Published November 28, 2012
SACRAMENTO, Calif. – A former campaign treasurer who defrauded dozens of California Democratic politicians of at least $7 million was incapable of managing her business, often letting candidates' bills go unpaid and refusing to fire incompetent employees, her attorney says in a court filing submitted before her sentencing Wednesday.
A judge was expected to sentence Kinde Durkee, who pleaded guilty to defrauding clients that included U.S. Sen. Dianne Feinstein over more than a decade. Federal prosecutors and her attorney have requested an eight-year sentence.
In documents filed late Tuesday, Durkee's attorney portrayed her as so overwhelmed by her fear of conflict that she simply could not manage her clients' money or the day-to-day affairs of her campaign finance operation. As a result, she raided the bank accounts that were set up to hold political contributions to candidates, officeholders and various groups, and used the money to pay for a variety of personal and business expenses.
The account deficits grew over the years until sloppy campaign finance reports filed by her firm prompted a state investigation.
Durkee's fear of confrontation led to all manner of poor decisions, according to the filing by her attorney. She refused to ask clients to pay their bills, paid fines imposed by state regulators out of her own pocket and worked long hours at menial business tasks despite having a staff that was too large for her operation.
Prosecutors and her attorney, Daniel Nixon, say Durkee, 59, ran the equivalent of a shell game from her Burbank office.
She shifted millions of dollars among bank accounts for politicians, community groups, personal accounts and those of her business, Durkee & Associates. She used the money to pay mortgages for her home and business, care for her parents in a home for seniors and for incidental expenses such as trips to Costco.
"Although the number of clients grew, so did the number of non-paying clients, and Ms. Durkee found that she had trouble confronting her clients to collect payment," according to her attorney's filing. "She had a very difficult time laying off incompetent employees and continued to employ individuals who were not able to adequately perform their jobs.
Durkee pleaded guilty in March to five counts of mail fraud for defrauding clients. Among them were Feinstein, who lost about $4.5 million. The roster also included Reps. Loretta Sanchez and Susan Davis; state Sen. Lou Correa, D-Anaheim; Assemblyman Jose Solorio, D-Santa Ana; and political nonprofit groups such as the Los Angeles County Democratic Party.
In March, U.S. Attorney Benjamin Wagner called Durkee "the Bernie Madoff of campaign treasurers," referring to the infamous New York financial manager who pleaded guilty to operating the largest Ponzi scheme in history. Wagner said he believes the actual fraud is closer to $10 million.
Over a 12-year period, Durkee used the millions of misappropriated dollars for her personal and business expenses, hiding the theft by preparing false campaign disclosure reports, prosecutors said in their pre-sentencing report.
The pre-sentencing report prepared by Durkee's attorney says she has always been known as a kind and generous woman, and that she did not lead a lavish lifestyle. Durkee's husband of nearly 30 years, John Forgy, has been unemployed for more than 15 years, "which increased the financial pressure on Ms. Durkee to support them," the report said.
Large sections of the filing released by the U.S. attorney's office were redacted. Durkee's attorney had previously submitted a request to have some documents sealed from public view.
The scheme was uncovered by investigators with the California Fair Political Practices Commission, who noticed discrepancies in the filings for Solorio and asked the FBI for assistance. The state lawmaker lost at least $677,000 to Durkee, according to the criminal complaint.
The judge was expected to also set a restitution figure, although the prospects for most victims recovering their money are slim. Durkee and her husband have agreed to forfeit the Burbank office from which she operated and to hand over her 401(k) retirement account, estimated to be valued between $100,000 and $120,000.
The crimes could have carried a maximum penalty of 100 years, but Durkee's plea deal calls for a possible sentence of 11 to 14 years. The U.S. Attorney's office said in a filing this week that it will seek eight years at her sentencing in U.S. District Court in Sacramento.
If Judge Kimberly Mueller agrees, Durkee would have to serve six years and 10 months before she is eligible for parole. Durkee has been free on $200,000 bond.