'One of Us'?

03.28.12

The Fall of California Democratic Campaign Treasurer Kinde Durkee

How did Kinde Durkee, described by Rep. Loretta Sanchez as ‘one of us,’ go from managing the campaign funds of top Democrats in her state to charges of stealing $7 million from those accounts? Christine Pelisek reports.

California Democratic campaign treasurer Kinde Durkee may have been called the Bernie Madoff of campaign finance, but her clothes and lifestyle certainly didn’t match that description. Durkee, who is accused of defrauding 50 state and national politicians of $7 million over a decade, drove to work in an old pickup and met clients wearing muumuus and flip-flops. The Spanish-style house she shared with her husband in Long Beach’s Bixby Knolls looked weather-beaten and neglected. Her lawn was a mix of dirt and grass patches.

“Any of the TV images you see about conwomen, she is not one of them,” said Eric Bauman, chairman of the Los Angeles County Democratic Party. “She is not slick. She isn’t well-spoken. She isn’t running off to Paris. She wears Kmart clothing and lives in a beat-up old house in Long Beach.”

Prosecutors allege that Durkee, who received the Susan B. Anthony Award from the Democratic Women of the San Fernando Valley in 2007 for her dedication to women’s political causes, carried out one of the most extensive campaign-fraud schemes in the history of California.

On Tuesday, federal prosecutors charged Durkee, who was arrested in September and indicted on suspicion of mail fraud, with five more counts of mail fraud against her political clients—including Sen. Dianne Feinstein, Rep. Loretta Sanchez, Rep. Linda Sanchez, State Assemblyman Jose Solorio, and State Sen. Lou Correa—adding up to more than $7 million.

She is expected to plead guilty on Friday in U.S. District Court in Sacramento. Her attorney, Daniel Nixon, did not return a call and email seeking comment.

According to the new court filing, Durkee is accused of shifting money out of campaign accounts and moving large amounts of cash to her firm’s accounts to pay for office expenses, payroll, her mortgage, her mother’s nursing home care, and trips to the Long Beach Aquarium, among other things.

In one example, Durkee, who oversaw close to 700 bank accounts for almost 100 candidates, and more than 50 Democratic clubs in Los Angeles and Orange County alone, allegedly used money from Feinstein’s campaign to pay an American Express bill that included charges to Trader Joe’s, Union 76, Turner Outdoorsman, Disneyland, the Los Angeles Dodgers, and Amazon.

While embezzlers like Madoff used their ill-gotten gains to support lavish lifestyles, the allegations against Durkee can’t easily be explained. She was a respected player in Southern California Democratic political circles and an icon in the campaign-finance world, working on some of the most expensive campaigns in California history. As the former protégé of veteran campaign treasurer Jules Glazer, she helped manage the presidential-campaign finances of Jimmy Carter, the regional finances of John F. Kennedy and Robert F. Kennedy, and the gubernatorial campaigns of Gov. Pat Brown and his son Jerry.

“She was a very normal person. It was like there is the Kinde Durkee I met for lunch and the Kinde I read about in the paper, and it doesn’t match up at all.”

Once Glazer retired, she took over his business, and her Rolodex became a who’s who of California politics. The Sanchez sisters, Feinstein, Solorio, Rep. Susan Davis, state Sen. Ted Lieu, state Sen. Christine Kehoe, and State Board of Equalization Chairman Jerome Horton were among her notable clients.

In the early years, she was regarded as persnickety but a helpful ally who returned calls promptly. “She was one of us,” said Rep. Loretta Sanchez. “I would see her at Democratic gatherings, and she would come up to me and say, ‘I just met someone. He would be a good donor for you.’ She would walk me over and introduce us.”

She provided low-cost or free services to struggling nonprofits and committees, and to underdog candidates. She volunteered regularly at Democratic events and was known to lecture at new clubs and committees on the importance of following rules and regulations. On occasion she even taught a workshop called “Clubs/Political Action Committee Finances: How to Stay Out of Jail.”

“She came across as professional and low-key,” said Lieu, who hired Durkee for his state Senate campaign. “She was very calm. She wasn’t flashy. It is so odd to me based on how much she may have allegedly stolen. It doesn’t match with my vision of what she looks like or wears or drives. She was a very normal person. It was like there is the Kinde Durkee I met for lunch and the Kinde I read about in the paper, and it doesn’t match up at all.”

