Durkee provided accounting services without a license, state investigation concludes

A state investigation has concluded that campaign treasurer Kinde Durkee provided clients with accounting services without a license, officials said Monday. But they have had trouble finding a prosecutor without ties to the ubiquitous political aide.

Durkee is already facing a federal charge of mail fraud that includes allegations of mishandling campaign funds from a state lawmaker’s account. A separate investigation by the state Board of Accountancy now has determined that she lacked a license, which board spokeswoman Lauren Hersh said would be a misdemeanor that could result in up to six months in jail and $1,000 in fines.

The state filed its report with the Burbank city attorney’s office for possible prosecution, because Durkee’s office is in that city. But the agency turned down the request, citing a potential conflict of interest.

Durkee was the campaign treasurer for a Burbank City Council member who took part in the appointment of the city attorney and will be involved in future evaluations of her work.

“Therefore, there is a potential conflict of interest and an appearance of impropriety which prevents our office from prosecuting this case,” Burbank Assistant City Atty. Denny Wei wrote in a letter to the state board.

The board subsequently sent its investigative report to the office of Los Angeles County Dist. Atty. Steve Cooley, but he too has had ties to Durkee. She worked on his political officeholder account from December 2000 through June 2001. She also was treasurer for two members of the Board of Supervisors, who vote on Cooley’s budget.

Cooley spokeswoman Jane Robison said the D.A.’s ability to take the case is under review.

Former prosecutor Steve Meister, now a Los Angeles defense attorney, said he would be surprised if the district attorney’s office acted.

“Because she [Durkee] is facing serious federal charges in a case that is already underway, my guess is the D.A. will pass on filing a misdemeanor,” Meister said.

The next stop for the state board’s case could be California Atty. Gen. Kamala Harris, but Durkee was the campaign treasurer for one of Harris’ opponents in last year’s race for the office, state Sen. Ted Lieu (D-Torrance). Shum Preston, a spokesman for Harris, declined to comment on the matter Monday.

Private attorney Diane Karpman, who advises law firms on legal ethics issues, said Durkee’s political connections are a potential minefield for many elected prosecutors.

“It raises questions in the minds of the public: Are they going to give her a good deal?” said Karpman, whose practice is in Beverly Hills.

Because Cooley’s financial relationship with Durkee is more than a decade old, he could argue he does not have a conflict of interest, Karpman said, even if he opted out.

Karpman sees no argument for Harris to recuse herself, because she had no direct relationship with Durkee and the election is settled.

Durkee was in charge of more than 360 bank accounts for almost 100 candidates, including U.S. Sen. Dianne Feinstein (D-Calif.) and state Sen. Lou Correa (D-Santa Ana), according to court records. Even though the state allegation may be overshadowed by the federal case, Hersh said, the board is serious about holding people accountable.

“It sends a message to other people who think that they can hang out a shingle and just do whatever and get away with it,” Hersh said.

Papers filed by federal prosecutors allege Durkee used funds taken from her clients’ accounts to pay off credit card bills for trips to Disneyland and the Long Beach Aquarium, as well as for her business expenses and personal mortgage payments.

Some candidates, including Feinstein, believe they have lost hundreds of thousands of dollars, hindering campaigns being launched for the 2012 elections.

Further complicating matters, banks have frozen accounts in response to the federal probe. Two of Feinstein’s committees have sued their bank and Durkee for fraud and breach of contract.

Durkee’s attorney, Daniel V. Nixon, did not return a phone call or respond to an email seeking comment on the accountancy board case.

patrick.mcgreevy@latimes.com