Many big-name Democratic politicians used the services of a top campaign treasurer even though she had a history of fines and investigation into how she used the funds of elected officials.
Kinde Durkee was arrested on federal fraud charges this month, accused of taking thousands of dollars from the campaigns of various elected officials. Rep. Loretta Sanchez (D-Garden Grove), a Durkee client, said her campaign fund was nearly cleaned out, and the Los Angeles County Democratic Party reported that more than $200,000 had been taken from its fund.
Although many Democratic insiders said they were shocked by Durkee's arrest, it was far from the first sign of trouble. When the FBI launched its investigation into Durkee in January, the Los Angeles County district attorney's office and the state Fair Political Practices Commission were already probing Durkee's use of campaign funds.
Over the last decade Durkee had racked up $185,860 in fines from the Fair Political Practices Commission in eight different cases, a sum that FPPC Chairwoman Ann Ravel said points to "quite serious" issues.
There are only a few other campaign treasurers in California who, like Durkee, deal with a large number of clients. None have such an extensive history of violations, Ravel said.
"This is an anomaly — I don't believe that we have seen a case of this magnitude," she said.
One longtime client, state Sen. Christine Kehoe (D-San Diego), fired Durkee in 2009 and notified the district attorney's office after an audit of her campaign fund by the state Franchise Tax Board turned up "irregular activities." Kehoe's office declined to elaborate to The Times about her concerns.
Federal agents arrested Durkee on Sept. 2 at the Burbank office of her firm, Durkee & Associates, on suspicion of federal mail fraud. The complaint against her alleges that she took more than $677,000 in 2010 from the campaign account of Assemblyman Jose Solorio (D-Santa Ana) and covered up by filing false campaign reports.
According to an affidavit filed with the complaint, Durkee "admitted that she had been misappropriating her clients' money for years." It was unclear how many are potential victims.
Elections records showed she has worked for hundreds of campaign committees, and the criminal complaint said she had signing authority over more than 400 bank accounts.
Durkee's husband and attorney both declined to comment on the allegations at a court hearing Friday, at which Durkee was ordered to be released on a $200,000 bond.
A week after Durkee's arrest, many politicians were scrambling to gather bank records and poring over their campaign books to determine whether anything had been pilfered.
Some clients said they had not known there were any questions about Durkee's activities until her arrest. Others said they knew about Durkee's previous issues with the FPPC and the district attorney's investigation but didn't see them as red flags.
"I was aware of some of it," said state Sen. Lou Correa (D-Santa Ana), who said the FBI had informed him that Durkee might have embezzled hundreds of thousands of dollars from his campaign fund. "The D.A. looks into it, the FPPC looks into it, and it would appear that most of the stuff was fixed — if there was anything wrong, it got fixed."
The FPPC called in the FBI to look into Durkee after an investigation of its own that grew out of a routine audit of state Board of Equalization candidate Jerome Horton's campaign fund.
The audit brought up a number of issues. Horton and Durkee were fined $13,000 in April for failing to refund contributions from his 2006 campaign and failing to properly identify the sender of mass mailers.
The review also led to separate questions about Durkee's handling of funds, Ravel said. FPPC investigators began looking at Durkee's other accounts and noticed unusual patterns. Balances would fluctuate wildly for no apparent reason. Because she had clients who were federal candidates, the FPPC referred the case to the FBI.
The L.A. County district attorney's office opened separate investigations into Durkee's activities in 2008 and 2009. The Times reported in 2008 that investigators had served a search warrant on Durkee's office as part of an investigation involving a committee for which she served as treasurer. That case was closed this May when investigators were unable to find sufficient evidence to prove a crime.
The second investigation centered on potential embezzlement by Durkee from her clients, said Deputy District Atty. Max Huntsman. Earlier this year, prosecutors turned over information from that case to the FBI.
Durkee is scheduled to appear in court in Sacramento on Oct. 19. In the meantime, she was released from custody on the condition that she have no access to Durkee & Associates or client bank accounts and have no contact with employees of the firm, except for her husband and other relatives who work there.
The U.S. attorney's office is preparing to file a motion to place a lien on the business and Durkee's house.