a letter to the address listed by a donor, whether the address is real or fake.

When a donor provides donations amounting to more than $200 under a single name, such as Doodad Pro or Good Will, campaigns are required to disclose the cumulative donations in monthly reports to the FEC. That's how bloggers spotted the donations from Doodad Pro and Good Will.

Despite the $50 no-record rule, and the $200 no-disclosure rule, there are significant incentives for donors to correctly identify themselves, and for campaigns to correctly identify donors. For example, donors who provide significantly more than $50 under false names face criminal charges that can get them five years in jail, plus one year in jail for every false declaration, said Sandstrom.

Also, campaigns want accurate lists of names and e-mail addresses so donors can be asked to give more money or to volunteer. Campaigns "do not have to maintain records of the name and addresses [of sub-$50 donors, but] almost all campaigns do, because they want to solicit them" for more money, said Sandstrom, who now works at the law firm Perkins Coie. "A person who gave to you once will likely give to you a second time."

However, the Obama campaign's numbers will not be audited by federal regulators because Obama did not take federal funds. In contrast, the McCain campaign -- which did accept federal matching funds -- has released the names and the home cities of all of its donors, and its accounts will be audited by the FEC.

There are potential fixes to the problem raised by the combination of robo-donors and the $50-or-less exception. For example, campaigns can require donors to type characters displayed in so-called "captcha" boxes before completing a contribution. The graphical boxes contain images of distorted letters that are difficult for software robots to read. Also, donors can be required to give an address that matches the address on a credit card already approved by a U.S.-owned bank. Fundraising professionals will likely object to these measures, however, because they can deter some would-be donors.

The McCain campaign already includes at least one self-defense against robot donations. On Nov. 25, it barred additional donations from a National Journal computer used during the magazine's test after first accepting five donations made in quick succession.

Another option would be a law requiring campaigns to preserve records of all online donations for subsequent review by FEC officials. "That would protect people's privacy while allowing the government to police these small-scale donations," said Bradley Smith, a former FEC chairman who served on the commission from 2000 to 2004. Smith is now a professor at Capital University Law School, Columbus, Ohio.

But these records would have to include data collected by the credit card companies and the banks that process the credit card transactions. Only these companies have full access to the home addresses of donors. The banks are "always going to be the fundamental check on fraud and illegal donations," said Jonathan Zucker, co-founder of Act Blue, which collects online donations for many Democratic candidates.

Other steps may be of only marginal value. For example, a staffer for the Inhofe campaign called National Journal as soon as its robot donations were submitted. The staffer was alerted by specialized software that detected a sequence of two identical donations. This alerting software, he told National Journal, is intended to help campaign officials quickly aid supporters who accidentally contribute more than they intended. However, it could have been bypassed if National Journal had masked its donations behind a series of different names, telephone numbers and donation amounts.

FEC spokesman Bob Biersack said the commission has not launched a formal review of the high-tech donations. "It doesn't mean there could not be one in the future," he added.

But any review of donation technology has to address the anonymity provisions involving the $50 rule, said Thomas. "That's the heart of the current problem."

Marc Lavallee and Peter Bell assisted with this story.