embezzlement

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State oversight avalanche bears down on ABAG

Posted on by Josh Richman

State officials are rushing to put new oversights in place following the embezzlement of almost $1.3 million by an Association of Bay Area Governments official from a bond-funded San Francisco development account.

State Treasurer John Chiang on Thursday announced a partnership with Senate President Pro Tem Kevin de León, D-Los Angeles, to conduct legislative oversight hearings to make sure money raised through government bond sales is safe from fraud, abuse, and mismanagement. Chiang also said he has created a special task force to develop best-practices guidelines on the care of bond proceeds that will be issued to all state and local governments.

California and its local governments over the past decade have issued more than $700 billion in public debt, Chiang noted in a news release.

“We rely on these borrowed moneys to build and maintain the critical infrastructure upon which our communities and economy depend – from schools and roads to levees and libraries,” Chiang said. “The ease in which one of ABAG’s leaders allegedly fleeced more than a million dollars in bond funds raises concerns regarding whether there are sufficient safeguards at the thousands of State and local agencies which are responsible for nearly three-quarters of a trillion bond dollars.”

And state Controller Betty Yee announced Thursday her staff will audit ABAG’s internal administrative and accounting controls.

“As California’s chief fiscal officer, I am charged with protecting state resources,” Yee said. “When public money goes missing, I need to determine how it happened and whether effective controls are in place.”

Yee’s audit will initially focus on FY 2012-13 and 2013-2014, but that might expand if investigators discover accounting weaknesses that may have affected earlier years. The Controller’s Office sent a letter today to ABAG asking that the association make available documents that will be used in the audit including ledgers, contracts, invoices, personnel records, meeting minutes, policies and procedures. The audit work will begin Feb. 20 and is expected to take a few weeks.

More, after the jump…
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Feds seek eight years for campaign embezzler

Posted on by Josh Richman

Federal prosecutors say Democratic campaign treasurer Kinde Durkee should serve eight years and one month in federal prison for having embezzled more than $7 million from U.S. Sen. Dianne Feinstein and other prominent California elected officials.

Durkee, 59, of Long Beach, is scheduled to be sentenced Wednesday in Sacramento.

“Over the course of approximately 12 years, the defendant misappropriated millions of dollars from clients, used the money for her personal and business expenses, and prepared false campaign disclosure reports to hide the theft,” says the sentencing memo prosecutors filed last Wednesday. “This sentence will reflect the seriousness of the offense, provide just punishment, and afford adequate deterrence.”

A restitution figure should be ready by Wednesday’s hearing, prosecutors wrote.

Durkee pleaded guilty earlier this year to five counts of mail fraud. Her plea agreement noted that the sentencing range would be from 11 years and three months to 14 years, but also that prosecutors would recommend the low end of whatever range federal probation officers came up with.

Besides Feinstein’s campaign, other victims included the campaigns of Rep. Loretta Sanchez, D-Garden Grove; Rep. Linda Sanchez, D-Cerritos; state Sen. Lou Correa, D-Santa Ana; and Assemblyman Jose Solorio, D-Anaheim. There were at least 50 victims in all, prosecutors said.

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FEC nixes DiFi’s post-embezzlement pitch

Posted on by Josh Richman

The Federal Election Commission ruled yesterday that U.S. Sen. Dianne Feinstein, whose campaign lost millions to embezzlement by treasurer Kinde Durkee, can try to go back and collect new contributions from donors whose checks were never cashed.

Dianne FeinsteinBut the FEC ruled Feinstein, D-Calif., can’t take new contributions from donors whose money Durkee pocketed. Overall, Feinstein campaign consultant Bill Carrick said today, that leaves the senator with almost no recourse.

First California Bank hasn’t released records from the Durkee-managed accounts, he said, so the campaign has no “capacity to figure out right now what money was deposited and what money wasn’t deposited.” Congresswoman Linda Sanchez, D-Lakewood; Loretta Sanchez, D-Anaheim; and Susan Davis, D-San Diego – also Durkee clients – are in the same boat, Carrick said.

“It’s disappointing, definitely,” Carrick said. “People intended their money to be used for the Feinstein senate campaign, they did not intend for it to be embezzled by Kinde Durkee.”

