Feinstein sues treasurer, bank over campaign fraud

AP News
Posted: Sep 23, 2011 5:48 PM
Feinstein sues treasurer, bank over campaign fraud

Sen. Dianne Feinstein's campaign filed a lawsuit Friday against a bank that handled accounts for a prominent Democratic campaign treasurer accused of looting millions of dollars from the war chests of local, state and federal politicians.

The lawsuit, filed in Los Angeles Superior Court, names First California Bank, treasurer Kinde Durkee, Durkee's firm and two business associates, including her husband, who is a partner in her business. The filing comes two days after state financial regulators launched an investigation into how the bank managed the dozens of accounts Durkee maintained at First California, based near Los Angeles in Westlake Village.

"A fraud of the scale alleged herein could not have occurred, and did not occur, without the knowing involvement of First California Bank," the lawsuit reads. "In exchange for fees and profits, First California Bank intentionally ignored dozens of red flags, ignored its duties and obligations under state and federal law and allowed Durkee to perpetuate the scheme."

The bank's chief marketing officer, Diane Dickerson, said the company had not been served with the lawsuit and could not comment. Durkee's attorney, Daniel Nixon, also did not return a call.

The longtime treasurer, who controlled more than 400 accounts, was charged earlier this month with mail fraud by federal prosecutors who alleged she siphoned nearly $700,000 from a state candidate's campaign to pay her credit cards, a mortgage, business bills and her mother's care at an assisted-living facility. She then shifted funds from other candidates' accounts in an elaborate shell game to cover up the wrongdoing, prosecutors allege.

She admitted to authorities that she had been misappropriating her clients' money for years, according to the criminal complaint.

The scope of the scandal remains unclear even weeks after Durkee's arrest, but Feinstein estimates in the court papers filed Friday that she lost "millions of dollars" from at least two campaign committees, Feinstein for Senate and Fund for the Majority.

The complaint spells out several examples of alleged wrongdoing, including two instances of illicit transfers from Feinstein's campaign accounts this summer.

In the first, Durkee transferred $80,000 from one of the senator's accounts in two transactions and then re-deposited the same amount in the account three weeks later, the lawsuit alleges.

In the second, she took $100,000 from another Feinstein account and re-deposited it the same day, the court papers allege.

She has not been able to determine her exact losses because First California has refused to give her access to her accounts without a letter absolving the bank of any responsibility _ which Feinstein won't sign, said Bill Carrick, her lead strategist.

The bank announced last week that it was seeking to have a judge sort out who owns the money in dozens of hopelessly co-mingled Durkee-controlled accounts _ essentially putting a freeze on the money.

"I think our point of view is we want a full accounting of all these bank accounts so we know what happened and then we want to be reimbursed for everything that was wrongfully taken," Carrick said. "All of this happened inside that bank so they had full knowledge .... of this whole scheme."

The growing implications of Durkee's arrest have put the spotlight on an insular political culture that allowed one person to hold the purse strings for a clientele that left no levels of the party unscathed, from local mayoral candidates and small Democratic clubs to state politicians to federal lawmakers such as Feinstein.

Dozens of small Democratic clubs and medium-sized political action committees also may have been wiped out.

Durkee got most of her clients through word-of-mouth within the party. Smaller clubs were often steered toward her independent firm, Durkee & Associates, by local party bosses because she offered grass-roots groups her services at free or dramatically reduced rates.

She has been released on bond and is scheduled to make a court appearance Oct. 19 in Sacramento.

More charges are possible, authorities have said.