Kinde Durkee, who was arrested last month and charged with mail fraud, is… (Henry Vandermeir / Associated…)
The state Fair Political Practices Commission on Thursday weighed whether political committees that lost millions of dollars in what the chairwoman called "the greatest campaign treasurer fraud in the history of the country" should be allowed to ask donors to replace their lost contributions.
Three of the five commissioners traveled to Los Angeles to hear from some of the scores of mostly Democratic politicians and organizations in the region who used Burbank-based campaign treasurer Kinde Durkee. Durkee was arrested last month and charged with mail fraud. She is under federal investigation for allegedly embezzling millions of dollars from her clients.
No politicians spoke, but several lawyers representing them did, suggesting that the commission allow them to return to donors whose money has vanished or is tied up in legal proceedings. Donors are limited in how much they can contribute to candidates. For example, state law allows an individual to give $3,900 to a legislative candidate for each election.
But Robert Stern, president of the Los Angeles-based Center for Governmental Studies, warned against letting donors contribute more than the limits. "They got what they wanted. They got access to the public official," he said. "Access is really important, and that's why they're giving this campaign money. If you let them give again, you double their access."
Stern said, however, that an exception might be justified if Durkee received contributions intended for candidates but failed to report them to the candidates.
Stephen Kaufman, a lawyer who represents half a dozen of Durkee's former clients, pressed the commission to devise a "narrowly tailored" approach to allow committees to replace donations. He said his examination of bank records indicated that some large contributions never made it to the candidates.
"I think that we have only begun to uncover the criminal activity that's at play here," he said. "I have to say it's shocking to look at those bank records and to see what went on with those accounts."
The commission's staff will hold a public meeting Oct. 20 to discuss whether it should require training for campaign treasurers and post enforcement actions against them on its website.
Dan Jacobson, who is the board chairman of the Democratic Foundation of Orange County and described himself as "not a political lawyer, just a simple suburban lawyer," suggested that the donors did not "make" the donations under the definition that he found in a dictionary his brother got for his bar mitzvah. That dictionary, he said, says the word means "to bring into being."
Since the donors didn't bring them into being, he said, the commission should find a way to allow donors to give again. "I think a formula has to be created that probably won't be perfect, but it will be better than where we are now," he said.
Ann M. Ravel, the chairwoman, said that the agency's legal staff is still analyzing the issue but that it is unclear whether the commission can authorize replacement donations or whether the Legislature would have to change the law. She said she hopes to hold a vote on the issue in November. "We need to at least have some certainty for them so they can move forward however they're going to move forward," she said.
Ravel, a Democrat, said barring candidates from seeking replacement donations would handicap them. "It creates an imbalance in the election, which I think that we've got to think about," she said.
But Ronald D. Rotunda, a Republican commissioner, was skeptical. He suggested that the candidates may bear responsibility for not keeping track of their campaign finances and expressed concern about what would happen if candidates eventually got some of their money back. "Oh, what a tangled web we weave when we try to change the law for a particular case," he said.
Dennis White, who has taken over as treasurer of the Riverside County Democratic Central Committee, drove two hours to the hearing to relay his worries about how he will file required paperwork since he has no access to the account information held for the committee by Durkee's firm. "They had full control over our banking," he said. "We didn't even know what our checking account number was."
He said Durkee charged low rates to handle the complex paperwork: just $25 a month for Democratic clubs and $250 for his committee. "It's totally baffling. She had a good reputation," he said, expressing dismay at what happened. "This is nothing more than a Ponzi scheme."
Now he has the responsibility for filing accurate reports. "We're never going to let somebody else take that bank account," he said. "I have to become the expert."
The Riverside County Democrats thought they had $10,300, but bank records show $4,500, and that money is now tied up in a legal proceeding in Los Angeles County Superior Court. "If we ever see that money again, we'll be really lucky, and if we do, it'll be cents on the dollar," White said.
After he addressed the commissioners, White huddled with an agency official who he said advised him to start over with a new committee and a new name. "We'll have to be the Riverside County Democratic Central Committee dash A or something," he said.