Docket No. A09-07 

1 FEDERAL ELECTION COMMISSION 

2 In the Matter of: 

3 

4 AUDIT HEARING: LOS ANGELES 

5 COUNTY DEMOCRATIC CENTRAL 

6 COMMITTEE 

7 Wednesday, 

8 December 14, 2011 

9 Conference Room 

10 Federal Electio n Commission 

11 999 E Street, N.W. 

12 Washington, D.C. 

13 

14 The hearing commenced, pursuant to notice, at 

15 10:05 a.m., before the Commissioners of the Federal 

16 Electio n Commission, the Honorable CYNTHIA L. BAUERLY, 

17 Chair, presiding . 

18 APPEARANCES: 

19 On Behalf of the Federal Electio n Commission: 

20 Commissioners: 

21 CYNTHIA L. BAUERLY, Chair 

22 CAROLINE C. HUNTER, Vice Chair 

23 MATTHEW S. PETERSEN, Commissioner 

24 DONALD F. McGAHN II , Commissioner 

25 STEVEN T. WALTHER, Commissioner 

26 ELLEN L. WEINTRAUB, Commissioner 

27 Staff : 

28 TOM HINTERMEISTER, Offic e of the Staf f Director 

29 TONY HERMAN, General Counsel 

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1 APPEARANCES (Continued): 

2 On Behalf of Los Angeles County Democratic Party: 

3 STEPHEN J . KAUFMAN, Esquire 

4 Kaufman Legal Group 

5 777 South Figueroa Street, Suite 4050 

6 Los Angeles, Californi a 90017 

7 (213) 452-6565 

8 ERIC BAUMAN, Chair 

9 Los Angeles County Democratic Party 

10 3550 Wilshir e Boulevard, Suite 1203 

11 Los Angeles, Californi a 90010 

12 (818) 755-4578 

13 

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3 

1 PROCEEDING S 

2 (10:05 a.m.) 

3 CHAIR BAUERLY: Good morning. The Federal 

4 Electio n Commission wil l come to order. Today, we are 

5 here on an audit hearing fo r the Los Angeles County 

6 Democratic Central Committee. We are going — 

7 Commissioner Walther wil l joi n us as soon as he i s 

8 available . We have scheduled thi s audit hearing fo r 

9 approximately an hour and we wil l provide an 

10 opportunity fo r counsel for the Committee, Mr. 

11 Kaufman, to provide information to the Commission and 

12 answer any questions. 

13 At the outset, I do want to note that thi s 

14 i s a fairl y remarkable set of circumstances. I think 

15 it' s clea r the coincidence, alone, of sending the 

16 Committee the draf t Fina l Audit Report on the same day 

17 that the treasurer was indicte d was perhaps, I think, 

18 maybe a record for the Commission. I'm not sure that 

19 that's ever happened before and, hopefully, won't be a 

20 frequent occurrence. But I think it' s fai r to note 

21 that the report that was drafted by the Audit 

22 Division , obviously, was based on information that was 

23 provided by that individual . I t reflect s what had 

24 happened to that point thus far . 

25 We have, as part of our procedure, the 
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1 opportunity fo r the Commission to request that the 

2 Committee submit supplementary information afte r thi s 

3 hearing. Our polic y notes that the Commission 

4 discourages voluminous submissions and we provide 10 

5 days to do that or a deadline that the Commission 

6 sets. 

7 I would propose at the outset to my 

8 colleagues that given the unusual nature of thi s 

9 circumstance, that we ask the Committee and the 

10 auditors to work together, to provide as much 

11 information as availabl e afte r thi s hearing and 

12 provide at leas t 30 days and more, i f necessary, to 

13 ensure that the next version of the recommended report 

14 that comes before the Commission can full y reflec t the 

15 reality , the changed reality , as much as i t i s able 

16 to, given the circumstances of thi s matter. 

17 So i f there's no concerns about that, I 

18 think we would leave the record open and ask — you 

19 know, while I'm not sure we're encouraging voluminous 

20 submissions, I don't want you to be discouraged by 

21 what the polic y says i n terms of providing us the 

22 information that i s necessary to make sure that thi s 

23 accurately reflect s the fairl y strange nature of thi s 

24 particula r matter. 

25 MR. KAUFMAN: Thank you. 
1 CHAIR BAUERLY: So the Commissioners wil l 

2 have an opportunity to pose questions afte r we hear 

3 from counsel. Commissioners may also ask questions 

4 designed to elici t clarificatio n from the Offic e of 

5 General Counsel or the Offic e of the Staf f Director. 

6 The General Counsel and the Staf f Director wil l have 

7 the opportunity to ask questions of the audited 

8 Committee and then we wil l conclude with an 

9 opportunity fo r closin g remarks by Mr. Kaufman. So 

10 with that, I wil l turn i t over to you. Please 

11 proceed. 

12 MR. KAUFMAN: Thank you. Chair Bauerly and 

13 Commissioners. Good morning. My name i s Stephen 

14 Kaufman of Kaufman Legal Group. I am counsel for the 

15 Los Angeles County Democratic Central Committee. To 

16 my lef t i s Eri c Bauman, who i s the Chair of the 

17 Committee. And we want to firs t thank you fo r the 

18 opportunity to be heard on thi s matter and fo r 

19 accommodating our schedules, so that we could be here 

20 i n person to testif y to you today. 

21 We are here to address new fact s and 

22 information that came to ligh t since the issuance of 

23 the draf t audit report. And as the Chair mentioned, 

24 by sheer coincidence, the draf t audit report was 

25 released on the very day that the Committee's former 
1 Treasurer was indicte d on charges of federal mail 

2 fraud. 

3 Those mail fraud charges aris e from her 

4 misappropriation of Committee funds from — i n 

5 particular , the federal complaint that was file d 

6 relate d to her misappropriation of funds from a state 

7 account and the coverup that ensued from that, namely 

8 the transferrin g of funds from multipl e clien t 

9 accounts and multipl e business accounts to make up for 

10 the shortfall s i n the money that she absconded with 

11 from that account. 

12 In that complaint, Ms. Durkee, the former 

13 Treasurer, according to a declaration submitted by the 

14 FBI, admitted to misappropriating clien t funds for 

15 years. And i n the months that have followed, we have 

16 become aware of substantia l misappropriation, and I 

17 can tel l you that my fir m has been involved i n 

18 representing numerous clients , who al l have faced 

19 simila r circumstances, as a resul t of Ms. Durkee's 

20 conduct. 

21 Based on news reports and the lawsuits that 

22 have been file d and the crimina l complaint, i t appears 

23 that Ms. Durkee's actions affected over 400 committees 

24 and that the extent of her misappropriation looks lik e 

25 i t wel l exceeds $10 millio n and could be substantiall y 
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1 more than that based on the information that's been 

2 provided by the various committees to date. 

3 The extent of thi s misappropriation and the 

4 complexity of the coverup that appears to have taken 

5 place i s unprecedented. And while thi s Commission and 

6 certainl y other regulatory agencies have seen 

7 instances of embezzlement before by committee 

8 treasurers, these circumstances appear to be 

9 extraordinary and, as I said, unprecedented. 

10 While we haven't had access to al l records 

11 fo r thi s Committee and other committees, we certainly , 

12 as the months have gone by, have obtained access, to a 

13 limite d degree, to some bank statements and other 

14 committee records. 

15 And the lengths that Ms. Durkee went through 

16 to cover up the activit y i s trul y remarkable. 

17 Falsifie d documents evidencing deposits of checks that 

18 were never deposited, transfers among various bank 

19 accounts, her own personal accounts, credi t card 

20 accounts that served as holding accounts for clien t 

21 credi t card transactions and jus t simply transactions 

22 among and between the accounts of her various client s 

23 evidence an attempt, you know, for somebody to be able 

24 to cover expenses when they became due or to cover up 

25 shortfall s i n bank accounts when they became overdrawn. 
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And one of the additiona l documents we 

brought today, i n additipn to the materials that we 

submitted with our October 6th lette r to thi s 

Commission, i s a complaint that was file d by Senator 

Dianne Feinstein and her committee against Firs t 

Californi a Bank and Kinde Durkee and Associates 
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allegin g fraud and deceit i n an attempt to recover the 

million s of dollar s that are missing from Senator 

Feinstein's account. We have copies to distribut e to 

everybody. 

We presented with our lette r a copy of a 

complaint and interpleader, which was file d by the 

Bank, i n an attempt to deal with the competing claims 

from Los Angeles County Democratic Central Committee 

and other committees who have been defrauded i n an 

attempt to recover thei r money. The Bank initiall y 

refused to provide any of the committees with thei r 

funds or any information regarding thei r bank 

accounts. They subsequently file d an interpleader 

action with the court, depositing the funds that were 

remaining with the court. That action i s currentl y 
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1 pending. 

2 • I t has bounced from judge to judge. And the 

3 Feinstei n campaign relate d the fraud case with the 

4 interpleader case, so it' s now been put int o the 

5 complex litigatio n courtroom i n Los Angeles. There 

6 are hundreds of committees that are stil l responding 

7 to that sui t and we suspect i t wil l take quite a 

8 while, months, probably years to sort out al l of the 

9 issues relatin g to the funds that remain i n the 

10 accounts and that the committees won't see the money 

11 that i s there for quite some time. 

12 With respect to the L.A. County Democratic 

13 Central Committee, we believe that they los t almost 

14 $200,000, given al l of thei r accounts, which include 

15 state accounts and federal accounts, based on the 

16 dolla r amounts stated by the Bank when they deposited 

17 the funds. We believe that the federal account should 

18 have had i n the neighborhood of $58,733, but that i n 

19 fact based on the numbers i n the interpleader suit , 

20 the Committee has $25,160. 

