Fraud case leaves California Democrats scrambling

Stunning accusations that a top California Democratic campaign treasurer looted the war chests of her big-name clients have left candidates across the state scrambling to raise more money as election season looms.

Kinde Durkee, who controlled the funds of roughly 400 candidates and groups, ranging from Senator Dianne Feinstein to local Democratic youth clubs, was arrested in September and charged with fraud.

While the extent of the losses isn't yet clear, the coffers of dozens of Democratic politicians have been frozen, prompting the crippled campaigns to ask the California Fair Political Practices Commission to permit further donations from contributors who have already given the maximum.

Feinstein, seeking re-election in 2012, has been forced to start from square one to raise campaign money, said Bill Carrick, political strategist and consultant to the Senator.

But a commission official said it wasn't that simple.

It's quite clear that we can't just say 'the contribution limit is set aside', California Fair Political Practices Commission chair Ann Ravel said, adding that the commission's legal team was researching what options were permissible by law.

Feinstein donated $5 million of her own money to her re-election bid after the campaign lost access to an estimated $5.2 million, Carrick said. The senator has sued Durkee for fraud and breach of contract in a lawsuit that also accused First California Bank of aiding that fraud.

Durkee, the 58-year-old daughter of a Hollywood pastor, is accused of co-mingling money in the roughly 400 accounts she controlled at the bank, making it unclear to whom any recovered money actually belongs.

The bank reported $2.5 million in Durkee-controlled accounts, according to court documents, far less than the at least $9.8 million that her clients had raised, according to the Los Angeles County Democratic Party.

We lost at least $200,000 and the impact of that, for us, is much more immediate than it is for most candidates, Los Angeles County Democratic Party Chair Eric Bauman said.

We've got more than 50 races on the November 11 ballot. Our ability to support our endorsed candidates in these local elections is significantly affected, Bauman said, adding that the loss represents 90 percent of the party's total funds.

'GOING TO BE TOUGH'

If a donor's campaign contributions were never received, Ravel said, there is a possibility that they could donate again. The commission hopes to decide if and how donors could contribute again by its next hearing on November 10.

That deadline, however, would be too late for local elections slated for the following day, and the sudden loss of funds will be most acutely felt in grass-roots operations.

It's definitely going to be tough, Carrick said. It's going to be very difficult for them to replenish that kind of money.

Not everybody is as sympathetic to the sudden fund-raising challenges facing the California Democratic campaigns.

Most of these Democrats are very influential, powerful incumbents, and the political parties are able to contribute as much as they want to the candidates, said Allan Hoffenblum, a former Republican political consultant.

I don't think any client of (Durkee's) will lose because of this. There's plenty of money out there, he said

Durkee, who has been called the Bernie Madoff of campaign finance treasurers by one former client, Representative Susan Davis of San Diego, admitted to using campaign funds for her own personal expenses, according to court documents.

The mail fraud case against her in federal court alleges that Durkee used campaign donations to make mortgage payments and pay her American Express bills.

Durkee admitted that she had been misappropriating her clients' money for years and that forms she filed with the state were false, according to an account of an interview by Federal Bureau of Investigations agents in September, according to the federal complaint.

The bank angered clients when it handed over control of the 398 bank accounts associated with Durkee to a California state court on September 23, recusing itself from sorting out how much of the recovered money should be doled out to whom.

In yet another attempt to escape liability for the fiasco that they helped create, First California Bank has turned most of the accounts that Durkee controlled over to the courts, the Los Angeles County Democratic Party said.

It added that smaller parties who lost funds lack the financial resources to fight in court to get their money back.

First California Bank marketing director Diane Dickerson told Reuters: It will all come out in time, I promise. She declined further comment.

Durkee is next expected to appear in court in December. Her attorney could not be reached for comment and a phone number listed in court documents as belonging to her appeared to have been disconnected.