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Oct. 10 (Bloomberg) -- To neighborhood kids, the cream- colored stucco house near Hughes Middle School was known as the site of an annual Halloween party. To neighbors in Long Beach, California, kinde Durkee’s two-bedroom ranch was notable for its chipped paint and overgrown shrubbery.
In Democratic circles, the 58-year-old bookkeeper with at least 398 bank accounts for political campaigns and nonprofit groups had a reputation for being prompt and responsive.
Neighbors and associates say there’s nothing in Durkee’s background, demeanor or lifestyle to suggest that she “masterminded a multimillion dollar fraudulent scheme,” as U.S. Senator Dianne Feinstein charged in a Sept. 23 lawsuit. While Feinstein reported $5 million in cash to the Federal Election Commission as of June 30, the bank found only $662,100 on Sept. 21, according to court documents.
“She’s a warm, accessible person,” said Eric Bauman, chairman of the Los Angeles County Democratic Party, who said he’s known Durkee since the early 1990s. “At best you would describe her attire as frumpy. Drove a beat-up old car. Lived in a plain home in Long Beach. You don’t look at this person and say, ‘This person doesn’t look right.’”
Durkee, who hasn’t replied to Feinstein or entered a plea in a related criminal case, didn’t respond to requests for comment in telephone calls and notes left at her home and office. Neither did her husband and business partner, John Forgy, or client-accounts manager, Matthew Lemcke. Her lawyer, Daniel Nixon, didn’t respond to a message left at his office.
The scope of the alleged embezzlements from Durkee- controlled funds for federal politicians is the largest at least since the Federal Election Campaign Act became law in 1972, said Kent Cooper, a former Federal Election Commission official.
“There’s been no one else who even comes close,” Cooper, who now runs the money-in-politics database Capitol Hill Access, said by telephone from Washington.
Feinstein’s campaign also sued First California Bank, the operating unit of Westlake Village, California-based First California Financial Group Inc., where Durkee had 398 accounts. Chief Executive Officer Chong Guk Kum didn’t respond to voice mail messages requesting comment. Gary Horgan, a company lawyer, said in an e-mail that the bank would not comment.
Things started to unravel for Durkee in 2010, when the California Fair Political Practices Commission found irregularities while auditing the political finances of Jerome Horton, the chairman of the Board of Equalization, the state’s tax administrator. Horton said Durkee “acknowledged her mistakes” during the audit and agreed to pay the commission’s $13,000 fine and his legal bills.
“I had no knowledge of the magnitude of her fraud or the extent to which others were involved until I read it in the paper,” Horton wrote in an e-mail message to Bloomberg News.
After auditing another Durkee-managed account, the commission in November 2010 called the Federal Bureau of Investigation’s Public Corruption Squad in Sacramento, according to court documents. In an affidavit, FBI Special Agent Reginald Coleman said it appeared that Durkee moved money from campaign accounts to her company’s bank accounts and then transferred other candidates’ funds to cover shortfalls. She covered up her actions by filing false disclosure forms, according to the affidavit.
The account of a Democratic state assemblyman from Anaheim, Jose Solorio, is missing $677,181, the FBI investigation revealed. Other Durkee clients, including Democratic U.S. Representatives Susan Davis of San Diego and Loretta Sanchez of Santa Ana and the Los Angeles County Democratic Party, reported losses of $200,000 or more.
At least some of the money went to pay Durkee’s mortgage and credit-card bills, which included charges for gas, ice cream, cosmetics and a veterinarian, the FBI said. Durkee also used campaign funds to make a $4,950 payment to Belmont Village, an assisted-living facility where her mother lives, according to Coleman’s affidavit.
In addition, Durkee donated money to three of the funds she is accused of stealing from: $500 to Feinstein in 2000, a total of $4,900 to Sanchez in 2010 and 2011 and a total of $825 to the Los Angeles County Democratic Party in 2006 and 2007, according to Federal Election Commission records.
At the state level, a typical embezzlement case involves lawmakers inducing employees to do campaign work on government time, said Edwin Bender, executive director of the National Institute on Money in State Politics, a Helena, Montana-based watchdog group.
“This case is unique, in my experience, in that one person handled the accounts of many, many candidates and apparently managed over a long period of time to transfer money around in such a way as to benefit personally,” Bender said in an e-mail message.
