Kinde Durkee Was Trusted by California's Top Democrats — Until Millions of Dollars Vanished

When Durkee's bank flagged the embezzlement in November 2006, Altamirano called Martinez. Martinez said she would come in to explain herself. Instead, she fled to Mexico.

Instead of reporting the theft, Durkee covered it up for three years. The incident only came to light when FTB auditor Michael Chiquillo started to dig into irregularities in the Kehoe campaign.

Kinde Durkee’s mugshot

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More About

• Kinde Durkee
• Jules Glazer
• Dianne Feinstein
• Election Campaigns
• Politics

As she had with others, Durkee did her best to stonewall him. She refused to provide copies of the fraudulent checks. In some cases, she provided electronic images, but the payee, amount and date were illegible.

Finally, in the fall of 2009, Durkee admitted to Chiquillo that Martinez had vanished. Durkee said she used her own money, as well as money from another client, the California Latino Alliance, to replace the stolen funds.

None of this, of course, had been disclosed in Kehoe's campaign-finance reports, which Durkee had signed under penalty of perjury. Nor did the transfers appear in the California Latino Alliance's reports.

Chiquillo took it upon himself to inform Kehoe of the theft. The state senator immediately fired Durkee, and sent off her letter to the DA, urging that charges be filed.

Prosecutors could have pursued an embezzlement case against Martinez and a perjury case against Durkee for the false statements. They did neither.

"We did gather material," says Sandi Gibbons, the DA's spokesman. "We don't disclose what we do during criminal investigations."

As an FTB auditor, Grant Beauchamp had suspicions about Durkee, but he had never been able to prove them. When he got another crack at her, he didn't miss his chance.

The opportunity came, thanks to a conflict of interest. The FTB handles the vast majority of campaign audits. But two state offices — the controller and the Board of Equalization — oversee the tax board, so their campaigns are audited by the Fair Political Practices Commission.

That's where Beauchamp was working when the Jerome Horton file landed on his desk in March 2010. Horton had run for Board of Equalization in 2006, and Durkee had been his treasurer.

Beauchamp, 54, is a mild-mannered veteran of political auditing, with more than 20 years' experience. Though it started routinely, the Horton file would become the highlight of his career.

It did not take Beauchamp long to find weird and unexplained payments. For one thing, Durkee initially said that an $8,000 payment the campaign made to Elsa Martinez, the former employee, was a consulting expense. Only later did she admit that it was embezzlement.

Beauchamp was sufficiently troubled by Durkee's evasive written explanations to schedule a face-to-face meeting. In June 2010, he flew to Burbank to give her one last chance to explain herself.

They met in a conference room at Durkee's drab headquarters on South Victory Boulevard. Beauchamp recalls becoming suspicious when Durkee and an employee, C. Lydia Almanza-Siu, refused to be tape-recorded.

"There were pauses, and looks back and forth, when they were answering questions," Beauchamp says. "It was obvious they weren't telling me the truth on some issues."

Evasiveness had worked for Durkee many times before. But unlike others, Beauchamp didn't let it drop there. Instead, he got approval from his boss to subpoena Durkee's bank records going back more than three years.

What he found was astounding.

Durkee was moving money around from herself to her clients and back, and from one client to another. She also had bounced thousands of checks.

Another surprise was the name on the account that was raided most often: Dianne Feinstein.

This was brazenness on an unimaginable scale. Sen. Feinstein is the state's most popular and most powerful politician. Taking her money was so reckless, so self-destructive, that it was like stealing from the mob. There would be no getting away with it.

The FPPC has no authority over federal campaigns, so Beauchamp turned the case over to the FBI in December 2010. The FBI finally arrested Durkee on Sept. 2. The criminal complaint accused her of stealing $677,000 from Assemblyman Jose Solorio.

In an interview with an FBI agent, Durkee "admitted that she had been misappropriating her clients' money for years and that forms she filed with the state were false," according to the complaint. She also "admitted to the agents that she had personal and business-tax problems."

Thus far, that's all she has said about it. Her attorney declined to comment, other than to say that she will plead not guilty.

Durkee spent a week in jail before her husband posted the $200,000 bond. At her bond hearing, she sat on a bench alongside other accused criminals, wearing a loose-fitting black shirt. Her hair was white and tousled. She stood when her case was called, lifting her shackled hands to wipe a tear from her eye.

The collapse of Durkee's firm was a disaster for her clients. U.S. Rep. Loretta Sanchez lost $125,000. Her sister, Rep. Linda Sanchez, lost $322,000. Rep. Susan Davis, who has likened Durkee to Bernie Madoff, lost $160,000.

As for Feinstein, she lost $4.65 million, with another $662,000 stuck in a frozen account.

Feinstein sued Durkee, but almost as an afterthought. Her primary target was First California Bank — which is more likely to have recoverable assets. In the suit, Feinstein alleges that First California must have known of Durkee's embezzlement. Her lawyers contend that the bank failed to report it because it was getting rich off her overdraft fees.