21 Even more significantly , the Committee's 

22 Levin account, which we believe had almost $75,000 i n 

23 it , has a tota l of $867 remaining i n the bank account, 

24 which i s not accessible to the Committee at thi s time 

25 or any time i n the near future. 
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1 In response to these reports, the Los 

2 Angeles County Democratic Central Committee fire d Ms. 

3 Durkee — should be a no-brainer on that one — and 

4 replaced her with a new treasurer and also replaced 

5 the attorney who had been hire d by the party Committee 

6 to oversee the activitie s of Ms. Durkee's firm . 

7 In addition to the fact that the Committee 

8 hire d a person who had been a professiona l treasurer 

9 fo r years, representing numerous candidates and 

10 committees, primaril y based in.southern California , 

11 and relie d on her experience and expertise, the 

12 Committee had hired a law firm, whose job and function 

13 i t was to review the reports prepared by Ms. Durkee's 

14 offic e and to review financia l reports that were 

15 generated by the treasurer on a regular basis, often 

16 on a dail y basis, during cycles i n which there was any 

17 significan t activity , to provide the Committee with an 

18 additional , leve l of oversight and accountabilit y i n 

19 reviewing the activitie s of thei r former treasurer. 

20 That fir m has also been replaced. 

21 You are now looking at the Committee's new 

22 counsel and we are activel y working with the Committee 

23 to access records, tryin g to evaluate what happened. 

24 The records are stil l tricklin g in . Every once i n a 

25 while, we get a burst of information through the Bank 
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1 or through some other channel that provides us with a 

2 littl e bi t more than we knew yesterday. 

3 But we still , you know,, really.don't know 

4 and probably never wil l know the ful l extent of what 

5 happened here, because while we might be able to see 

6 what happened on thi s Committee's end, we don't know 

7 what happened on the other end of a transaction . We 

8 don't necessaril y know the origi n of money that was 

9 coming int o the account or where money was going to. 

10 We can jus t see i t going i n and out. So I'm not sure 

11 we'l l ever have al l of that information. 

12 The Committee i s considering it s own action 

13 versus the Bank for fraud. We are i n discussion righ t 

14 now about filin g a separate suit . We have made our 

15 claim i n the interpleader lawsuit to assert our right s 

16 to the funds that remain. And the Committee has 

17 implemented additiona l interna l procedures and 

18 interna l controls , you know, i n an effor t to ensure 

19 that thi s type of activit y cannot happen i n the 

20 future, despite the fac t that i t took what we believe 

21 to be substantia l effort s previously, even while Ms. 

22 Durkee was treasurer, to implement controls over the 

23 process. 

24 With respect to the transactions that are 

25 the subject of the draf t audit report, as the audit 
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.1 report reflects , the audit was the firs t time that the 

2 individua l officer s of the Committee were aware of 

3 these transactions. I f one looks at the audit report, 

4 the reasons fo r the overstatements or understatements 

5 i n the cash appear to al l resul t from transactions 

6 that were neither known to the persons responsible at 

7 the Committee, the officer s and the Chair, nor were 

8 • they authorized. 

9 None of the transactions that are 

10 highlighte d i n the audit report were authorized by 

11 individual s within the Committee. There was a process 

12 i n place for approving expenditures and no 

13 expenditures were supposed to be made from the account 

14 unless they were authorized by one of two 

15 representatives of the Committee and none of the 

16 transactions that are i n the audit report were subject 

17 to that authorization . 

18 And as a resul t of the circumstances I jus t 

19 detaile d to you, we do believe that the transactions, 

20 which are the subject of the audit report, were of the 

21 nature of the transactions that are detaile d i n the 

22 complaint file d by the U.S. Attorney's Offic e and 

23 those that are detaile d i n the Feinstei n complaint, 

24 that these were unauthorized transactions and 

25 additiona l transactions that were intended to cover up 
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1 the activit y by the Committee's then-treasurer. And 

2 we believe that the information that was provided to 

3 support those transactions during the course of the 

4 exi t interview and the audit process, itself , which 

5 was based on information provided by the now-indicted 

6 treasurer, i s not reflectiv e of the actual nature of 

7 these transactions. 

8 So with that, the purpose fo r our being here 

9 today i s to ensure that the audit report reflect s the 

10 actual facts , as they occurred, to the best we can, or 

11 at leas t reflect s the facts and circumstances behind 

12 Ms. Durkee's indictment, the fac t that we believe that 

13 these funds were misappropriated from the Committee's 

14 account, that the transactions reflectin g monies 

15 coming int o the account with no apparent explanation 

16 were a resul t of a cover up by the treasurer, that the 

17 Committee was unaware of these transactions as they 

18 were occurring, and that they were completely 

19 unauthorized transactions. 

20 And, frankly , we think that those fact s 

21 serve as the basis fo r questioning whether these 

22 transactions can even properly be characterized as 

23 receipts and disbursements that weren't disclose d on 

24 the Committee's report, since what we essentiall y have 

25 here are unauthorized transactions that involve the 
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1 Committee's monies going out, coming in . 

2 But at the end of the day, it' s the 

3 . Committee's money, that's simply moving around through 

4 various accounts without any authorization or 

5 knowledge of the Committee, itself . And we think that 

6 al l of thi s needs to be taken int o account and that 

7 thi s audit report needs to be looked at i n a new 

8 light , given al l the facts and circumstances that have 

9 unfolded since September 2nd. 

10 I do want to add that there i s one amount 

11 that has .been stated i n the audit report, that we have 

12 talke d to the auditor about, that appears to be a 

13 misstatement. There i s a reference on pages 3 and 4 

14 of the audit report, relatin g to findin g number 1, and 

15 i t i s a summary of the amounts that were overstated 

16 and understated for thi s Committee, for the Federal 

17 Committee. There are two accounts that are subject to 

18 the audit report: the Levin account and the Federal 

19 Committee. And i n 2008, there's an amount stated that 

20 reflect s an understated cash on hand that's 

21 understated by $25,661. 

22 That amount i s incorrect . The amount of the 

23 understatement i s actuall y $4,752, not $25,661, and we 

24 have had conversations with the auditor about that and 

25 the auditor di d indicat e that that amount would be 
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1 corrected on the fina l version. But I wanted to make 

2 the Commissioners aware of that fact . And so with 

3 that, we are availabl e for additiona l questions and 

4 happy to discuss the facts and circumstances here i n 

5 greater detail , as you wish. 

6 CHAIR BAUERLY: Thank you, Mr. Kaufman. 

7 Questions from Commissioners? Commissioner Weintraub? 

8 COMMISSIONER.WEINTRAUB: Thank you. Madam 

9 Chair. Mr. Kaufman, other than that correctio n that 

10 you jus t made, the $25,000 figure , which you say 

11 should have be.en $4,000, do you think that the overal l 

12 kind of ins and outs- that are described i n thi s 

13 report, are there other inaccuracies? Do you guys 

14 know, are you i n a positio n to say? 

15 MR. I^UFMAN: Well of course we don't know 

16 anything for sure because the person who could 

17 probably answer those questions isn' t here and 

18 probably isn' t likel y to be here anytime soon to 

19 answer those questions. 

20 COMMISSIONER WEINTRAUB: And might not 

21 answer them anyway. 

22 MR. KAUFMAN: And might not answer them 

23 anyway. We certainl y don't dispute that the 

24 transactions that are lai d out i n the report are, you 

25 know, transactions that appear to be unaccounted for . 
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1 And I would suggest there are, and I think that the 

2 report only highlights , certai n key transactions that 

3 go int o the ultimate conclusion about the 

4 overstatements and understatements. 

5 So I am sure that there are additiona l 

6 transactions out there that have resulte d from various 

7 misconduct by the former treasurer, but I couldn't, we 

8 don't have enough information and I couldn't point to 

9 you today and say, on such and such date, thi s 

10 happened. 

11 But i t is — you know, i t does seem apparent 

12 to us, I mean, for example, there i s a, i n the 

13 Federal, i n findin g number 1, the Federal account, you 

14 know, there's a discussion about the $7,700 

15 transaction that took place i n December of 2008 that 

16 was characterized as an advance of credi t card 

17 contributions that apparently had gone int o a 

18 commingled, you know, credi t card processing account 

19 and-that the treasurer indicated to the auditors that 

20 the funds were being advanced and moved int o the bank 

21 account. 

22 In looking at the bank statements, it' s 

23 apparent that the Committee was overdrawn at that 

24 point, that there had been, there's something lik e 20 

25 overdrafts i n the month of December fo r thi s 
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1 Committee, I mean,.just .an inexcusable amount of 

2 transactions and negligence i n handling the account. 

3 I t was overdrawn and it' s clea r that the money i s 

4 moved int o the account to help make up the shortfall , 

5 to bring the Committee, you know, int o balance. 

6 MR. BAUMAN: The Bank never alerte d us. 

7 MR. KAUFMAN: Yeah, I mean, that's 

8 information that we were never provided with from the 

9 Bank and we don't know exactly where the money was 

10 drawn from. We know what she said . So, you know, we 

11 can certainl y point to things and say thi s doesn't 

12 look right , but I don't know that we'l l ever be able 

13 to say exactly what happened. 

14 COMMISSIONER WEINTRAUB: I guess that's what 

15 I'm tryin g to figur e out, i f as you take another month 

16 or however long, you can si t down with our auditors 

17 and tr y to sort through al l this , are you going to be 

18 i n a position , do you think it' s possible that you'l l 

19 ever be able to at leas t figur e out money going i n and 

20 money coming out, you know, what was going on with 

21 these accounts? 

