More than $5.2 million is missing from the campaign coffers of California Democrats on the Hill, and hundreds of thousands more are unavailable for withdrawal in the wake of an alleged embezzlement scandal that has rocked the Democratic Party in the Golden State and all but wiped out hundreds of bank accounts associated with state, House and Senate campaigns.
Those hardest-hit by what is now the largest campaign-embezzlement scandal to date are Sen. Dianne Feinstein (D-Calif.), whose re-election campaign reported a cash-on-hand adjustment of more than $4.5 million due to misappropriated funds; Rep. Susan Davis (D-Calif.), whose campaign adjusted its cash-on-hand figure by $160,015 to account for allegedly embezzled funds; and Reps. Linda Sánchez (D-Calif.) and her sister Loretta Sanchez (D-Calif.), whose campaigns reported missing about $322,123 and $125,000, respectively.
The losses — which typically are appearing as adjustments to cash-on-hand figures during the most recent batch of campaign finance filings submitted to the Federal Election Commission — are likely to grow as campaigns continue to identify suspicious transactions that allegedly allowed a trusted bookkeeper to misappropriate millions of dollars from nearly 400 client accounts.
Kinde S. Durkee, 58, was arrested in early September on suspicion that she used her bookkeeping firm Durkee & Associates to siphon about $677,000 from the election campaign of California Assemblyman Jose Solorio to pay for an array of personal expenses that included clothing, cosmetics, her cable bill and an assisted-living facility for her mother. Since that time, the scope of the probe into the funds misused by the Burbank, Calif.-based firm has widened, implicating hundreds of accounts maintained by lawmakers’ re-election campaigns, nonprofits and county-based political party organizations.
Accounts maintained by Feinstein’s re-election committee were wiped clean in the scam. Although the Feinstein for Senate campaign reported having roughly $5 million in the bank at the end of June, it discovered that more than $4.5 million was missing after Durkee’s arrest. An additional unauthorized disbursement thought to be made by Durkee on Aug. 31 brings the campaign’s total exposure to $4,658,413.
Longtime Feinstein campaign spokesman Bill Carrick said the $662,100 that remained in the campaign’s war chest was unavailable for withdrawal because First California Bank, where Durkee maintained 398 accounts, has frozen the assets that remain in Durkee-associated accounts and asked a Los Angeles judge to figure out whom the remaining funds belong to. The bank has also refused to turn over banking records unless clients sign a waiver that absolves it of responsibility, which the Feinstein for Senate campaign has declined to do, Carrick said.
Feinstein loaned her re-election campaign $5 million at the end of September in order to replenish its diminished funds. At that time, her campaign sued Durkee, her business associates and First California Bank. Carrick says documents obtained from the litigation could shed light on how Durkee took money from the campaign.
“We’re anxious to get into discovery and get ahold of the bank records and be able to track all of the transfers that were in and out of the Feinstein for Senate account,” Carrick said.
First California Bank has likewise frozen the assets of the Committee to Re-Elect Loretta Sanchez, which had $38,238 remaining in a Durkee-controlled account as of Sept. 21 and reported $596,850 in cash on hand at the end of September; the Committee to Re-Elect Linda Sanchez, which had about $4,500 remaining in Durkee-controlled accounts and $143,846 remaining in its coffers; and the Susan Davis for Congress campaign, which confirmed that $6,918 in frozen assets is included in the $351,871 it reported having at the end of September.
Other campaigns acknowledged that cash-on-hand figures could be amended as they continue to investigate the matter.
“The Committee has been in the process of obtaining all available records in order to determine the extent of the embezzlement, but has not had sufficient time to perform a full reconciliation. Thus the Committee’s report presumably contains a cash on hand figure that is not accurate,” a note submitted by the Committee to Re-Elect Loretta Sanchez read.
Accounts associated with the re-election effort of Rep. Laura Richardson (D-Calif.) also have about $17,775 in assets frozen in First California accounts. The Richardson for Congress campaign reported $116,706 in cash on hand and $460,011 in debts at the end of September. The campaign’s most recent FEC filing did not reflect any adjustments due to the Durkee embezzlement, but an attached statement noted that it had not yet finished its financial review.
“Prior to September 13, Richardson for Congress was a client of Kinde Durkee of Durkee & Associates. We will continue to review all FEC filings and bank statements and will amend prior reports if necessary,” the notation said.
Attorneys told Roll Call that they would not be surprised if other campaigns opt to file civil lawsuits against Durkee while the Justice Department conducts its probe.
“There’s a race-to-courthouse element to this. If you want priority, you want to file your claim as soon as you can,” said Joseph Birkenstock of the law firm Caplin & Drysdale.
According to court documents filed by First California, the nearly 400 accounts managed by Durkee at the bank had about $2.5 million on hand at the time the assets were frozen, which is not enough even to cover the losses of Feinstein alone.
Durkee was released on a $200,000 bond Sept. 9 and is next scheduled to appear in court in December.
Following the speeches from elected officials, the crowd stands at long tables as they dig into BBQ, brunswick stew, cadillac rice at the Law Enforcement Cookout at Wayne Dasher's pond house in Glennville, Ga., on Thursday, April 17, 2014.