Those interviewed by The Daily Beast said Durkee’s work began to show signs of sloppiness in the last few years, but they chalked it up to a poorly trained staff, bad internal controls, and a lack of business sense. “Looking back now, I am not so sure she was a good business owner,” said Eleazar Elizondo, a Los Angeles-based Democratic campaign consultant who has known Durkee for more than a decade. “I don’t know when the debt exceeded the credit. She certainly had access to people who could have loaned her money.”

Frank Barbaro, chairman of the Orange County Democratic Party, said Durkee charged some clients 30 percent to 50 percent less than her competitors. “She had to have been in the hole every week when she was doing her payroll,” he said. “The thought was [that] she was undercutting people so much she was robbing Peter to pay Paul. If this was going on for a number of years, it could have easily happened.”

Although most of her clients seemed oblivious and attributed any mistakes to the cost of doing business, the Fair Political Practices Commission saw her sloppiness as a sign of potentially bigger issues. She became known among FPPC staffers as a “Frequent Flyer” after racking up $185,860 in fines in eight cases. Over the years, the FPPC performed more than 100 audits on Durkee’s accounts and saw numerous subtle signs that she was borrowing small amounts of money from clients’ campaign accounts, but it never could get the proof, said Grant Beauchamp, an FPPC program specialist.

“It was little things,” he said. “Something would occur and she would pay herself $1,000, and then she would put it back in and say it was a refund or overbill. We couldn’t demonstrate it was more than what she said it was. There was suspicion for a long time, but until recently no one was able to hit the right committee.”

Things began to spiral downward for Durkee in 2009, when Kehoe fired her after learning from a Franchise Tax Board auditor conducting a routine audit on a checking account for the Kehoe for state Senate 2008 committee that $57,166 appeared to have been embezzled. The auditor also said there were suspicious transactions, including the questionable movement of $100,000 in campaign funds.

Durkee put the blame on an employee named Elsa Martinez, who fled to Mexico after the alleged embezzlement. According to a letter Kehoe sent to the Los Angeles County District Attorney’s Office, Durkee didn’t report the allegations to her office or the cops and only admitted what she had done when the Franchise Tax Board auditor confronted her. Kehoe wrote that the money was returned to her account two years after the initial discovery. The case was referred to the Los Angeles County district attorney’s office, but charges were never filed.

It wasn’t until the FPPC’s Beauchamp initiated a random audit of Horton’s books that Durkee’s world apparently began to unravel. Beauchamp said he found a number of serious irregularities in Horton’s campaign as well as several others, including a number of federal committees. “I was quite shocked at the scope of the embezzlement,” he said.

The case was referred to the FBI in December 2010, and Durkee was arrested in September and charged with one count of mail fraud. At the time of her arrest, Durkee blamed everything on “personal and business tax problems.”

The federal probe into Durkee’s actions sowed panic in California’s Democratic circles, with many wondering whether they could be victims. Feinstein, who has used Durkee as a treasurer for her campaigns since 1992, was one of the first out of the gate to declare she was missing $5 million. Within days, she filed a lawsuit against Durkee and the First California Bank.

Immediately after the alleged embezzlement surfaced, the First California Bank froze about 400 bank accounts. On Sept. 23 it remitted approximately $2.5 million of the account balance funds controlled by Durkee to the Los Angeles Superior Court to sort through the mess. Most of her clients had no idea whether their money was missing; they gave Durkee sole signing power over their accounts.

In court filings last Monday, Durkee agreed to a forfeiture auction of her home in Long Beach. According to the filings, Durkee owes $671,000 on the house and $17,471 in state tax liens.

“This whole thing would have imploded on her,” said Beauchamp. “She needed more and more money to keep going.”

“I don’t believe anyone wakes up in the morning and decides to embezzle,” said Marilyn Grunwald, a member of the Democratic Women of the San Fernando Valley. “Clearly something went wrong with her life. I think we have to have a little bit of compassion. There is no doubt she has caused life to be very difficult for Democrats when we have to face the elections, but there is a human element there somewhere.”