22 MR-. KAUFMAN: Good question. I don't know. 

23 We might be able to address some circumstances, but we 

24 won't be able to address al l circumstances. I mean, 

25 there's a transaction here that's an alleged transfe r 
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1 from the nonfederal committee to the Federal 

2 Committee. We can certainl y look at that transaction 

3 because we have both sides of it . I think we know the 

4 answer i s it' s not an administrative transfe r that was 

5 done i n accordance with, you know, the process that i s 

6 set out fo r making those administrative transfer s on a 

7 periodi c basis, but we can at leas t look at both sides 

8 of that transaction. 

9 COMMISSIONER WEINTRAUB: I'm jus t tryin g to 

10 get my mind around the scope of the problem --

11 MR. KAUFMAN: Understood. 

12 COMMISSIONER WEINTRAUB: ~ as I'm sure you 

13 are. 

14 MR. KAUFMAN: Yeah and I think, you know, we 

15 need to be clear . I mean, we didn't come here with 

16 answers to every transaction that's liste d today 

17 because we don't have those answers. But we do think 

18 that they need to be looked at i n a differen t ligh t 

19 than i s reflecte d i n the draf t audit report. 

20 CHAIR BAUERLY: Commissioner McGahn? 

21 COMMISSIONER MCGAHN: Thank you. So we're 

22 clea r on the timeline , the draf t was writte n before 

23 the embezzlement situatio n was known, right ? It' s 

24 jus t the way our procedures work. So we al l agree the 

25 audit report doesn't reflec t realit y i n that sense. 
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1 MR. HINTERMEISTER: Exactly. 

2 COMMISSIONER MCGAHN: Okay, al l right . 

3 MR. HINTERMEISTER: I t was given to the 

4 Committee the same day that the — 

5 COMMISSIONER MCGAHN: Right. 

6 MR. HINTERMEISTER: — person was indicted . 

7 COMMISSIONER MCGAHN: A couple of questions. 

8 The general theme, though, i s what are we supposed to 

9 do. And le t me star t by saying, there's probably no 

10 worse feelin g than being a party chair and trustin g 

11 people to watch the money and you realiz e the people 

12 you've trusted have reall y le t you down. And I view 

13 you as the victim , not as the perpetrator of anything, 

14 and the fact that the reports are messed up, no nice 

15 way to say this , not your fault , I understand that, 

16 and the person who caused i t i s not here and won't be 

17 here. 

18 But the problem we have i s we do have an 

19 audit ongoing and we've got to figure out first , I 

20 guess, what the report i s going to look like , and, 

21 second, what kind of amendments you're going to 

22 require and what those are going to look like . And 

23 what I hear i s you don't reall y have access to your 

24 own records because, one, the person who has them i s 

25 under indictment, two, to the extent the Bank has 
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1 them, the Bank i s essentiall y i n an adverse posture 

2 with you, at thi s point. There i s the interpleader 

3 suit , where the Bank has basicall y said, you guys al l 

4 figure i t out. This i s the money we have, good luck. 

5 Now you have a gazillion , and that's a rough 

6 approximation, you know, defendants i n thi s suit , 

7 right , where basically , you know, here's a pizza , you 

8 have 40 people, you figure out who gets the eight 

9 slice s of pizza . And you're lef t completely on your 

10 own with probably raw bank statements and transactions 

11 that you can't reall y classif y as one thing or 

12 another. Before you knew there was embezzlement, 

13 well , thi s looks lik e something to do with the credi t 

14 card account, so I guess thi s was an advance. I t 

15 makes no sense and now we know why i t doesn't make any 

16 sense. 

17 COMMISSIONER MCGAHN: So even i f we sai d you 

18 need to do amendments, what are the descriptions going 

19 to be, you know, embezzlement-related transactions? 

20 You raise d an interestin g point, one I hadn't thought 

21 of, and I'm not sure where we go with it . Maybe, you 

22 could help me develop it . 

23 We're auditing the L.A. County Democratic 

24 Party. Is i t an audit of the L.A. County Democratic 

25 Party's bank account or i s i t an audit of the party 
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1 committee? Because i f it' s an audit of the bank 

2 account, well , the bank account i s a mess. There's 

3 al l kinds of money coming i n and out. But i f it' s of 

4 the party committee and the party didn't authorize 

5 thi s kind of stuff , should you reall y have to report 

6 it ? 

7 Part of me says, probably you do somehow 

8 because what FECA di d was centraliz e the accounts i n 

9 the one place with one treasurer. You had to fil e i t 

10 under oath, so there's one person on the hook to 

11 address a very rea l concern back when FECA was passed, 

12 slush funds and the like . But now, the converse i s 

13 when you put one person i n charge and they stea l the 

14 money, what do you do? 

15 So I'm not sure where we go from here 

16 because we have an audit report of the Committee and 

17 as a Commissioner, i f you — le t me ask you this , i f 

18 you were me, what would you do? I mean, we've go to 

19 account for thi s somehow and I think the audit report 

20 — whether there's a findin g — i s a completely 

21 differen t issue as to whether there's an enforcement 

22 case, I mean, and I've already stated where I am on 

23 al l of that. 

24 But we have an audit report and i n the short 

25 term, what are we going to do? I'm sure there's a 
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1 bunch of information you can give to the auditors and 

2 they're going to work with you and I know without, you 

3 know, getting int o interna l stuff , we're cognizant of 

4 the issue. But you know, you have transactions, 

5 there's no way you're going to know what they're for , 

6 other than somebody stol e the money. But how do we do 

7 what we need to do here? How do we thread thi s 

8 needle? 

9 MR. KAUFMAN: Well, I do think that that one 

10 of the fundamental issues, is , again, that the 

11 Committee i s required to report receipts and 

12 disbursements. Now, you know. Section 434(b) lays out 

13 a host of receipts that are to be disclose d by the 

14 Committee and disbursements that are to be disclose d 

15 by the Committee. And i f you look at the categories, 

16 the laundry lis t provided there — 

17 COMMISSIONER MCGAHN: Stolen money i s not on 

18 the list . 

19 MR. KAUFMAN: — I don't see embezzlement 

20 and coverup, you know, caught i n there. And even i f 

21 you, you know, wanted to characterize them i n some 

22 other way, I mean, there's not — there aren't a lo t 

23 of, you know, categories that thi s fit s into . So you 

24 know, I don't know where the responsibilit y of the 

25 Committee fall s on that. 
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1 I mean, certainly , the treasurer has 

2 responsibilit y for the Committee, you know, 

3 coextensive with the Committee and I, you know, think 

4 the audit report, you know, needs to reflec t kind of 

5 the actions and culpabilit y of both partie s to that, 

6 being the Committee and the Committee's treasurer. 

7 And I think where possible, i f the audit report can 

8 focus on the one and not the other, then that's where 

9 I would direc t things. 

10 Clearly , she didn't fulfil l her obligation s 

11 as a treasurer. But I don't think the same thing can 

12 be sai d for the Committee, who had no knowledge of 

13 these transactions, despite the fact that they had 

14 processes and procedures i n place and had hire d a 

15 professiona l treasurer to do i t and which gave no 

16 authorization to these transactions. 

17 COMMISSIONER MCGAHN: Let me ask you a 

18 littl e bi t about your processes and procedures. You 

19 hired someone who held themselves out to be a 

20 professiona l treasurer, represented al l kinds of other 

21 committees and, you know, had done thi s for years. 

22 You didn't tr y to do i t yourself on the kitchen table . 

23 You hired someone who was held out as a professional . 

24 You mentioned you had a law fir m reviewing 

25 that work, okay. The problem i s i f the reports are 
25 

1 internall y consistent and add up on thei r face, the 

2 law fir m i s not going to pick up embezzlement unless 

3 they actuall y do a bank rec once a month or so, which 

4 i s really , you know, i n hindsight, would have been — 

5 but even then, a clever — i f someone i s going to 

6 steal , they're going to steal , and that's the problem 

7 you have, i s the way they kind of cover thei r tracks. 

8 I t jus t creates a mess i n the snow and you wil l never 

9 figure i t out. Was the law fir m paid? 

10 MR. BAUMAN: Yes. 

11 MR. KAUFMAN: Yes. 

12 COMMISSIONER MCGAHN: Any idea, and you 

13 don't necessarily have to answer it , I don't want you 

14 to guess, but how much you paid for compliance 

15 services from thi s professional treasurer and thi s law 

16 firm? 

17 MR. BAUMAN: Do you want to address that? 

18 COMMISSIONER MCGAHN: You don't have to 

19 answer i t today, but maybe i f you could give i t to us. 

20 A not insignifican t amount of money, I would say. 

21 MR. BAUMAN: Including the audit or not 

22 includin g the audit? 

23 COMMISSIONER MCGAHN: Not includin g the 

24 audit. 

25 MR. BAUMAN: We were averaging anywhere from 
26 

1 three to fiv e thousand dollar s a month i n lega l fees 

2 for oversight and for having our counsel respond to 

3 specific s of how do you code a certai n item, which 

4 account do you come from, what allocatio n to use, and 

5 i t was averaging, we were probably spending $65,000 to 

6 $70,000 a year jus t on that. 

7 COMMISSIONER MCGAHN: Just on that, okay. 

8 So that's a significan t commitment to compliance. 

9 Internally , what other sorts of procedures di d you 

10 have? You mentioned you needed authorization of at 

11 leas t one or two people. Was that the chair or maybe 

12 politica l director ? Is that someone other than the 

13 treasurer? 

14 MR. KAUFMAN: Yeah. There were actually , I 

15 guess, three people who were authorized: the chair, 

16 the controller , and the executive directo r al l had 

17 authorization authority i n terms of tellin g the 

18 treasurer what she was authorized to pay. 

19 COMMISSIONER MCGAHN: Okay. 

20 MR. KAUFMAN: And payments were not supposed 

21 to be made without that authorization . 

22 COMMISSIONER MCGAHN: How was that 

23 authorization conveyed? Signoff sheet or was i t oral ? 

