Calif. Dems seek options after embezzlement scheme

AP News
Posted: Sep 30, 2011 3:44 AM
Calif. Dems seek options after embezzlement scheme

Democratic candidates will go before California's political watchdog agency Friday seeking a reprieve from some of the state's campaign finance laws as they struggle to restore hundreds of thousands of dollars that may have been lost in an embezzlement scheme by their former campaign treasurer.

The Fair Political Practices Commission will hear from candidates and campaign officials during a hearing in Sacramento to consider options in the wake of the scandal involving longtime Democratic treasurer Kinde Durkee.

Federal prosecutors charged Durkee earlier this month with mail fraud and said she siphoned $700,000 from the campaign account of state Assemblyman Jose Solorio to pay her credit cards, a mortgage, business bills and her mother's care at an assisted-living facility. She then shifted money from other candidates' accounts to cover up the wrongdoing, prosecutors allege.

Durkee controlled as many as 400 accounts, including some for nonprofits. A criminal complaint says she admitted to misappropriating her clients' money for years.

The embezzlement case comes as many candidates head into difficult campaigns in an unpredictable election year.

Candidates for state and congressional offices face newly redrawn political maps that could lead to tougher contests for many incumbents and possibly more competitive seats. For the first time, the district lines were drawn by an independent citizens group rather than the state Legislature.

Also for the first time, candidates will compete under California's new top-two primary system, in which the two highest vote-getters will proceed to the November 2012 election, even if they are from the same party.

The changes mean many candidates, even long-time incumbents, could face serious challenges in the primary and general election. Such races will require sizable campaign war chests.

With their bank accounts depleted or frozen, many are hoping the commission will waive contribution caps or allow them to set up legal defense committees to take contributions from donors who already have given the maximum contribution allowable by law.

Those are among the options being considered Friday, yet it's unclear whether the commission can act on its own or whether it would require approval from the state Legislature and Gov. Jerry Brown, spokeswoman Tara Stack said. Lawmakers are not scheduled to return to Sacramento until January, six months before the primary.

Dozens of Democratic clubs and political action committees also may have been wiped out, but some are not subject to regulation by the commission. Those clubs and committees work behind the scenes, registering voters and conducting grass-roots organizing, and most will be unable to recover quickly from a major hit to their finances.

Investigators are trying to sort out who lost how much after entrusting their funds to Durkee & Associates. Her Burbank firm often came recommended through word-of-mouth by fellow Democrats.

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Many candidates do not even know how much money they have remaining and cannot spend any of it, since the bank that holds the candidates' campaign accounts, California First, will not release detailed information unless the campaigns sign releases freeing the bank from legal liability. Most are unwilling to do so.

U.S. Sen. Dianne Feinstein, whose campaign estimates she may be out $5 million, is suing the bank for lack of oversight. Feinstein, who is independently wealthy, has pledged to repay the money herself, an option most candidates do not have.

Feinstein is one of several members of Congress whose campaign accounts are in limbo. Reps. Susan Davis and Loretta Sanchez also said they believe hundreds of thousands of dollars are missing.

Federal candidates are subject to different campaign finance laws than candidates for state office. They even could face sanctions from the Federal Election Commission, whose regulations require someone other than the person who signs the campaign committee's checks to review bank statements each month for unauthorized transactions.

Durkee is scheduled to appear in federal court in Sacramento on Oct. 19.