Durkee pleaded guilty in March to mail fraud, but is unlikely to be able to make full restitution to Feinstein and the other pols she bilked. Feinstein lent her campaign $5 million in the embezzlement’s wake, and although she has 23 challengers in next month’s primary election, none have held a candle to her in the polls – though the scandal has provided some rhetorical fodder.

Elizabeth Emken“Once again, the FEC has refused to allow Dianne Feinstein a free pass. Her refusal to accept any responsibility for the gross mismanagement that resulted in the embezzlement of millions of dollars in campaign donations shows an appalling lack of accountability to the people of California,” Elizabeth Emken of Danville, the state GOP’s endorsed candidate, said in a statement issued this morning. “It’s yet another reason why the average voter feels that Washington elites like Dianne Feinstein are out of touch, and a recent poll shows an overwhelming majority of Americans would vote to completely replace Congress. Incumbents like Senator Feinstein are being put on notice in 2012—the voters are saying it’s time to go.”

“That shows an appalling lack of judgment in trying to describe the situation,” Carrick responded. “I guess she doesn’t think anyone was victimized by someone who embezzled in the neighborhood of $10 million… It’s a pretty reckless statement.”

But not all Republican candidates share Emken’s view. Oceanside businessman Dan Hughes said today that although it might hurt his own candidacy, “I believe that the people/contributors whose funds were stolen before Senator Feinstein spent them should be able to re-contribute.

Dan Hughes“As much as I disagree with Senator Feinstein on policy, in this case she was the victim of a crime and she should not be made to suffer twice,” Hughes said. “Should she have had better controls in place? Absolutely yes, and the voters can decide if she is responsible enough to continue on as their senator.”

Meanwhile, Hughes and other candidates face an uphill battle getting support and exposure for their campaigns. Hughes yesterday shopped around a story that he “got Darrell Issa‘s support over the weekend;” today he sent a statement from Issa, R-Vista, who chairs the House Oversight and Government Reform Committee, calling Hughes “a leader in business and in our community who has my highest respect.”

But that “support” isn’t wholehearted, it seems. Asked whether Issa’s words amounted to an endorsement or just a “statement of respect,” John Franklin – Issa’s political director – replied today that it’s the latter.

House Majority Whip Kevin McCarthy, R-Bakersfield; Armed Services Committee Chairman Buck McKeon, R-Santa Clarita; Rep. Dan Lungren, R-Gold River; and Rep. John Campbell, R-Irvine, have endorsed Emken.

And then there’s candidate Orly Taitz, the Republican dentist/lawyer from Laguna Niguel who has helped lead the fight to question President Obama’s citizenship. She released this video recently:

Is that suit of armor the “demon sheep” of 2012? And if so, is that a sad commentary on this year’s race? You be the judge.

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FPPC to hold hearing on Durkee case Sept. 30

Posted on by Josh Richman

California’s political finance watchdog agency will hold a public hearing next Friday to hear from those affected by the Democratic campaign treasury scandal that has rocked the state.

Staff of the Fair Political Practices Commission, chaired by Ann Ravel, will hear from officials, campaigns and the public regarding regulatory questions arising due to the campaign fraud case surrounding longtime treasurer Kinde Durkee.

Durkee, who ran Durkee & Associates in Burbank, is accused of taking significant amounts of money from the campaign accounts of numerous California officials, the FPPC notes, and many banks have frozen campaign accounts during the ongoing investigation. Among the most prominent apparent victims are U.S. Sen. Dianne Feinstein, D-Calif. – who sued Durkee and First National Bank on Friday – and Reps. Susan Davis, D-San Diego, and Loretta Sanchez, D-Anaheim, all of whom could be missing substantial sums.

“The far reaching impacts have given rise to numerous regulatory questions such as expenditure reporting and recordkeeping, replacement of contributions to state candidate election committees, and compliance with reporting deadlines,” the commission said in a news release. “Commission staff would like to obtain as much information as possible in order to consider any appropriate regulatory action to take in response.”

The hearing is scheduled for 10 a.m. next Friday, Sept. 30 in the FPPC’s hearing room, 428 J St., Suite 800, in Sacramento. It will be webcast on the commission’s website as well as at cal-span.org.