24 I'm jus t tryin g to get a sense of fleshin g out — 

25 MR. BAUMAN: Originally , i t was a written 
27 

1 document that was faxed and then as we became — we 

2 found the 21st century, i t became an e-mail 

3 transmission. 

4 COMMISSIONER MCGAHN: Okay. So it' s a 

5 writte n signoff process? 

6 MR. BAUMAN: Correct. 

7 COMMISSIONER MCGAHN: What other sorts of 

8 interna l procedures di d you have to ensure the monies 

9 that you raise d to tal k to voters i s actuall y spent to 

10 tal k to voters? 

11 MR. KAUFMAN: Well, again, le t me address 

12 thi s — again, financia l reports were provided on 

13 almost a dail y basis . Now of course when the person 

14 providing the financia l reports i s — 

15 COMMISSIONER MCGAHN: Trickin g them up. 

16 MR. KAUFMAN: — doctoring them, then 

17 they're not going to be of much use. But there was a 

18 • lo t of financia l oversight and financia l reporting. 

19 There were biannual audits that were conducted, 

20 interna l audits conducted by the organization. The 

21 organization — 

22 COMMISSIONER MCGAHN: But by whom? 

23 MR. KAUFMAN: There was a committee of the 

24 politica l committee, a volunteer committee, that was 

25 set up to do an interna l review as recently as a 
28 

1 couple of years ago. And i t was confirmed during that 

2 process that Ms. Durkee had a system i n her office , i n 

3 - which differen t people performed differen t functions, 

4 i n which one person was responsible for making 

5 payments, another person was responsible fo r 

6 overseeing the incoming funds, another person was 

7 responsible for actuall y preparing the campaign 

8 reports. 

9 COMMISSIONER MCGAHN: You thought you had 

10 segregation of tasks even within your professional 

11 arm's-length treasurer, with a law fir m looking over 

12 that person's shoulder at the tune of — 

13 MR. KAUFMAN: Correct. 

14 COMMISSIONER MCGAHN: — 60 to 7OK a year 

15 jus t fo r that? 

16 MR. KAUFMAN: Correct. 

17 COMMISSIONER MCGAHN: And a civilia n board 

18 of people twice a year taking a look? 

19 MR. KAUFMAN: Correct. 

20 . . COMMISSIONER MCGAHN: Okay. 

21 MR. KAUFMAN: Now, what actuall y happened of 

22 course we don't know. But I mean, I wil l tel l you, i n 

23 looking at what went on here, I mean, it' s a head24 scratcher because, you know, one's reaction to looking 

25 at the information, you say, how can anybody who i s 
29 

1 preparing the reports not know what's going on over 

2 here. 

3 But then, again, the extent to which thi s 

4 treasurer went to cover her tracks i s so 

5 extraordinary, it' s impossible to say who knew what 

6 and depending on the interna l divisio n i n the office , 

7 you know, it' s quite possible she could have 

8 manipulated stuff , so that other ends of the offic e 

9 weren't seeing it . I would fin d that hard to believe . 

10 But even with the divisio n of tasks, you know, 

11 obviously, i t didn't stop thi s from taking place, even 

12 with the divisio n of tasks within her office . 

13 MR. BAUMAN: I f I may add, as somebody who 

14 • has managed organizations with as many as 2,200 

15 employees, I understand the basic separation of 

16 accounting and bookkeeping functions that are 

17 necessary to ensure financia l safety and securit y for 

18 an organization. So the fac t that the traditiona l 

19 separation of payables and receivables, having an 

20 account manager, having a separate compliance and 

21 reporting person, those things made me comfortable i n 

22 my capacity as chairman to fee l that as a fiduciar y 

23 for Democrats i n Los Angeles, I was doing my job. 

24 In fact , I think those very separations 

25 conspired to enable much of thi s to occur because 
30 

1 these people were at leas t theoreticall y firewalle d 

2 from each other and something that happened here 

3 clearly , they could have had no idea what was going on 

4 here. 

5 What confirms that for me i n retrospect i s 

6 that the FBI didn't come i n and arrest al l the 

7 employees. I f the FBI had believed that there was a 

8 conspiracy internally , i t would not only have been Ms. 

9 Durkee, who was carted of f i n handcuffs. And so that 

10 leads me to, that reinforces my belie f that the normal 

11 separation of powers or separation of activitie s 

12 conspired to enable this . 

13 MR. KAUFMAN: I should also add that the 

14 Committee has had at leas t two prio r audits done at 

15 the state leve l by the Franchise Tax Board and had 

16 clean audits with no findings on both occasions. 

17 COMMISSIONER MCGAHN: The reason why I asked 

18 about the controls i s the Commission, a couple of 

19 years ago, well , more than a couple of years, did a 

20 polic y about interna l controls and, at the time, i t 

21 was a positive . And what's frustratin g i s you look at 

22 things i n the policy , that you need two signatures on 

23 checks, well , you learn the hard way that the bank 

24 doesn't care — 

25 MR. KAUFMAN: Don't care. 
31 

1 COMMISSIONER MCGAHN: ~ i f Mickey Mouse and 

2 Donald Duck sign the check, because they're going to 

3 cash i t and take the hi t on the backside i f i t doesn't 

4 clear . They put i t on the consumer to polic e whether 

5 the check should be right . It' s a heartbreaking thing 

6 when i t happens. You realize , gee, what was the bank 

7 doing. Well, they were jus t moving paper. And what 

8 you say rings true. 

9 You, also, have some electroni c problems 

10 here, right . I see there's a debit for 50 grand and 

11 $10, at one point, the credi t card holding account, 

12 al l the multiple signatures on a checkbook aren't 

13 going to fi x that i n any way, shape, or form. And 

14 something we haven't done i s figure out how to help 

15 people on that front . To me, i f someone i s going to 

16 steal , they're going to steal . 

17 The question i s how fast you catch them, 

18 jus t the way it' s set up. And even with the, even 

19 with al l the controls you had, you stil l had someone 

20 steal . And what's even more heartbreaking i s the fac t 

21 that things were siloe d on that end, probably enabled 

22 i t and allowed for malfeasance to continue longer. 

23 So with the electroni c stuff , can you tal k 

24 about that a littl e bit , maybe fles h that out, 

25 because, to me, the polic y that we have doesn't reall y 
32 

1 speak to i t and i t speaks to me the new vulnerabilit y 

2 of campaigns i s electroni c transfers . You know, when 

3 you do a media buy, you send i t to the station . You 

4 know, you probably electronicall y transfe r money to 

5 your mail account, right , when you do your.mail. 

6 And credi t card donations, that's a massive 

7 floatin g account, that i f one person has many client s 

8 and floa t i t i n the same account, becomes a personal 

9 ATM machine, which seems to be part of what happened 

10 here. Would you fles h that out for us a littl e bit , 

11 the electroni c stuff ? 

12 MR. KAUFMAN: Yeah and that's correct. I 

13 mean, we've entered a differen t age for dealing with 

14 these transactions. Again, committees lik e this , you 

15 know, the best they can do i s set up a system of 

16 accountability , lik e requirin g authorizations before 

17 those transactions are made and providing those 

18 authorizations to the bank, you know, i s certainl y one 

19 way of ensuring that those transactions are accounted 

20 for . But there i s a big gap. 

21 And I think one of the other issues here i s 

22 her system of depositing electronically . You know, 

23 it' s gotten to the point where you don't even need to, 

24 and I can tel l you, I mean, our offic e experiences the 

25 same thing. You don't even have to go to a bank 
33 

1 anymore and present them with checks, you know, to be 

2 deposited int o a bank account. I t can al l be done 

3 remotely. And i f one wants to commit embezzlement, 

4 one can simply deposit those checks int o another bank 

5 account that's linke d to a remote deposit terminal. 

6 Now again, as you said, i f somebody wants to 

7 embezzle, they're going to be able to do it . The 

8 question i s how quickly can you catch it , you know. 

9 In a wel l set-up situation , i t should be caught on the 

10 monthly bank reconciliation . When i t happens at the 

11 very top, as i t did here, thi s wasn't jus t a rogue 

12 employee, you know, who was doing this . This i s the 

13 person at the top, who has access to everything and 

14 can manipulate everything. So when i t happens at the 

15 top, you know, when i s someone going to catch them. 

16 But with the abilit y to do things remotely 

17 and electronicall y these days, i t does add to the 

18 burden on committees lik e thi s to implement controls 

19 and almost have to be involved i n the day-to-day 

20 functions that i s the very reason why you hir e a 

21 professiona l treasurer i n the firs t place. And part 

22 of the basis for hirin g a professiona l treasurer, who 

23 has a reputation, i s to be able to rel y on someone who 

24 i s professionall y traine d i n this , so that you can 

25 hand some of those functions to those people. 
34 

1 And i f you have assurance that the proper 

2 divisio n of labor and accountabilit y i s being done on 

3 that end, then i t should reliev e the Committee of some 

4 of those tasks i n having to do them themselves. But 

5 it' s al l part of the interna l controls . 

6 I mean, I think one of the things that the 

7 interna l controls don't speak to, i t kind of addresses 

8 a situatio n where a committee has a staf f that 

9 undertakes these functions. But the interna l contro l 

10 polic y lai d out by the Commission, I think, doesn't 

11 essentiall y recognize that what the committee i s doing 

12 by hirin g a professiona l treasurer i s hirin g on to 

13 those interna l controls . 

14 MR. BAUMAN: One thing I'd jus t lik e to add, 

15 you may or may not be aware, Durkee had a simultaneous 

16 business calle d ETRIBUTE, which was a credi t card 

17 processing firm . And most of the clients , LACDP 

18 included, used that service, because i t was a littl e 

19 bi t cheaper ultimatel y than a traditiona l processing 

20- service and most importantly for us, and part of the 

21 reason we di d it , i t was full y integrated 

22 theoreticall y int o our reporting and depositing 

23 system. 

