For years, lawmakers have battered the Fair Political Practices Commission, the state’s campaign law enforcer spawned by the Watergate scandals.
Its budget has been slashed and limits have been sought on its authority. It’s been smacked and audited on the orders of legislators over whom the FPPC wields investigative authority. Its location on J Street eight blocks from the Capitol is not accidental: Lawmakers really don’t like the FPPC.
But as complaints intensify about the role of Democratic fiscal operative Kinde Durkee and a federal probe widens, a major irony has emerged: It was the FPPC that got the ball rolling two years ago. In fact, ultimately it may wind up that the FPPC’s action will have saved lawmakers and candidates hundreds of thousands of dollars, or even more.
If so, the FPPC probably shouldn’t expect any pats on the back.
“The legislators are getting really upset because they (the FPPC) waited for so long. A couple of years. Now they let people know they have a problem. I’m not sure the FPPC will be thanked by the legislators,” said Bob Stern, president of the Center for Governmental Studies in Los Angeles and a former top official at the FPPC.
“The real thing that is bothersome is that the FPPC is considering waiving the contribution limits,” he added. “What it means is that incumbents – it’s mostly incumbents, maybe only two or three challengers – can go back to those same donors and double their contributions. That doesn’t make any sense whatsoever.”
Stern and others plan to appear Thursday before the FPPC at an unusual hearing in Los Angeles, at which the five-member commission will take testimony on the Durkee case and from anyone who has suffered losses. A number already have come forward, such as Rep. Loretta Sanchez, D-Garden Grove, who said her campaign fund was wiped out, and the L.A. County Democratic Party, which said it lost $200,000. State Sen. Christine Kehoe fired Durkee in 2009, following an audit by the Franchise Tax Board, and Sen. Lou Correa, D-Santa Ana, said hundreds of thousands of dollars may be missing from his campaign accounts.
FPPC investigators found something suspicious in the finances of a campaign involving Durkee during routine checks in 2009 and began a detailed inquiry. The FPPC alerted the FBI, which triggered a federal probe that culminated Sept. 2 in the arrest of Durkee in Southern California for investigation of mail fraud stemming from the alleged looting of $677,000 from the campaign account of Assemblyman Jose Solorio, an Orange County Democrat.
She is scheduled to appear in federal court in Sacramento on Oct. 19.
By one count, Durkee has had connections to nearly 400 state, federal and local campaigns over the years. Early on, U.S. Sen. Dianne Feinstein filed a fraud and breach-of-contract lawsuit against Durkee and First California Bank, which handled Feinstein’s campaign funds, and other court actions are likely.
The FPPC’s chief enforcement officer, Gary Winuk, said an FPPC staff auditor noticed peculiar transfers of funds in and out of the campaign account of Jerome Horton, a former lawmaker who now is chairman of the state Board of Equalization. The campaign transactions “raised red flags to him as an auditor,” Winuk said.
“We decided to take a harder and bigger look at what was going on with the Durkee and Associates firm,” he told the commission on Sept. 30, adding that the “problem was larger than just limited to Jerome Horton. In fact, it was so large, we realized it was impacting federal candidates as well.”
Winuk said that “at that point, we reached the limits of our jurisdiction as a state agency and realized there were potential victims of a potential crime there.”
The FPPC and FBI aren’t the only ones looking at Durkee’s bank activities.
“We did go into the bank for an inquiry into the Durkee-owned accounts, accounts over which she had full authority,” said Alana Golden, a spokeswoman for the state Department of Financial Institutions, which regulates California banks. We did review those files at First California Bank.“ She also said “multiple banks are involved – there were other banks where there are (Durkee) accounts.”
The L.A. County district attorney’s office also was looking at Durkee.
A Sept. 6 FBI affidavit filed four days after Durkee’s arrest, said the federal investigation “stemmed from a referral by the Fair Political Practices Commission.” To the FPPC, “based on its investigation, it appeared that Durkee … had misappropriated money from her clients’ bank accounts and had filed false disclosure reports to hide these appropriations,” according to the affidavit.
The role of the FPPC as a potential savior of campaign cash is an unusual one for the 36-year-old commission, which rides herd over campaign laws and levies civil fines against politicians’ campaigns of up to $5,000 each for violations.
The FPPC, which has a staff of about 70 people to watch hundreds of campaigns and a $7.9 million budget, rarely handles criminal investigations. It can, and does, turn over evidence it develops to state and federal authorities, including prosecutors. It also investigates lobbyists and local officials, and it has imposed at least $16 million in fines and civil judgments since its inception.
Those penalties include some $200,000 against Durkee and her campaigns over the years, largely for misreporting or late reporting of transactions. The largest single penalty – more than $100,000 – involved some $18 million in television advertising payments during the gubernatorial campaign of former controller Steve Westly. The FPPC’s focus on Durkee has yet to play out, noted campaign strategist Andrew Acosta.
Ed’s Note: Corrects by removing reference to Liu campaign, 10th graf.