Democratic Campaign Treasurer Arrested

Story first appeared in the Wall Street Journal.
Accusations that a campaign treasurer stole more than $1 million from Democratic candidates across California have jolted the party on the eve of the 2012 campaign season.
The reach of an alleged fraud scheme widened as more California Democrats, including Sen. Dianne Feinstein, said their war chests had been raided by a prominent campaign treasurer.
Kinde Durkee was arrested Sept. 2 and accused by federal authorities of stealing campaign funds and using the money to pay for an array of personal expenses, including mortgage payments, cosmetics and nursing-home care for her mother. Based in Burbank, Calif., the 58-year-old had long managed money for scores of Democratic campaigns.
According to the federal criminal complaint, Ms. Durkee "misappropriated money from her clients' bank accounts and filed false disclosure reports to hide the misappropriations." Ms. Durkee "admitted that she had been misappropriating her clients' money for years," according to court documents.
Her lawyer didn't immediately respond to requests for comment.
The complaint against Ms. Durkee focused solely on her alleged misappropriation of more than $600,000 from the campaign accounts of state Assemblyman Jose Solorio's campaign accounts. But prosecutors said the case is set to widen as evidence surfaces that more politicians were alleged victims and millions of dollars in campaign donations may be missing.
Ms. Durkee's most prominent alleged victim so far appears to be Sen. Dianne Feinstein, who has used her services for nearly 20 years. A spokesman for Sen. Feinstein said they believed money was missing from campaign funds but it was unclear how much.
It could take years of forensic accounting to sort out the funds. Money from state and federal campaigns that are subject to different rules have been commingled, according to the federal complaint. Campaigns have unwittingly been spending money from other campaigns and their donors, according to people familiar with the matter.
While some California political figures expressed shock at the allegations against Ms. Durkee, there are growing indications that there were potentially serious problems in her operation for years.
Stephen Kaufman, a campaign attorney who worked for clients of Ms. Durkee's said there definitely had been red flags that have gone off in the last few years. Mr. Kaufman said he was working with a number of clients to find out the status of the bank accounts that Ms. Durkee had controlled.
Ms. Durkee was cited for financial reporting misdeeds 11 times by the state agency that oversees campaign finances, starting in 2002. The fines totaled $190,000.
Compared to other campaign treasurers, the number of citations stood at an extreme level, said Ann Ravel, chairwoman of the Fair Political Practices Commission, the state oversight agency. Ms. Durkee was the subject of quite a few major violations.
One of the investigations found unusual fluctuations in the campaign accounts of a statewide regulatory board candidate. Investigators noticed similar irregularities in the accounts of other clients of Ms. Durkee, including one official for a federal office, prompting the state agency to contact the Federal Bureau of Investigation, Ms. Ravel said.
The impact on the Democratic Party in the state was unclear Tuesday, but party officials said any lost funds could hamper their efforts to run effective campaigns in a tough election season.
Garry South, a longtime political consultant for Democrats in California said this appears to be political fraud and theft on a scale he has never seen in 40 years in politics. He added that it looks like she might have removed millions of dollars from Democratic campaign coffers of 2012 and it might not be easy to replace.
Sukhee Kang, the mayor of Irvine, who is running for the U.S. House of Representatives next year, said iIt is really a broken trust. Mr. Kang believes that more than $45,000 is missing from his campaign funds. He said he checked one campaign bank account earlier this week and instead of finding an expected $22,000 there, it contained $718.
U.S. Rep. Susan Davis wrote in a letter to her supporters, saying more than $250,000 was stolen from her campaign, and that Ms. Durkee, her treasurer, had been arrested.
Eric Bauman, the chair of the Democratic Party of Los Angeles, said Ms. Durkee managed the group's funds for at least 12 years, and had full control of its four bank accounts. He said he believes the fund is missing more than $200,000—most of the cash the group should have on hand.
Campaign treasurers function as a candidate's banker and accountant—keeping track of all the incoming and outgoing funds and following federal guidelines for financial reporting. The treasurer typically has full control of candidates' political accounts.
Ms. Durkee was a trusted political operative within the Democratic Party in California, with roots in campaigns stretching back decades. She got her start in campaign finance in the 1970s on the George McGovern campaign, as a protégé of veteran campaign treasurer Jules Glazer. Ms. Durkee built up her client base through word of mouth. It helped that there are only a handful of campaign treasurers in the state, political insiders said.
People who met Ms. Durkee and visited her offices say she gave no outward sign of lavish spending. She was never dressed expensively, said a Democratic consultant who knew her for years.
Her offices in Burbank, Calif., were nondescript. During campaigns, visitors saw staffers processing donation checks on tables. Several of Ms. Durkee's family members worked at her firm, according to firm records and court testimony.
Wylie Aitken, a prominent trial lawyer and major Democratic donor in Orange County, said Ms. Durkee had been recommended to him as probably the premier person to look after you so you didn't break campaign rules.