Card fees carve out millions from political contributions

ByRonald J. Hansen, The Arizona Republic

— -- The explosive growth in online political contributions is helping to make this the most expensive presidential campaign in history.

But lost in the money pipeline is the cost of point-and-click donations.

An Arizona Republic analysis of campaign expense records shows that organizations that process credit-card transactions have collected more than $11 million in fees for handling Internet contributions and related services.

Candidates in both parties, including the three major candidates still in the race, have divided the processing fees among several organizations, with some turning to openly partisan sources to process the bulk of their donations, the analysis shows.

One company, which presumptive Republican nominee John McCain uses, did work for the 2004 Swift Boat attack effort on Democratic nominee John Kerry.

Processing fees are routine in all credit-card transactions, whether buying coffee at Starbucks or donating online to a charity. The fees are a safety and convenience expense usually hidden from consumers. But in the political realm, it means a portion of a contribution is gone before the candidate ever gets it.

"Every time you use a credit card, the (campaign loses) a little bit," said Julie Barko Germany, director of the Institute for Politics, Democracy & the Internet at George Washington University. "That's a large chunk of change, and it adds up."

However the overhead is seen as a worthwhile expense because research suggests online contributors typically give more than donors who write checks. And the personal information collected means campaigns are able to know more about their supporters than ever before.

Campaign officials for McCain and Democratic candidates Hillary Rodham Clinton and Barack Obama declined to discuss fees or companies associated with processing their online contributions or even how much of their contributions come in that way.

"We aren't going to get into our fundraising strategies," said Jeff Sadosky, a spokesman for the McCain campaign. He would say only that online contributions were "robust."

Politics plays part

Campaign expense reports show that McCain, the Arizona senator, has paid at least $686,000 for processing of online donations and related services. Most of that went to, part of the Donatelli Group, a conservative political support firm.

From January 2007 through March, McCain has raised more than $75 million.

Clinton raised nearly $176 million in the same period, and Obama raised nearly $235 million. Together, Clinton and Obama have paid more than $5 million to several companies to process online donations and perform other services. One of those companies is ActBlue, a political action committee that supports candidates in the Democratic Party. Obama has used the company far more than Clinton.

Federal campaign records don't require candidates to identify how contributions were raised, so it is unclear how much has been collected online vs. traditional methods. That also makes it difficult to gauge what percentage of donations went to processing fees.

Typical merchants, such as Starbucks, pay fees to credit-card companies that amount to a percentage of the purchase. The percentages routinely range from 1% to 4%, depending on the type of card a customer uses and the type of account a merchant has.

In 2006, American merchants paid $57 billion in fees to accept payment, according to Adam Levitin, a Georgetown University law professor.

On its website, says its standard fee is of 10% of the money it processes. That covers the bank fees and related charges from the credit companies themselves. ActBlue's processing company, Auburn Quad, charges 3.95%, said Marissa Doran, director of strategy for ActBlue. Of that, Auburn Quad keeps 1.5% of the donation.

Neither the campaigns nor the companies would talk about their arrangements or say whether they were paying the standard rate, getting a negotiated one or receiving donated services.

Doran said the flat fees streamline a complex process. Besides, processing checks can include bank fees or labor costs, too, she said.

"We have a lot of people who have said, 'We couldn't have processed this many $5 checks,'" she said. "We basically are able to save small campaigns from having to reinvent the wheel."

Swift Boat ties

To help process his online contributions, McCain returned to Rebecca Donatelli, who helped him during his unsuccessful 2000 White House bid.

She is chairman of, Campaign Solutions and Connell Donatelli Inc., all of which are closely aligned with Republicans and at least one conservative cause McCain once criticized.

Campaign finance records show that since January 2007, McCain's campaign has paid and Campaign Solutions about $938,000, most of it for processing fees.

Among Donatelli's clients was Swift Boat Veterans for Truth, the organization that suggested in 2004 that Kerry lied about his military record in Vietnam. CD Inc. — Connell Donatelli — is listed as the group's registrant, according to Network Solutions, a company that registers Internet domain names. It is unclear whether the companies did work beyond securing the Web address.

