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

"First California continued to actively provide banking assistance to Durkee and [her firm] as they raided their clients' coffers," Feinstein alleges, "all in the name of profit and greed."

The bank has refuted those claims and sought to have Feinstein's lawsuit dismissed.

Kinde Durkee’s mugshot

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More About

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

When the scandal erupted, Democrats feared it would hurt their prospects in 2012. But it's still far from clear that there will be much effect on congressional or legislative elections.

The most vulnerable may be U.S. Rep. Laura Richardson, a Long Beach Democrat. But she was already facing a tough re-election battle, thanks to redistricting and a series of scandals. And if she loses, it will be to another Democrat. Assemblyman Solorio may have a harder time running for state Senate in 2014, but he at least has some time to replenish his coffers.

The others likely will have to schedule more fundraisers. But they'll probably be OK. Feinstein simply wrote herself a $5 million check.

The real fallout may be at the local level, among smaller campaigns and committees.

One example is Diana Shaw, a retired labor attorney who narrowly lost her race in November for College of the Canyons Board of Trustees.

Durkee was her treasurer. When the scandal broke, Shaw was unable to access $1,300 in campaign funds — which would have come in handy when her Republican opponent sent out a misleading mailer, claiming to be the choice of Democrats.

Shaw wanted to send a piece pointing out that she was the only Democrat in the race. But without money, she couldn't. She ended up losing by about 600 votes.

"That $1,300 would have given us 5,000 more postcards," Shaw says. "You tell me what the difference would be. I don't know. But I certainly do believe the Kinde Durkee problem did contribute."

Shaw's defeat meant the teachers' union lost a potential advocate on the board. In the last round of collective bargaining, teachers didn't get a raise, but administrators did. Had she won, Shaw says, she would have been able to push for a better contract.

"I think the big fundraisers, like Dianne Feinstein, they have inexhaustible wealth," Shaw says. "The small people are the ones who really suffered."

The most intriguing mystery remains unsolved. Where did the money go?

It's clear from the federal complaint that some of it went to Durkee's personal expenses, such as her credit cards, her tax bills and her mother's nursing-home care. But that doesn't add up to the millions of dollars that have vanished.

It didn't go into real estate. After Durkee's arrest, the government launched a forfeiture action against her house and a condo in Long Beach. But the cases were dropped, likely because there was not enough equity in either property to make it worth the government's while. (The U.S. Attorney's Office declined to comment.)

In a third case, the government sought to seize Durkee's business headquarters. But the mortgage company objected, noting that Durkee had recently defaulted on her $660,000 commercial real estate loan. Durkee's stake in that property was worthless.

If the FBI found a pile of money in a private bank account somewhere, the government could move to seize it. So far, it hasn't, which suggests there isn't one.

"I really don't know where all the money went," admits Grant Beauchamp, the auditor who unraveled the case.

Political professionals tend to be gossips, and in the days and weeks after Durkee's arrest, a number of theories made the rounds.

The most popular is that she had a secret gambling problem. Or perhaps she lost the money in the stock market. Yet another theory was that she had squirreled the money away in the Cayman Islands and was preparing to flee the country.

The most likely scenario is far less dramatic.

Absent better evidence, the best explanation is that she never solved the problem that Jules Glazer left for her, the challenge of bringing his business into the modern age.

She never figured out how to maintain hundreds of clients, charging rock-bottom prices, while doing all the things that a modern campaign treasurer has to do. And so — to cover her payroll — she cheated.

"I've talked to a number of people who think she simply didn't charge enough money," says Renee Nahum, a political consultant and Durkee client. "She paid too many people. It didn't jibe. That money had to come from somewhere, and so she started moving money around."

Durkee employed more than 20 people. David Gould, who handles a comparable number of accounts, employs just seven.

"Explain that," Gould says.

The FBI complaint notes that Durkee used $55,000 of Jose Solorio's campaign money to make two payrolls. If you accept those figures and extrapolate them, her annual payroll works out to roughly $1.5 million. Add that up over a decade, and you can see where $7 million or more could go.

The world of California political treasurers is a small one. Everyone knows everyone else; they bump into each other at campaign events and at meetings of the California Political Treasurers Association. Durkee attended those meetings, and her fellow treasurers knew her in the same glancing way that her clients did — sweet, pleasant, modest.