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Illustration: Shoshana Gordon/Axios

A little-noticed line in a recent criminal filing suggests federal prosecutors consider a popular political fundraising tactic to be legally questionable.

Why it matters: Fundraisers often boast of "5x" or other contribution matches to coax small-dollar donations. The Justice Department indicated in a court filing Monday this could amount to "material misrepresentations" if, as critics often contend, there's no evidence the match ever occurs.

  • The tactic has become more prominent in recent years.
  • Both parties have used it. Donald Trump's re-election campaign and its allies at the Republican National Committee exploited it to extreme degrees last year — promising up to 900% matches. The Democratic Congressional Campaign Committee has also been a frequent fan of the tactic.
  • A campaign that enlisted donors to put up five times the funds raised through one such matching offer would almost certainly be inducing those donors to exceed the federal limits on their own campaign contributions.

What's happening: DOJ's comment was just a brief aside in a Statement of Offense. It accompanied a guilty plea Monday by the operator of a number of groups that raked in small-dollar donations last year with fraudulent fundraising appeals.

  • One of the groups, Keep America Great Committee, sent fundraising emails that "contained material misrepresentations including promising '5x' matching of any donation to KAGC," DOJ wrote.
  • In a news release on the guilty plea, DOJ emphasized the fraudulent matching offers. "The solicitations promised that individual donations would be “5x matched' by (defendant James) Bell’s PACs... However, none of the individual donations was ever '5x matched' by Bell or anyone else."

What they're saying: Political compliance attorney Brett Kappel called DOJ's comments about KAGC's fundraising practices "very significant."

  • "This prosecution puts fundraisers on notice that the continued use of this very popular fundraising pitch will be treated as a possible violation of the mail and wire fraud statutes," Kappel wrote.

The big picture: The KAGC case caught DOJ's eye due to widespread fraud in virtually every aspect of the group's operations.

  • The scrutiny of its donation-matching claims specifically, though, suggests DOJ considers such offers problematic when donations are not actually being matched.
  • All indications suggest little-to-no such matching actually takes place, even among legitimate political groups.

Between the lines: Grassroots fundraising has surged for both parties, and the incentives to woo small-dollar donors are more intense than ever.

  • "In many cases, email fundraisers are reaching a point of diminishing returns and are given very high goals to hit. They're doing anything and everything to reach and beat them," said Patrick O'Keefe, director of customer success at the payment processing firm Andeot.
  • O'Keefe, the former executive director of the Maryland Republican Party, said tactics can include "fake matches and sketchy pre-checked recurring asks."
  • He was referring to recent scrutiny of the Trump campaign and others over efforts to subtly enlist small-dollar donors into giving multiple recurring contributions.

Editor's note: This story has been updated to include information from a DOJ news release.

Go deeper

Jul 31, 2021 - Politics & Policy

DOJ: Russians hacked federal prosecutors

Photo: Stefani Reynolds/Bloomberg via Getty Images

The Russian hackers behind the massive SolarWinds cyber-espionage campaign broke into the email accounts of some of the most prominent federal prosecutors' offices around the country last year, the Justice Department announced.

State of play: DOJ said 80% of Microsoft email accounts used by employees in the four U.S. attorney offices in New York were breached.

Austria set to make COVID vaccines mandatory for adults

A vaccination center installed at the Barbara Chapel of St Stephen's Cathedral in Vienna, Austria. Photo: Alex Halada/AFP via Getty Images

Austria's lower house of parliament voted on Thursday in favor of making COVID-19 vaccinations compulsory for most adults from next month.

Why it matters: The bill is expected to soon pass the upper house and be signed by President Alexander Van der Bellen in order for the law to take effect Feb. 1, per Reuters. It'd make Austria the first EU nation to impose such a sweeping mandate.

Hope King, author of Closer
Updated 2 hours ago - Economy & Business

Peloton pumps its brakes

Data: FactSet; Chart: Axios Visuals

Peloton’s popularity is falling as swiftly as it shot up.

Why it matters: Not all pandemic habits stick around. Peloton's trajectory over the past two years exemplifies how challenging it's been for companies to gauge shifts in consumer demand — particularly in sectors heavily altered by the pandemic.