McCain, a former Vietnam prisoner of war, has condemned the Swift Boat campaign.

"I deplore this kind of politics," McCain said in 2004. "I think the ad is dishonest and dishonorable. As it is, none of these individuals served on the boat (Kerry) commanded. Many of his crew have testified to his courage under fire."

McCain's campaign would not discuss its use of the companies.

Matt Grossman, a political science professor at Michigan State University, said it is not surprising McCain would continue to use Donatelli's service.

"The Republican consulting world is a small world. People tend to use the same people," Grossman said. He compared the relationship to that between Obama, an advertising firm he hired and one of its employees who, on his own time, made an Internet ad endorsing Obama while denigrating Clinton.

On its website, notes that it has handled credit-card transactions for President Bush's 2004 campaign, McCain's 2000 campaign, the Republican National Committee and GOP organizations in at least six states. Campaign Solutions has worked for 14 senators, including McCain, and for 20 state Republican Party organizations.

Donatelli, who has been lauded for her political work and for her fundraising for non-profit organizations, referred questions to the campaign, which did not comment. She is married to Frank Donatelli, whom McCain named deputy chairman of the Republican National Committee last month, shortly after winning enough delegates to secure the nomination.

Two firms for Dems

Many of the Democratic candidates have relied on a pair of processing companies.

The Synetech Group Inc. of Charlottesville, Va., which several Democrats have used, has made finance software for years and offers consulting services. No employees of the firm have made any presidential or congressional contributions this election cycle, records show.

Since last year, it has collected more than $1 million from Clinton, Obama and former candidate John Edwards.

Auburn Quad is another leading processing choice for Democrats. The firm was created by the founders of ActBlue to provide the processing software for that website, Doran said. ActBlue is a clearinghouse and collects donations for thousands of Democratic candidates nationwide.

Edwards raised $4.3 million from ActBlue's website and paid $161,000 in fees to Auburn Quad. Obama has raised at least $278,000 through ActBlue directly and paid at least $45,610 to Auburn Quad.

CyberSource Corp. is the second largest recipient of the fees for Clinton, behind American Express. CyberSource of Mountain View, Calif., works with companies like Google and Home Depot and says it works with half the firms listed in the Dow Jones Industrial Average.

So far, it has collected $623,000 for processing credit-card donations for Clinton. None of the company's 17 listed executives had made discernible donations to any presidential campaign, according to the non-partisan Center for Responsive Politics.

Hometowns matter

Not all the candidates used companies with strong political ties to process their online donations.

Texas Rep. Ron Paul's bid for the Republican nomination has fallen far short at the ballot box but is widely regarded a model for online fundraising. He relied on TransFirst, a Dallas-based company whose employees appear to have made $13,000 in political contributions, almost all of it to Republicans.

The bulk of former candidate Mitt Romney's identifiable processing fees went to NOVA Information Systems, which was renamed Elavon this month. It is a division of U.S. Bancorp, the sixth largest bank in the nation.

Unlike the politically active figures managing most of McCain's online fundraising, Romney's partners seem uninvolved or mildly supportive of Democrats.

It appears NOVA officials did not make any significant political contributions this election cycle while officials with the parent company have divided $7,030 in political contributions among three presidential candidates, all of them Democrats.

Former candidate Fred Thompson relied on NOVA, a Tennessee-based company, and McCain has used it, too.

Processing fees already may be viewed as an unavoidable expense as basic to campaigning as phone bills and plane tickets.

"Your average online donor is an impulse buyer," said David All, a Washington, D.C.-based consultant who last year founded, which he hopes to be a Republican answer to ActBlue. So far, the site's donors have raised more than $5,000 for GOP presidential candidates.

In charging a 4.5% flat fee, All said he loses money on small donors, which is hopefully offset by the bigger ones. In any event, he sees the site as filling a critical void for the GOP.

"With online donors, the sooner you can seal the deal, the better," he said. "You're risking not sealing the deal if you can't donate online."

The Arizona Republic and USA TODAY are both owned by Gannett.

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