Carolyn Lochhead and Carla Marinucci, Chronicle Staff Writers
Saturday, September 24, 2011

Washington — California Sen. Dianne Feinstein’s campaign filed suit Friday against a small Los Angeles County bank and the Democrat’s former campaign treasurer, alleging that Kinde Durkee and her associates “stole millions” in funds from Feinstein campaign committees in the last two years.

The suit, filed in Los Angeles, charges that First California Bank knew about the alleged embezzlement and “ignored multiple red flags.”

Feinstein, who is running for her fourth full term, had amassed a $5.2 million campaign war chest that Durkee managed in her Burbank office along with more than 400 other bank accounts for which she had signature authority.

Durkee, a campaign treasurer for many top California Democrats, was arrested Sept. 2 by the FBI and charged with stealing or misappropriating $670,000 from the campaign of state Assemblyman Jose Solorio, D-Anaheim.

The investigation has led to a widening examination of alleged fraud involving the campaign accounts of Feinstein and several other California lawmakers, including Reps. Loretta Sanchez, D-Garden Grove (Orange County), and Susan Davis, D-San Diego.

A person familiar with the lawsuit said as much as $25 million may be missing from the various campaigns and that First California Bank routinely allowed Durkee to bounce checks in a way that a larger bank would not have.

Also on Friday, California’s political watchdog agency, the Fair Political Practices Commission, said it will hold a public meeting next Friday to answer questions from campaign officials and gather information for potential action against Durkee.

Account access denied

Feinstein campaign consultant Bill Carrick said he does not know exactly how much is missing from the account because the bank refused to give the campaign access to its account unless it signed a waiver promising not to take legal action.

“It’s ridiculous that you can’t have access to your own account, but that’s the situation the bank has put us in,” Carrick said, adding, “I would venture to say that nobody who is a victim in this scheme has any idea” how much has been stolen.

California bank examiners have opened an investigation into First California, a person familiar with the lawsuit said. Bank officials did not respond to a request for comment. The FBI complaint said City National Bank in Los Angeles also managed Durkee accounts.

Durkee admitted to FBI agents that she misappropriated funds and commingled accounts through her firm, Durkee and Associates. The Feinstein lawsuit also names Durkee partner John Fogy and associate Matthew Lemcke as co-conspirators.

The suit alleges that Durkee “embezzled millions of dollars” over her 20-year career. “From an office in Burbank, Calif., Durkee operated and masterminded a multi-million-dollar fraudulent scheme,” the lawsuit charges, schemes which “required the assistance of willing financial institutions.”

Centering on the bank

The suit, filed in Los Angeles County Superior Court by Burlingame attorney Joseph Cotchett, alleges that First California Bank of Westlake Village “was at the heart of the illegal transfer of money” out of campaign accounts. It cites a letter from the bank acknowledging that “there was a very high likelihood” that various bank balances are inaccurate and that “these conditions appeared to be pervasive in the Durkee-controlled accounts.”

The suit argues that the bank continued to provide services to Durkee for many years, “happy to collect the fees and interest generated by the scores of accounts Durkee maintained at the bank.” It claimed that “other professionals, including attorneys, accountants and additional banks had full knowledge of the wrongful acts.”

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