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Kinde Durkee Scandal: California Lawmakers Report Big Losses To Campaign Accounts

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KINDE DURKEE FUNDRAISING SCANDAL
U.S. Sen. Dianne Feinstein (D-CA) (L) speaks with reporters after the tax compromise vote December 15, 2010 in Washington, DC.The bill passed the Senate by a vote of 81-19, moving the vote to the House of Representatives. (Photo by Mark Wilson/Getty Images) | Getty Images

WASHINGTON — California lawmakers who employed a treasurer facing federal embezzlement charges reported some steep financial losses to their campaigns, with Democratic Rep. Linda Sanchez taking the hardest hit of $322,000.

Sanchez was among the hundreds of Democratic candidates and committees in California who used Kinde Durkee as their treasurer. Federal prosecutors have accused Durkee of siphoning nearly $700,000 from a California assemblyman, but the case took on more significance when she told authorities she had misappropriated money from other Democratic lawmakers over the years.

Sanchez' sister, Rep. Loretta Sanchez, also employed Durkee and reported a $125,000 loss. This past weekend, her campaign reported the missing money to the Federal Election Commission as an "adjustment for embezzled funds." Another California Democrat, Rep. Susan Davis, reported that $160,000 was missing and used the same description.

The lawmakers had acknowledged previously that their campaigns had suffered steep losses, but the quarterly fundraising reports provided the first official accounting to federal regulators of specific losses.

The totals are estimates at best. First California Bank, which administered the Durkee accounts, has told a state court that the money in the various accounts had been mixed together and that it cannot say for certain how much each account should have in it.

The campaigns were required to submit their quarterly fundraising and spending reports by Saturday.

Sen. Dianne Feinstein's campaign disclosed on Friday that her campaign account lost about $4.7 million.

Her campaign had about $5.2 million in the bank going into July. Meanwhile, the bank estimated last month that about $650,000 were still in her accounts. Those two numbers were used by the campaign to estimate the amount of money lost.

Feinstein's new treasurer, William Wardlaw, said in a letter to the FEC that it's "possible and perhaps likely that additional information will be located in the coming weeks and months which will require an amendment to this report."

Feinstein moved quickly in the days after Durkee's arrest to try and offset the financial hit by providing her campaign with a $5 million loan. The House lawmakers who used Durkee don't have such personal resources at their disposal. Linda Sanchez reported that she had about $144,000 in the bank, or little more than half of the amount that she started the quarter with in July. The loss of that money could prove critical as Sanchez seeks re-election in a newly redrawn congressional district. Davis also has less money than she started with in July.

But Loretta Sanchez managed to add to her cash-on-hand despite the reported loss. She has about $597,000 in the bank.

Durkee had authority over about 400 bank accounts, including political campaigns, and she 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.

Feinstein filed a lawsuit last month against Durkee and First California Bank. Her campaign is hoping that some of the millions of dollars that are believed missing will eventually turn up in other accounts, but that process could take several months.

The campaigns are required to file fundraising reports with the FEC despite the uncertainty of exactly how much money they're missing. Also, the campaigns face the prospect of sanctions if they report incorrect figures and did not take enough steps to prevent embezzlement.

For example, in June 2010, the FEC fined the National Republican Congressional Committee $10,000 after the committee's treasurer had transferred hundreds of thousands of dollars from the NRCC to other accounts for his personal use.

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