Political embezzlement rises as campaigns get richer

Posted Sept. 19, 2011, at 2:22 p.m.
Rep. Susan Davis
Rep. Susan Davis

WASHINGTON — Rep. Susan Davis’ latest letter to supporters said: “We have been robbed!!”

Davis, 67, is one of several California Democrats whose campaign accounts were allegedly looted during the past year by their treasurer, Kinde Durkee. On Sept. 10, Davis sent out the appeal to begin rebuilding her account.

Five days after Durkee’s arrest in Burbank on Sept. 2, Rep. Frank LoBiondo’s former campaign treasurer was sentenced to 30 months in prison for embezzling more than $450,000 from the New Jersey Republican’s campaign committee.

As candidates raise more money for their campaigns, there is greater opportunity for nefarious treasurers to embezzle campaign cash from politicians accustomed to putting their careers in the hands of consultants, aides and volunteers, said Michael Toner, a former Federal Election Commission chairman.

Such thefts are “almost entirely preventable,” said David Mason, another Federal Election Commission chairman who is a senior vice president at Washington-based Aristotle Inc., a political consulting company. “Politicians still want to rely on trust. It’s a personal business.”

Election lawyers said thefts are increasing as campaign treasuries grow and candidates rely on the same person to pay the bills and track the expenses. The average House member spent $1.4 million to win election in 2010, compared with $840,300 a decade earlier, according to the Center for Responsive Politics, a Washington-based research group that tracks campaign spending.

The list of those victimized includes then-U.S. Sen. Joe Biden of Delaware, now vice president; then-Sen. Elizabeth Dole of North Carolina, a former Republican presidential candidate; and Rep. John Boehner of Ohio, now Republican House speaker.

The National Republican Congressional Committee’s treasurer stole more than $844,000 from the NRCC and other political committees, and the campaign manager for then-Rep. Christopher Shays of Connecticut was sentenced to 37 months in prison in 2010 for embezzling more than $250,000 from his account.

“These officeholders flip over the keys to these professional treasurers in a way they would never do for their own savings,” said former National Republican Senatorial Committee general counsel Craig Engle, founder of Arent Fox’s political law group and treasurer of the firm’s political action committee. “The more time an officeholder is spending going over his spending, the less effective a candidate he or she will be.”

In the past, treasurers were often family friends or prominent local figures, Engle said. As record-keeping became more complicated, candidates brought in professionals, with no personal connections to them, to handle the job. They found them by word-of-mouth and recommendations; Durkee could sign checks on more than 400 bank accounts, including an undisclosed number of political committees, according to an Federal Bureau of Investigation affidavit.

“As politics has become a regulated industry, the need for professional treasurers, or campaign finance officers, has increased dramatically,” Engle said. “What you see on reports now are professional political treasurers who are handling the books and records. No longer is it a friend or big wheel. It’s someone who does it for a living.”

The campaigns that employed Durkee are now dealing with a breach of trust and the need to re-raise the money they’ve lost.

Another Durkee client, Sen. Dianne Feinstein, had $5 million in the bank as of June 30, FEC reports show. How much if that is still there remains unknown. The campaign hasn’t had an opportunity to review the bank records, said her chief campaign consultant, Bill Carrick.

“I would anticipate there’s been embezzlement,” Carrick said in an interview. Durkee was “moving money all over in a classic Madoff Ponzi scheme. As a consequence, no one really knows whose money is where. We’re going to try like hell to find it.” Money manager Bernard Madoff pleaded guilty in 2009 to running a Ponzi scheme in which he took money from new clients to pay earlier investors.

Davis’ FEC statement showed her with $456,509 in the bank through June 30. In her appeal for help to supporters, which was provided to Bloomberg News by her office, she said she could have lost as much as $250,000. The losses could have been worse if Davis had not moved some of her donations into a reserve account to which the treasurer did not have access, she said.

“As many of you have often said to me, ‘Please let me know when you really need my help’ — well I do now and I am not holding back,” Davis said in her letter.

“It can really turn your campaign upside down,” said Toner, who is co-chairman of the election law practice at Wiley Rein. “It becomes a lot harder to get new contributions when you’ve just been embezzled. You don’t have the money you thought you have and you’ve got to reach out to donors and say, ‘I’ve got to start over.’ ”

 

 

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