24 And we were made to understand that i t 

25 actuall y increased the rapidit y with which the funds 
35 

1 were made availabl e to us. And of course looking at 

2 the records that we received, i t looked lik e a 

3 transaction that we made today often posted by 5:00 

4 that day on our reports. 

5 COMMISSIONER MCGAHN: Right, which i s the 

6 trick . I mean, politica l committees, with credi t 

7 cards, folk s are sometimes hesitant because i t takes a 

8 while to get the money. So you had somebody, you 

9 know, we can get paid fas t and of course you're going 

10 to sign up for that and i t fit s — 

11 MR. BAUMAN: Worth 2.5 percent. 

12 COMMISSIONER MCGAHN: ~ hand i n glove i n 

13 the reports. And then, i t turns out i t was reall y the 

14 treasurer's ATM machine apparently and a backdoor way 

15 to the cookie jar . Thanks. 

16 CHAIR BAUERLY: Commissioner Petersen? 

17 COMMISSIONER PETERSEN: Thank you, Madam 

18 Chair. I jus t wanted to follow up, jus t had a further 

19 question about the interna l controls here. There was 

20 something on page 4 of your letter , which talked about 

21 the Committee received regular financia l reports that 

22 tracked the Committee's interna l records of it s 

23 activitie s and I was jus t wondering how that exactly 

24 worked. 

25 Was she, was Ms. Durkee also, were the 
36 

1 interna l records developed with information that Ms. 

2 Durkee was providing, so that those two records were 

3 matched? Could you explain a littl e bi t further how, 

4 to the extent you know at thi s point, how those were 

5 being reconciled? 

6 MR. BAUMAN: So on a dail y basis, and I 

7 admit to over neurosis on this , on a dail y basis, I 

8 received a balance sheet, an income and expense 

9 statement, and a profi t and loss summary year to date. 

10 I received a reconciliatio n report once a month and I 

11 received a donor report, federal , well , a donor report 

12 fo r each of my committees once a month. 

13 Those reports al l came from — Durkee had 

14 proprietar y software with which she kept data and spi t 

15 out reports and I believe i t was hooked up to 

16 QuickBooks or some equivalent system that produced 

17 these dail y reports that I received. And everyday at 

18 approximately 5:00 or 5:30, my account representative 

19 . would send.me those reports. 

20 COMMISSIONER PETERSEN: Okay. 

21 MR. KAUFMAN: But at the same time, the 

22 Committee itsel f was maintaining records of receipts 

23 from donors — 

24 MR. BAUMAN: Correct. 

25 MR. KAUFMAN: — and reviewing those 
37 

1 reports. So they had kind of a running balance of 

2 what they thought was coming int o the account based on 

3 stuf f that they were tracking on thei r end and 

4 comparing with these reports that were being generated 

5 by the treasurer. 

6 COMMISSIONER PETERSEN: Okay. And jus t to 

7 the extent you know, how was — and you mentioned how 

8 thi s was, I mean, probably the most extensive and 

9 certainl y complex embezzlement scheme that we know of 

10 that's happened to date. How were those, again, to 

11 the extent you know, how were those numbers being 

12 manufactured to ensure that those were matching 

13 interna l records? 

14 MR. KAUFMAN: Well, for example, you know, 

15 again, from what we know and what we can piece 

16 together and what we've seen with other committees, 

17 you know, a contribution that was received by a credi t 

18 card, getting back to Commissioner McGahn's 

19 statements, and went int o thi s commingled account were 

20 being included on these financia l reports, but may 

21 never have found thei r way int o the Committee's bank 

22 accounts. 

23 MR. BAUMAN: Same with checks that were 

24 received. 

25 MR. KAUFMAN: Yeah, and checks that had been 
38 

1 received and such. So they may have been received, 

2 put on a report as received, put on the financia l 

3 records as i n the bank, but never found thei r way. I 

4 mean, we've seen jus t extraordinary things i n some of 

5 the transactions for these various committees. I saw 

6 one committee that had, not thi s committee, but 

7 another committee, where a $150,000 check was writte n 

8 from a committee's relate d account int o another 

9 relate d committee account. 

10 We even have a copy of the check that was 

11 provided to us a year ago, before thi s even came to 

12 light , that reflect s the deposit of that check i n the 

13 Committee's bank account. And yet, when al l of thi s 

14 came to light , that check was never deposited i n the 

15 Committee's bank account, despite the fact that we 

16 have some kind of doctored document that shows a 

17 deposit. I t has on the back a deposit stamp and a 

18 signature and everything else , was never deposited 

19 int o that bank account. 

20 So you know, thi s was al l numbers and the 

21 fact that i t may not have found it s way int o the bank 

22 account was not necessarily reflecte d i n the financia l 

23 reports that were provided. 

24 COMMISSIONER PETERSEN: Okay. Also, to pick 

25 up on, well , one of the las t things that you had 
39 

1 mentioned i n your statement and also Commissioner 

2 McGahn picked up on this , you know, the question of 

3 where do we go now. You raise d the issue about 

4 whether or not unauthorized transactions, i n thi s case 

5 which were embezzled, regarding embezzled monies, 

6 whether or not those should be considered receipts for 

7 disclosures that should be properly reported. 

8 The concern that arise s i n my head about 

9 that approach i s i f we adopted that approach, because 

10 there's a universe of unauthorized transactions and 

11 potentiall y embezzled funds would be one of those. 

12 And i f we adopted a rul e that sai d unauthorized 

13 transactions don't have to be reported, then we could 

14 end up with what committees are reporting on thei r 

15 disclosures as being cash on hand not matching up with 

16 what bank records might show. 

17 And so, at leas t i n my own mind, I'm 

18 wondering about the practicalit y of that versus, I 

19 think the larger point i s that, and maybe thi s i s 

20 reall y what you're drivin g at, i n thi s sort of a case, 

21 where you have a remarkable set of fact s where a very 

22 extensive embezzlement operation was going on, i f that 

23 is , i f it' s that sort of set of circumstances, which 

24 leads to reports not being accurate, should the 

25 Commission be taking that int o account, i n terms of 
40 

1 determining what, i f any, action we should be taking 

2 on the back end. 

3 This i s an issue that we've dealt with 

4 periodicall y with embezzlement, small and large scale, 

5 what do you do with the committee. My approach i s 

6 generally to take a lighte r touch with committees who 

7 have been subject to embezzlements. As Commissioner 

8 McGahn mentioned, I think that, i n thi s case, it' s 

9 committees lik e you that are the victims and even i f 

10 there are technica l violation s of the law, I think 

11 that i n terms of how we exercise our enforcement 

12 jurisdiction , I think that we need to reall y take that 

13 int o account. 

14 But jus t to dive back int o thi s lega l issue, 

15 i s i t your point that we shouldn't — how hard are you 

16 recommending that the Commission not consider these 

17 sorts of unauthorized transactions to be receipts or 

18 disbursements that don't need to be disclose d versus 

19 it' s the larger point that the Commission reall y needs 

20 to make sure that we take a full y fleshed-out, three21 dimensional realisti c view of the facts here before 

22 making any decisions about how we want to trea t thi s 

23 i n the audit context and i n the enforcement context. 

24 MR. KAUFMAN: I realiz e that what I'm saying 

25 about classifyin g these or not classifyin g these as 
41 

1 receipts and disbursements i s a rather, you know, 

2 extraordinary approach. I mean, you have to have 

3 accountability . But I do think that under these 

4 circumstances, under these narrow circumstances, you 

5 know, it' s something that you should look hard and 

6 fas t at. 

7 But I do think that the larger issue that 

8 you rais e i s most pertinent here and that i s how do 

9 you trea t thi s Committee, i n ligh t of the fact that i t 

10 has been victimize d and.in ligh t of the fact that — I 

11 mean, ultimately , you know, it' s les s important, I 

12 think, to the publi c to be able to identif y kind of 

13 how thi s money was moving around than to ensure that, 

14 you know, ultimately , the publi c has a view of what's, 

15 you know, what's i n the committee. 

16 What money does the committee have now and, 

17 you know, maybe the difference between where i t 

18 thought i t was and where i t i s now, and less about al l 

19 the various transactions that may have occurred with 

20 money in , money out, that — I mean, at the end of the 

21 day, it' s nice to be able to figure i t out, but what 

22 advantage do we gain from the disclosure of al l of 

23 that back and forth , when i n fact you know, the 

24 transactions aren't reall y signifyin g any activit y on 

25 behalf of the Committee. 
42 

1 I mean, it' s nice that the $35,000 payment 

2 went to the Pasadena United Democratic headquarters, 

3 but it' s not because i t was a contribution to that 

4 committee or thi s Committee was tryin g to, you know, 

5 give money to that committee. It' s because Ms. Durkee 

6 had a shortfal l on that end and, therefore, was moving 

7 money from one pot to another. So the mere fac t that 

8 the Committee may not have disclose d that transaction, 

9 I'm not sure what information that's givin g the 

10 public , that's helping the publi c assess the politica l 

11 activitie s of eithe r of those committees. 

12 COMMISSIONER PETERSEN: Thank you. 

13 CHAIR BAUERLY: Commissioner Weintraub? 

14 COMMISSIONER WEINTRAUB: Thank you. Madam 

15 Chair. Nobody i s disputing that these were 

16 extraordinary circumstances, and I think you're 

17 hearing sort of a consistent theme of interest s on the 

18 Commissioners' parts about interna l controls that you 

19 had i n place. So I think I would fin d i t helpfu l and 

20 perhaps some of my colleagues would, as well , if , i n 

21 the course of the next few weeks, you could pul l 

22 together for us a detaile d descriptio n of al l of the 

23 interna l controls that you had i n place or thought you 

24 had i n place. I think that would be helpfu l to us. I 

25 know i t would be helpfu l to me. 
43 

1 I mean, I think on the general question of 

2 whether you should disclos e the transactions, assuming 

3 you could figure them out, which, I think, you know, 

4 righ t now i s an open question. I t sounds like , you 

5 know, whether anybody wil l ever figure out exactly 

6 where al l thi s money moved to at any one time. 