The FBI arrested Durkee on Sept. 2. Since then, dozens of other candidates and organizations across Southern California have checked their own books for losses. Davis said in a Sept. 10 letter to supporters that about $250,000 in campaign funds had been stolen. The San Diego Democrat described Durkee as “the Bernie Madoff of campaign finance treasurers.”
Sanchez’s campaign, which reported almost $379,000 in cash on hand June 30, said in a statement to supporters that it had been “nearly wiped out” by Durkee.
Durkee, who is not a certified public accountant, began her political career in the 1970s as a protégée of Jules Glazer, a longtime California Democratic campaign treasurer, according to Bill Carrick, Feinstein’s political strategist.
Glazer was national treasurer for the presidential campaign of Jimmy Carter, and statewide treasurer for California Governors Pat Brown and his son, Jerry Brown, according to the Los Angeles Times. When Glazer retired in 1994, Durkee took on most of his business, Carrick said. Glazer died in 1999 at the age of 77.
Durkee established a reputation as responsive and efficient, if occasionally sloppy, Bauman and Carrick said. Bauman said he recommended Durkee to groups such as the Young Latino Democrats of the San Fernando Valley when it formed in 2009. Jose Sandoval, the 32-year-old founder, said in an interview that Durkee waived her fees when she met with members in early 2010 to explain how to comply with campaign-finance regulations.
“She seemed honest and was highly recommended,” said Sandoval, who added that no money was missing from his group’s account.
When the Democratic Women of the San Fernando Valley in 2007 established its Susan B. Anthony award to honor female advocates, Durkee was the first recipient.
Durkee and her clients were fined a total of $135,862 by the Fair Political Practices Commission in five cases between December 2009 and April 2011, state records show. Durkee also received five warning letters during that period.
The size and number of the enforcement actions attracted notice at the commission, Chairwoman Ann Ravel said in an interview.
“There was a pattern that should have set off alarm bells,” she said. “We believe it was sloppy bookkeeping and failure to do things on time. Some of those things were pretty major, though.”
Bauman, whose Los Angeles County organization was included in two cases that drew fines, said they involved technical violations such as missing deadlines rather than any evidence of misappropriations.
Durkee kept a low profile in the Long Beach neighborhood where she and her husband bought a 1,614-square-foot, two- bedroom house in 1991, according to neighbors and Los Angeles County property records. The couple left home early for the 35- mile commute to their office in Burbank, easily an hour in Southern California traffic, and returned late, rarely interacting with others on their block, neighbors said.
On a Sept. 29 visit, a mid-1990s Audi A6 and a late-1990s Chevrolet Blazer sat in the driveway, both caked with dirt.
Durkee and Forgy stood out only for being generous to neighborhood children on Halloween and, in a neighborhood that leans conservative, for posting a campaign sign supporting Democrats John Kerry and John Edwards in 2004, said Paul Trudeau, who’s caring for his mother in the house next door.
‘Hello and Goodbye’
“I don’t know much more than hello and goodbye,” Trudeau said. “They worked quite late.”
The couple struggled to pay bills, court records show. In 2000, the Los Angeles County Superior Court entered an $8,350 judgment against Forgy for First Select Corp., the collections arm of credit-card issuer Providian Financial Corp., which was acquired by Washington Mutual Inc. in 2005.
Chase Manhattan Bank, since absorbed into JPMorgan Chase & Co., sued Durkee in 2002 and 2003 to collect debts, court records show. Both cases were dismissed.
Their home, for which they owed $4,169 in taxes in 2009, was the subject of three tax liens, two in 2008 and one earlier this year, according to Los Angeles County Registrar of Deeds records.
The 2008 liens, which totaled $18,549, were lifted, the records show. There is no record of any settlement of the 2011 lien, which was in the amount of $10,002, according to the records.
Several lawyers for Durkee-managed campaign accounts said they’re mystified about where any misappropriated money might have gone, noting that Durkee and Forgy gave no signs of flaunting wealth.
“I find the whole thing remarkable,” said Stephen Kaufman, the lawyer for the Los Angeles County Democratic Party and several other Durkee clients, in an interview. “We have no idea where all the money went.”
--Editors: Pete Young, Jeanne Cummings
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