Just a few questions before starting:
-Didn't Trump campaign in the 2016 race on the "fact" that he was so rich that he didn't need donations?
-What would the interest be on a short-term $122,000,000 loan be and, should Trump be required to reimburse that amount to those he hoodwinked along with reimbursing the fees charged that are being kept on unauthorized "donations"?
'A complete ripoff': Campaign finance experts puzzled and stunned by Trump camp's reported 'money bomb' ploy
gpanetta@businessinsider.com (Grace Panetta)
Experts are puzzled and stunned by the Trump campaign's reported 'money bomb' ploy.
A New York Times investigation detailed how supporters were duped into making recurring donations.
So far, it's unclear whether the reported actions are illegal or just unethical.
Elderly donors who gave a few hundred dollars to former President Donald Donald Trump's reelection campaign were shocked to see thousands drained from their accounts. Refund requests spiked in the final months of the campaign. The ensuing surges in credit card fraud claims associated with Trump even got on the radar of the US' biggest banks.
A New York Times investigation published Saturday detailed a recurring donation scheme reportedly referred to as "the money bomb" that the Trump campaign used to pad its coffers in the final months of the campaign through the GOP fundraising platform WinRed.
The tactics included added pre-checked recurring donation boxes at the bottom of fundraising emails and creating an opt-out instead of opt-in system for recurring donations. And as time drew closer to the election, the fine print by those bright-yellow donation boxes became smaller and more confusing, leading to donors, including many elderly ones, unknowingly signing up to give thousands in contributions.
Asking for recurring donations is a common practice for Democratic campaigns and nonprofits too, but the Trump campaign's methods were particularly alarming to many experts.
"Groups do this all the time in a non-toxic way, and of course Trump, being Trump, did this 72 million times in the wrong direction, and it started to look like fraud," Beth Rotman, National Director of Money and Politics at advocacy group Common Cause, told Insider.
The payments, according to The Times, essentially functioned as an "interest-free loan" from Trump's donors to his campaign, which faced upheaval and financial turmoil in the months leading up to the November 3 election. Eventually, tens of millions of donations were refunded over the course of 2020, with WinRed pocketing the transaction fees.
As Insider's Tom LoBianco reported, former Trump campaign manager Brad Parscale had booked nearly $200 million worth of TV ads with the expectation that a surge in last-minute donations would cover the cost, a misstep that "left the reelection effort dead broke by the start of October."
The Trump campaign's recurring donation ploy both perplexed and shocked even the most seasoned campaign finance professionals interviewed by Insider.
'A complete ripoff' of a plan
Fred Wertheimer, the president of Democracy21, who has been a leader in pivotal campaign finance and ethics reform battles in Congress and the courts over the past four decades, told Insider that he'd "never seen anything like this."
"I've never seen anyone do what the Trump campaign just did," Wertheimer said, arguing that the Trump campaign's behavior constituted elder abuse and is "below the bottom of the barrel" of acceptable fundraising tactics.
"This is a complete ripoff, they knew exactly what they were doing," he added. "They knew they were tricking people into signing up for what they thought was one contribution, when they were really signing up for multiple contributions. Then when they got caught, they sent the money back. It's like if a bank robber got caught and said, 'Oh, well, I gave the money back.'"
The highly unusual nature of the Trump campaign's methods were also reflected in the staggering rate of refunds. While it's routine for presidential campaigns - particularly those that operate at a large scale - to refund some contributions to donors who unknowingly gave over the legal limit, the sheer number of refund requests and the spike in refunds stuck out to experts and insiders.
In all, the Trump campaign refunded $122 million in online donations, including 10.7% of its donations raised through WinRed, The Times reported. By contrast, President Joe Biden only refunded $21 million of online donations and 2.2% of the donations that came in through ActBlue.
"I've been here almost six years, and I can't think of anything particularly like this in which people did not know that they were making recurring contributions," Jordan Libowitz, communications director for Citizens for Ethics and Responsibility in Washington (CREW), told Insider. "Reimbursing 10% of donations is a massive, unbelievable amount."
In a lengthy Monday statement issued through his Save America PAC, Trump denied the main claims in the article, arguing that the Trump campaign always promptly refunded donations upon request, pointing to a less than 1% rate of contributions being subject to formal disputes through credit card companies. He also attacked The Times' reporting as "a completely misleading, one-sided hit piece" and continued to falsely claim that the 2020 election was stolen.
The law doesn't always account for campaign finance ploys
Experts interviewed by The Times and Insider all agreed that the Trump campaign's and WinRed's actions cross an ethical line, especially regarding the elderly donors who say they were duped. But it's not yet clear whether their ploys run afoul of campaign finance or consumer protection laws.
"This is not a common thing we've seen before," Libowitz said. "It could be that this is a thing without a lot of regulation around it, just because laws follow issues."
Rotman of Common Cause told Insider that the new revelations about the Trump campaign present a prime opportunity for agencies like the Federal Election Commission and lawmakers in Congress to set new, updated regulations and standards for solicitation of recurring online donations.
"It's not really fraud, but it's potential trickery," Rotman said of the Trump camp's tactics. "You're talking about attempts at trickery, and you need anti-trickery regulations and statutes. And you can do that with clearer guidance and enforcement. It should not be so easy for people to be mystified as to how much they're giving and how often."
Craig Holman, a campaign finance and ethics lobbyist for democracy watchdog group Public Citizen, told Insider that federal campaign finance laws and the Internal Revenue Code mainly only prohibit soliciting campaign donations over the legal limit, not necessarily the tactics used in those solicitations.
"I have never seen a fundraising practice for candidates and party committees like this before, but the laws and regulations governing solicitations are quite lax," Holman said. "It could be argued that the solicitation method would likely cause illegal contributions beyond the contribution limits, but it appears that refunds were made in such cases, so it is unlikely that legal action could be taken against the Trump campaign and WinRed."
Meredith McGehee, executive director of campaign finance reform advocacy group Issue One, told Insider that the Trump campaign's activities raise new questions about the intersection of campaign finance and consumer protection, including whether fundraising platforms like WinRed will be held to the same standards as other businesses, especially for actions that could be seen as preying on seniors.
"Basic consumer law is that you give consumers clear and noticeable notification that a pledge is going to happen. It sounds in the case of just pure consumer law that this failed the test of people knowing what they're getting into," she said.
Long-term, WinRed's mandate to make a profit and to catch up to their political opponents on the Democratic side in the online fundraising game creates an incentive structure more permissive of cutting corners, verging into ethical gray areas like this, McGehee added.
"It's important to note that WinRed is structured as a for-profit entity as opposed to ActBlue, which is nonprofit. When you're a for-profit company, the incentives to make these things clear are less strong - they're a business and their job is to make money," she said. "Since they're operating as a business, the question I would raise immediately is: is this good business practice?"
Even if the Trump campaign and WinRed don't face immediate consequences from federal agencies, the damning allegations could hurt the platform's ability going forward, and by extension, the GOP.
"The highly unethical and deceptive fundraising practices will inevitably take its toll," Holman told Insider. "These donors are quite unlikely to give a campaign donation again to Trump and WinRed."