7 I mean, I do think that i f I were a donor to 

8 thi s Committee, I would want to know what happened to 

9 my money. I do think there's a publi c interes t in , to 

10 the extent possible, tryin g to figure out what the 

11 heck happened and, you know, whether — lik e I said , 

12 whether that can be done. I t might take a forensic 

13 accountant to do it , but I think, you know, I would 

14 personally be supportive of tryin g to get as much 

15 information on the publi c record as i s possible about 

16 what actuall y happened here. 

17 And as my colleagues have noted, it' s an 

18 entirel y separate question whether, you know, you 

19 should be held accountable at some point, i n some way, 

20 for misstatements that may have occurred as a resul t 

21 of al l that. You know, that's a whole separate 

22 question. We're not there. We're tryin g to figure 

23 out what to do with thi s audit. 

24 And you may or may not know the answer to 

25 these and maybe you could fol d them int o thi s 
44 

1 descriptio n of the interna l controls, but di d you have 

2 a system i n place that required two signatures for the 

3 checks and was the Bank following that procedure? Or 

4 was the second signature forged? Or what was going on 

5 with that? 

6 MR. BAUMAN: The Bank has a polic y of not 

7 having a double signature policy . 

8 COMMISSIONER WEINTRAUB: That's unfortunate. 

9 MR. KAUFMAN: That's the answer to your 

10 question. And with respect to your other comments, I 

11 do want to be clea r about one thing. In response to 

12 the audit and at the request of the auditors, the 

13 Committee di d fil e amended reports that di d reflec t — 

14 COMMISSIONER WEINTRAUB: I appreciate that. 

15 MR. KAUFMAN: — the findings as stated i n 

.16 the audit report. There has been some disclosur e of 

17 payments, accurate or otherwise. You know, with 

18 respect to ultimatel y being able to report those 

19 transactions accurately, we'd lik e to be i n a positio n 

20 to do that. The dollar s involved i n tryin g to get to 

21 that point might be absolutely extraordinary. I mean, 

22 I suspect that, you know — -

23 COMMISSIONER WEINTRAUB: And I hear that, 

24 too. 

25 MR. KAUFMAN: — we're never going to be 
45 

1 able to get that — 

2 COMMISSIONER WEINTRAUB: I mean, i f i t would 

3 take, i f i t would cost a $1 millio n to figure out what 

4 happened to $4,000, that doesn't make a lo t of sense. 

5 MR. KAUFMAN: And I should add that, fo r 

6 what it' s worth, the Fai r Politica l Practices 

7 Commission, i n tryin g to grapple with some of this , 

8 has given — thi s i s the Californi a state agency 

9 dealing with state committees, has permitted 

10 committees to essentiall y reconcile thei r accounts 

11 between the money they thought was going to be there 

12 and the money that i s there by kind of creating block 

13 entrie s that indicat e that, the money was either , you 

14 know, money going out or money coming in , as a resul t 

15 of the misappropriation of funds by the former 

16 treasurer. .. 

17 COMMISSIONER WEINTRAUB: Now, i t sounds lik e 

18 what you were saying before was that the treasurer was 

19 creating fake bank statements, what looked lik e fake 

20 bank statements, showing deposits that didn't exist . 

21 But my question is , did , you can respond to that i n a 

22 second. But where I'm reall y going with thi s i s di d 

23 somebody other than the treasurer get monthly copies 

24 of the bank statements from the Bank? 

25 MR. KAUFMAN: I didn't mean to imply that 
46 

1 she was falsifyin g bank statements. That's not 

2 accurate. She was falsifyin g financia l records and, 

3 i n some instances, apparently, falsifyin g 

4 transactions. With respect to the bank statements, 

5 no, at the time, the bank statements were not going to 

6 persons other than her and people i n her office . So 

7 that's where part of the disconnect lies . The 

8 reconciliation s were going to the client , i n thi s 

9 case, the Committee, but the bank statements were not. 

10 COMMISSIONER WEINTRAUB: But if , for 

11 example, your lawyers had gotten copies directl y from 

12 the Bank of the bank statements and i t used those to 

13 tr y and reconcile the records they were getting from 

14 her, presumably, you would have caught on to thi s a 

15 lo t sooner. 

16 MR. BAUMAN: I want to say thi s 

17 respectfully , but for a committee that deals i n the 

18 leve l of dollar s that we do, we spent over, on an 

19 average year, $100,000 between treasury services and 

20 lega l oversight, i n an attempt to comply. I f you look 

21 at what the volume is , what the balances i n our 

22 Committee were, we were expending an extraordinary 

23 amount of money i n our best effor t to comply. The 

24 cost of thi s audit to us to date i s over $100,000. 

25 This i s not a committee that sit s with a 
47 

1 millio n dollar s i n it s account, nor i s i t a committee 

2 or group of officer s who, i n any way, was lax , because 

3 I personally take my reputation to be the one thing I 

4 have i n thi s game. Hence, the reason that we have 

5 what we believed was such sophisticated management of 

6 our money, of our reporting, and of our oversight, 

7 because, as you know, i n thi s trade, what do you have 

8 other than your reputation. So anyway, I'l l jus t 

9 leave i t at that. 

10 COMMISSIONER WEINTRAUB: And I don't mean to 

11 impugn anybody's reputation who i s sittin g here today. 

12 MR. BAUMAN: And I di d not take i t that way. 

13 COMMISSIONER WEINTRAUB: We want to tal k 

14 about people who aren't sittin g at the table . But you 

15 know, the people who are sittin g here today, I 

16 completely accept, you know, acted i n good fait h and 

17 were tryin g thei r best. And, Mr. Kaufman, you 

18 probably came i n long afte r al l thi s happened. But 

19 I'm tryin g to think — thi s has been a big problem for 

20 a lo t of committees. Obviously, you are not the only 

21 one that has had thi s problem. 

22 This particula r individua l victimize d a lo t 

23 of committees and we've had other individual s who have 

24 victimize d other committees, often individual s that 

25 were wel l known to the principal s and the managers of 
48 

1 politica l committees and obviously trusted, you know. 

2 I mean, we've had storie s of people who said , you 

3 know, thi s guy was my good frien d and look what he di d 

4 to me. You know, it' s a rea l sense of betrayal . 

5 So I don't, you know, ultimately , you've got 

6 to trus t somebody, right ? I mean, you can't, you can 

7 put i n a lo t of controls i n place, but ultimately , you 

8 have to trus t people to do the righ t thing and 

9 sometimes that trus t i s not wel l founded, as we al l 

10 fin d out to our misfortune. 

11 But I'm tryin g to figur e out, you know, what 

12 can we tell , how can we help committees to avoid these 

13 kinds of problems. One aspect of the safe harbor, and 

14 it' s jus t a safe harbor, it' s not a requirement, that 

15 the Commission offered i n 2007 was that bank 

16 statements be reviewed for unauthorized transactions 

17 and reconciled to the accounting records each month. 

18 Further, bank records are reconciled to disclosur e 

19 reports prio r to filing , and the reconciliation s are 

20 done by someone other than a check signer or an 

21 individua l responsible for handling the committee's 

22 accounting. 

23 Now, we didn't get, you know, int o the 

24 nitty-gritty , thi s i s a fairl y broad set of principle s 

25 that we put out there. But you know, i t seems to me 
49 

1 that one thing that reall y would have been helpfu l to 

2 you and, possibly, we should be more aggressively 

3 recommending i t to other committees going forward, i s 

4 to make sure somebody else i s getting i t straigh t from 

5 the bank and i s taking those, somebody who i s outside 

6 of the ambit of the person who i s otherwise doing your 

7 bookkeeping and writin g the checks, and that they're 

8 doing the cross-checks. 

9 Because, you know, you jus t could have saved 

10 yourself a lo t of heartache that way and I think a lo t 

11 of committees that — you know, i n retrospect, you 

12 know, that would have been better, right , i f we had 

13 caught thi s earlier . Nobody i s happy with where we 

14 are today. 

15 MR. KAUFMAN: And that's well-founded advice 

16 and, i n retrospect, one wishes that were the case. 

17 But again, i n doing thei r own interna l review and i n 

18 hirin g thi s professiona l and i n having the 

19 conversation with the professional , they were tol d 

20 that the functions for reviewing and reconciliatio n 

21 and checkwriting were being placed i n differen t people 

22 within the office . 

23 MR. BAUMAN: And for perspective, she had a 

24 staf f of 30 people. So I think that's important to 

25 note. I t made i t very believable when you went int o 
50 

1 an offic e that was a giant open offic e with cubicles 

2 al l around and there were clearl y delineated differen t 

3 people doing differen t things. I t wasn't lik e a one4 person shop. So you had a bookkeeper doing payables, 

5 receivables, writin g the checks, doing the reports. I 

6 mean, i t clearl y was delineated duties. 

7 COMMISSIONER WEINTRAUB: And do you think 

8 that there were differen t people who were doing these 

9 differen t functions? 

10 MR. BAUMAN: There were. That, I know, 

11 because I had to answer questions to differen t people 

12 depending on what was going on or my staf f did . So we 

13 knew that i t was very differen t people responsible for 

14 differen t parts. 

15 COMMISSIONER WEINTRAUB: So how di d the 

16 other people i n thi s organization — I guess we're al l 

17 stil l tryin g to figure out how thi s al l happened. 

