'A complete rip-off': Campaign-finance experts puzzled and stunned by Trump camp's reported 'money-bomb' ploy

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  • Experts are puzzled and stunned by the Trump campaign's reported "money-bomb" ploy.

  • A New York Times investigation detailed how supporters were led to make recurring donations.

  • It's unclear whether the actions reported by The Times are illegal.

  • See more stories on Insider's business page.

Older donors who gave a few hundred dollars to former President Donald Trump's reelection campaign said they were shocked to see thousands drained from their accounts. Refund requests jumped in the final months of the campaign. The ensuing surges in credit-card-fraud claims associated with Trump got on the radar of the US's biggest banks.

That's all according to a New York Times investigation published Saturday that detailed a recurring-donation scheme it said was referred to as "the money bomb," which 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 an opt-out, instead of opt-in, system for recurring donations, The Times reported. As time drew closer to the election, the recurring donations went from monthly to weekly. And the fine print by those bright-yellow donation boxes became smaller and more confusing, leading to donors, including many older ones, unknowingly signing up to give thousands in contributions, the newspaper said.

Read more: Tulsi Gabbard's old presidential campaign committee appears to fall victim to thieves making unauthorized Airbnb charges

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 nontoxic 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, the national director of money in politics and ethics at the 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, The Times said.

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," Insider's Tom LoBianco reported, citing Republicans close to Trump's campaign.

The Trump campaign's recurring-donation ploy both perplexed and shocked even the most seasoned campaign-finance professionals interviewed by Insider.

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Candidate yard signs outside a polling place. Paul Weaver/Pacific Press/LightRocket via Getty Images

'A complete rip-off' of a plan

Fred Wertheimer, the president of Democracy 21 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, adding that the Trump campaign's behavior constituted elder abuse and was "below the bottom of the barrel" of acceptable fundraising tactics.

"This is a complete rip-off. 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 was also reflected in the staggering rate of refunds, according to The Times. 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. In contrast, President Joe Biden 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, the communications director for Citizens for Responsibility and Ethics in Washington, 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, saying that the Trump campaign always promptly refunded donations upon request and that there was a less than 1% rate of contributions subjected to formal disputes through credit-card companies. He also attacked The Times' reporting as "a completely misleading, one-sided hit piece" and continued to baselessly claim that the 2020 election was stolen.

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Trump and former first lady Melania Trump. Bill O'Leary/The Washington Post via Getty Images

The law doesn't always account for every new campaign-finance ploy

Experts interviewed by The Times and Insider all agreed that the Trump campaign's and WinRed's actions crossed an ethical line, especially regarding the older donors who said they were duped. But it's not clear whether their ploys ran 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 said the revelations about the Trump campaign presented a prime opportunity for agencies like the Federal Election Commission and lawmakers in Congress to set 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 the democracy watchdog Public Citizen, told Insider federal campaign-finance laws and the Internal Revenue Code mainly prohibit soliciting campaign donations over the legal limit, not necessarily the tactics used in these 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, the executive director of the campaign-finance-reform advocacy group Issue One, told Insider the Trump campaign's activities raised new questions about the intersection of campaign finance and consumer protection, including whether fundraising platforms like WinRed would be held to the same standards as other businesses, especially for actions that could be seen as preying on older people.

"Basic consumer law is that you give consumers clear and noticeable notification that a pledge is going to happen," she said. "It sounds in the case of just pure consumer law that this failed the test of people knowing what they're getting into."

Long term, WinRed's mandate to make a profit and catch up to its political opponents on the Democratic side in the online-fundraising game creates an incentive structure more permissive of cutting corners that goes 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 may hurt the platform 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."

Read the original article on Business Insider