18 MR. KAUFMAN: Yeah. I mean, as to your 

19 ultimate question, you know, when that bank statement 

20 . . came in , who was reviewing — you know, can we be 

21 sure, as we si t here today, that, you know, there was 

22 some delineation , we don't know. But I mean, at leas t 

23 with respect to the appearance of differen t people 

24 performing differen t tasks, I mean, clearly , there 

25 were differen t people preparing the reports, from 
51 

1 people dealing on the expenditure side, from people 

2 dealing with the contributions coming in , because they 

3 were dealing with differen t people for differen t 

4 functions. 

5 So there was no reason for them to question 

6 the fac t that there was a thir d person, you know, 

7 reviewing the bank statements. I can assure you that 

8 now the Committee i s receivin g it s bank statements. 

9 COMMISSIONER WEINTRAUB: So we jus t ~ I 

10 mean, do we stil l not know -- you know, was she 

11 pullin g the wool over the other people's eyes i n her 

12 organization or was she lik e stealin g the paperwork 

13 of f thei r desk, we jus t don't know? 

14 MR. KAUFMAN: We reall y don't. I mean, it' s 

15 

16 MR. BAUMAN: And those people have al l gone 

17 underground, to be quite honest. You cannot fin d 

18 them. One FBI agent calle d me, asked me i f I knew the 

19 home address of one of the employees. Coincidentally , 

20 I did, because i t was my account manager, but 

21 literally , they al l went underground because they're 

22 tryin g to avoid — 

23 COMMISSIONER WEINTRAUB: But don't get me 

24 wrong. I mean, I'm not tryin g to lay faul t at your 

25 door. I mean, thi s was quite an enterprise and many. 
52 

1 many people were taken i n by it . 

2 CHAIR BAUERLY: Just to follow up a littl e 

3 bi t on what Commissioner Weintraub said, I think that, 

4 and fortunately, we're al l learning some lessons from 

5 thi s case. And I think as we learn more and have some 

6 understanding of to what extent we will , i t might be 

7 useful for the Commission to take a look at that safe 

8 harbor and reall y see whether there are additiona l 

9 things to put i n or to make clearer . The safe harbor, 

10 I don't know, i t wasn't necessarily writte n with the 

11 idea of using a vendor, as was what happened i n thi s 

12 case. 

13 So i t might be, the fact that there were two 

14 people insid e the vendor looking at bank recs and 

15 doing the bank reconciliation , i t turns out doesn't 

16 help you when there's a massive fraud going on. I f 

17 it' s i n your own offices , you know, i f these were your 

18 staff , you would obviously have had a much better 

19 opportunity to understand what was going on. 

20 So I think that, I agree with Commissioner 

21 Weintraub, thi s is , when someone i s as determined as 

22 she was to stea l people's money, i t seems very 

23 difficul t to see how even the safe harbor could. But 

24 I, also, think that it' s important for us to think 

25 about the vendor context, because, as you point out. 
53 

1 she tol d you she had these things i n place, as I 

2 understand it , and, obviously, had been working with a 

3 number of other committees and I'm guessing you relie d 

4 on that, as well . 

5 MR. BAUMAN: Correct, and the range of 

6 committees that she represented ranged from, you know, 

7 Senator Dianne Feinstein, to Democratic clubs who, you 

8 know, have $500 a year i n tota l revenues. And 

9 additionall y victimize d i n thi s were several dozen 

10 small nonprofits for whom she provided business 

11 management services. So thi s has such a broad sweep 

12 and such an effect . 

13 And, you know. Commissioner Weintraub said 

14 that she wasn't tryin g to lay blame at me, but the 

15 realit y is , I'm the chair of the party. I'm 

16 responsible for what i t does and doesn't do. And I 

17 hold myself out and believe that the operation of the 

18 organization I run i s one of the best i n the country, 

19 i f not the best i n the country. So I can't tel l you 

20 the leve l that thi s discourages my ego to be i n thi s 

21 situation . And I say that, you know, not i n humor, 

22 even though I think it' s humorous. 

23 This i s very important to me and I think the 

24 publi c has a righ t to know what's going on i n campaign 

25 finance. I happen to believe i n disclosur e for the 
54 

1 simple reason that people question what i s going on i n 

2 thei r politic s and thei r government. I don't know — 

3 ultimately , my lawyer and the Commission and the 

4 auditors wil l have to figure out how we report this , 

5 but I know, to be sure, that thi s i s an 

6 extraordinaril y costl y venture and we wil l never be 

7 able to put back what i s gone. 

8 And, you know, you're triple-victimized . 

9 And I'm not, I mean, I have to liv e with that. I have 

10 to figure out how to get past that and I think that 

11 there are many hundreds of other individual s and 

12 organizations and candidates who wil l have to figur e 

13 out how to do the same thing. And quite frankly , I 

14 had a very pleasant tri p to Washington D.C. to meet 

15 with you all , but I would jus t have been happy to be 

16 i n Los Angeles where it' s warmer. 

17 CHAIR BAUERLY: We're sorry about the 

18 weather. We cannot actuall y do anything about that. 

19 MR. BAUMAN: No snow, though. I was hoping 

20 for one day of snow. 

21 CHAIR BAUERLY: Other further questions from 

22 Commissioners? Commissioner McGahn? 

23 COMMISSIONER MCGAHN: Thank you. I 

24 certainl y agree the L.A. County Democratic Party has a 

25 very good reputation of being a very efficien t and 
55 

1 wel l run politica l operation. And, again, I jus t — 

2 it' s horribl e what's happened to you and I can't 

3 express that i n any stronger terms. 

4 I f you do a monthly bank rec and someone 

5 else gets the bank statement, generally, that wil l 

6 catch a lo t of embezzlement. But i n your case, I'm 

7 not even sure that would have caught i t because you 

8 are a loca l party, you have your hard account, you 

9 probably have a nonfederal account. You may have 

10 multipl e nonfederal accounts because of your bi g donor 

11 thing i n California , right ? 

12 You have that weird thing where you cli p 

13 some money, right , that trick . And then, you have a 

14 Levin account and you have your overhead ratio . So 

15 you're moving money to make up your overhead rati o al l 

16 the time. You may do a fundraiser that may rais e 

17 money for al l three accounts. You have to figur e how 

18 to pay for that. Somebody has to be able to pul l the 

19 trigge r and move that money. Otherwise, well , then 

20 there's going to be a findin g that you didn't move the 

21 money within 60 days, plus or minus 10 and al l of 

22 that. 

23 So it' s not as simple as you get one bank 

24 statement and you look at one FEC report, yes, that 

25 matches. Even to do the bank rec i s a whole other 
56 

1 leve l of cost, simply because you guys play i n 

2 federal , state, and loca l elections , and you're 

3 subject to FEC, FCCP, IRS, loca l tax. So I'm jus t 

4 throwing i t out there, that i f you have any ideas i n 

5 your submission, you know, or maybe jus t to help the 

6 discussion fo r longer term, because I think we're 

7 transitionin g to how we fi x the problem i n the future 

8 now, how to do this . 

9 I mean, a bank rec helps, but, you know, 

10 there was a national party that was embezzled because 

11 they had a rogue finance fiel d person set up a ghost 

12 account, solicite d money, put i t i n the ghost account, 

13 and one of those big donors calle d the nationa l party 

14 to complain why didn't I get a thank you note. 

15 The national party said, what are you 

16 talkin g about, and lik e you, they kept records of 

17 thei r donors and they were able to catch the 

18 embezzlement. I t wasn't necessaril y embezzlement, i t 

19 was somebody settin g up a shel l account and then they 

20 caught the person because, well , the donor didn't get 

21 a thank you. That's sort of the more traditiona l 

22 stealing . 

23 This i s an insid e job. And it' s reall y 

24 tough because you have so many multipl e accounts and 

25 you have a federal law that says you have to have one 
57 

1 person i n charge of al l that to sign one report under 

2 oath. And when that person i s the bad apple, you're 

3 stuck. 

4 So now that we're stuck, now that we're al l 

5 i n thi s together, when you're a victi m of thef t and 

6 now you have to report al l of thi s stuff , you're sort 

7 of drivin g around i n the mud. Now you have to back up 

8 the car unti l you fin d some dry land, where you know 

9 the numbers balance. I'm not sure you can do that 

10 because, lik e I said at the beginning, you don't 

11 reall y have the bank on your side. 

12 The person with the records is , well , 

13 indicted . Everybody else now we know has gone 

14 underground and scattered because they're probably 

15 lawyering up, as well . You have the FBI probably 

16 asking a lo t of questions, tryin g to do a forensic , to 

17 tr y to figure out the crimina l case. You don't want 

18 to get i n the way of that. And then, you have, you 

19 know, the FEC coming i n with an audit. 

20 Can we fin d dry land on thi s and, i f not, i s 

21 there a place where.we can sort of start , do a reset, 

22 and figur e out a point for going forward reporting 

23 that i t can add i t up, so there's sort of one report 

24 that sort of says, embezzlement problem, cash on hand 

25 doesn't match the report, and we sort of do a reboot 
58 

1 i n going forward? Because, i f you can't fin d dry 

2 land, that's the only option. 

3 Can you maybe discuss that approach or how 

4 to get thi s going forward? Because you, also, need 

5 something to tel l the publi c and your donors, hey, 

6 credibilit y has been restored, our house i s i n order 

7 and we're so, i t touches on a lo t of levels . But 

8 maybe again, could you help us figure out how to do 

9 thi s i n a way that doesn't cost you another hundred 

10 grand when you're a loca l party that maybe does, what, 

11 700-800 grand a year? I mean, you're out of money i n 

12 a hurry here i f we keep messing around. So how do we 

13 get thi s fixe d and move on? 

14 MR. KAUFMAN: Believe me, I keep hearing 

15 from my clien t about how out of money they are every 

16 time I tal k about a bil l here. 

17 MR. BAUMAN: I'l l pay your bil l when I get 

18 my money back. 

19 COMMISSIONER MCGAHN: And the longer we si t 

20 here, sorry, the more money we're burning, but i t may 

21 be money wel l spent. 

22 MR. KAUFMAN: Again, to address your point, 

23 well , as I mentioned before, the Fai r Politica l 

24 Practices Commission has essentiall y proposed exactly 

25 that, kind of a catchup entry, to bring your campaign 
59 

1 reports int o balance with what the current situatio n 

2 actuall y i s and maybe doing a lump sum i n and out, to 

3 bring those reports current. 

4 So to address that part of the issue, I 

5 .think that's one way of dealing with it . Because we 

6 can si t here and tal k about, you know, tryin g to fin d 

7 every in-and-out transaction or how do you 

8 characterize thi s or how do you characterize that. 

9 But the point is , the money has gone out of the 

10 account, so how do we, you know, account for it . 

11 The other thing I should add i s that with 

12 the change, i t probably goes without saying, but, I 

13 mean, the Committee has opened up new bank accounts, 

14 new bank, fresh start . You know, we know how to track 

15 that activit y now. We know where we started afte r 

16 September 2nd and we know where we've gone from there. 

17 So you know, hopefully, it' s a new day and we're able 

18 to account for , you know, kind of where we're at. 

19 But there i s going to be a gap between 

20 whatever happened previously and where things stood on 

21 September 2nd, when the bank accounts became frozen, 

22 and we are going to have to deal with that. I mean, 

23 putting the audit aside, from 2007 to 2008, we have to 

24 deal with that when the Committee file s it s next 

25 report i n January, coming up soon, there's going to be 
60 

1 a gap that we can't resolve. So how do we do that? 

2 COMMISSIONER MCGAHN: Yeah, that's the 

3 question. 

4 CHAIR BAUERLY: Well, as ~ 

5 COMMISSIONER MCGAHN: This isn' t the time 

6 for us to decide. 

7 CHAIR BAUERLY: Well, it' s not, but also of 

8 course our Reports Analysis Divisio n has been working 

9 with lot s of committees on thi s problem and they have 

10 some solutions , includin g filin g Form 99 to explain 

11 what's going on. So I think that there's certainl y 

12 help availabl e to you and how to do that. 

13 COMMISSIONER MCGAHN: I t used to be when 

14 then Congressman, now Speaker Boehner had a problem, I 

15 recall , I think he had to go back three years and do 

16 amendments and that used to be, at least , the way RAD 

17 approached i t and I think they stil l do that i n some 

18 instances. I'm not sure you can go back three years 

19 and make amendments because you don't have the 

20 records, what the money went to. That may not be an 

21 option. But I'm certainl y open to the fresh star t 

22 idea, as the state agency i s doing. I don't see any 

23 other way around this . 

24 Now, how you guys do your report? That's a 

25 work i n progress and I hope everyone keeps an open 
61 

1 mind and works through this . But you do rais e a good 

2 point, you stil l have reports due and they're under 

3 oath and someone has to sign those. And al l of a 

4 sudden, you have the new person saying, how can I sign 

5 this . I know these numbers aren't right . So even 

6 though we don't decide that today, they have to decide 

7 i t pretty soon. So what do we do? We put an 

8 asterisk , it' s under oath, it' s close enough? I mean, 

9 it' s a very tough positio n you're in . 

10 And I do want to thank you for taking the 

11 time and the expense to fl y out here to tal k to us. I 

12 think it' s been very helpfu l for me and I think that 

13 it' s not a cheap trip . And the downside of givin g 

14 people the abilit y to come and have ora l presentations 

15 i n front of the Commission i s they actuall y come and 

16 do ora l presentations, and i f you're not a Beltway 

17 guy, it' s not cheap. 

18 So that's another cost you've endured to 

19 deal with thi s that I think needs to be put on the 

20 scale of things you've done to make thi s right . So I 

21 don't have any other questions, but we do have to 

22 figure out i n the short term, when i s your next report 

23 due? 

24 MR. KAUFMAN: In January. 

25 COMMISSIONER MCGAHN: Yeah, prett y soon. 
62 

1 Year End, right ? 

2 MR. KAUFMAN: Yeah. 

3 MR. BAUMAN: I t should be an interestin g 

4 year, a big hole i n the middle of it . 

5 CHAIR BAUERLY: Any other questions from 

6 Commissioners? 

7 (No further questions from Commissioners.) 

8 CHAIR BAUERLY: Any questions from the 

9 Offic e of the Staf f Director? 

10 MR. HINTERMEISTER: Yeah. I jus t wanted to 

11 get clarificatio n on jus t a couple of things i n your 

12 response, namely, on page 2, and earlie r you sai d that 

13 there's losses of approximately $200,000. Do you know 

14 the time period on that? Was that al l within the 

15 audit period or are we talkin g over a long period of 

16 time? 

17 MR. KAUFMAN: No, that amount, and again, 

18 that reflect s al l of the various accounts of thi s 

19 politica l organization, state and federal , that i s the 

20 difference between what the Committee understood or 

21 believed that was i n it s accounts as of September 2nd, 

22 and the amounts that were actuall y i n thei r accounts 

23 as of September 2nd. So we don't know the period of 

24 time that resulted i n that discrepancy. We don't know 

25 i f that relate s to transactions i n and out dating back 
63 

1 to 2007, 2008, '09, '10. I mean, we jus t know that 

2 that's an amount that the Committee's records — 

3 MR. HINTERMEISTER: Okay. 

4 MR. KAUFMAN: — are out of balance. 

5 MR. BAUMAN: And may I add jus t one thing, 

6 the other thing that we don't know i s i f there were 

7 expenses over the course of years that were paid, that 

8 might not actuall y have been our expenses — 

9 MR. HINTERMEISTER: Okay. 

10 MR. BAUMAN: — i f you follow what I mean. 

11 So we had an expectation, based on our balance sheet, 

12 of what was i n each account. We were given a number 

13 by the Bank of what was i n there. So those are the 

14 two numbers, as Mr. Kaufman referenced. Whatever 

15 might have happened prio r i n addition , I don't know. 

16 MR. KAUFMAN: I t could be attributabl e to 

17 contributions that never made i t int o the bank 

18 account. I t could be attributabl e to funds that were 

19 taken out of the bank account and put i n other 

20 clients ' accounts. I mean, i t could be attributabl e 

21 to a host of transactions. 

22 MR. HINTERMEISTER: Okay. And then my 

23 second question i s kind of i n response to Commissioner 

24 McGahn's comments, working backwards and tryin g to 

25 fin d dry land. Is that a possibilit y at all ? I mean. 
64 

1 jus t looking at the draf t audit report and looking at 

2 the adjustments that are i n there, i s there anyway 

3 that some of those misstatements were not tie d to the 

4 embezzlement and we could come to kind of a bright 

5 lin e between what was caused by the embezzlement and 

6 what was not caused by the embezzlement? 

7 MR. KAUFMAN: Unfortunately, I don't think 

8 we can answer that question with any certainty . I 

9 mean, I do think that I can say that unless we're al l 

10 going to be shocked, I can't imagine that the 

11 transactions that we're talkin g about here have to do 

12 with anything other than the embezzlement or the 

13 desire to cover up some other transactions. I mean, 

14 they don't make much sense and I think the auditors 

15 found that they didn't make much sense. 

16 MR. HINTERMEISTER: Okay. I don't have any 

17 further questions. 

18 CHAIR BAUERLY: Are there any questions from 

19 the Offic e of General Counsel? 

20 MR. HERMAN: We have no questions. Madam 

21 Chair. 

22 CHAIR BAUERLY: Okay, thank you. Mr. 

23 Kaufman, we allow the counsel for the Committee to 

24 conclude our hearing with any additiona l remarks, i f 

25 you have any. We've obviously gone on for an hour-
65 

1 and-a-half, so we've covered a lo t of ground. But 

2 please proceed i f you have anything further you would 

3 lik e to provide for the.Commission. 

4 MR. KAUFMAN: Thank you. I think we've 

5 covered most of the ground that needs to be covered. 

6 I jus t want to again thank the Commission for 

7 affording us thi s opportunity to explain the 

8 circumstances and t o hear us out on al l of the issues 

9 that thi s Committee has faced, I think as has been 

10 noted numerous times i n thi s hearing room. 

11 The L.A. County Democratic Party i s a victi m 

12 here and we hope that whatever way that the audit 

13 report ultimatel y gets issued, that i t reflect s the 

14 true set of circumstances and reflect s who was 

15 responsible for these transactions and the fact that 

16 thi s Committee, you know, had no knowledge or 

17 understanding of the transactions that are at issue 

18 and should not be held responsible for whatever 

19 failing s there may have been on the part of the 

20 Committee to report these transactions i n a.cc.ordance 

21 with the federal Electio n Law. 

22 So we appreciate the opportunity to be heard 

23 today. We are happy to come to Washington, D.C. and 

24 visi t your fai r cit y anytime. But, hopefully, i t wil l 

25 be under other circumstances i n the future. And we 
66 

1 thank you, again, fo r accommodating us on the 

2 scheduling of thi s hearing. 

3 CHAIR BAUERLY: Thank you. Thank you, both, 

4 for appearing before the Commission today. We 

5 appreciate the information and your presentation. 

6 This hearing i s adjourned. Thank you. 

7 (Whereupon, at 11:30 a.m., the hearing i n 

8 the above-entitled matter was concluded.) 

9 // 

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67 

DOCKET NO.: 

CASE TITLE: 

HEARING DATE: 

LOCATION: 

REPORTER'S CERTIFICATE 

A09-07 

Audit Hearing: Los Angeles County 

Democratic Committee 

December 14, 2011 

Washington, D.C. 

I hereby certif y that the proceedings and 

evidence are contained full y and accurately on the 

tapes and notes reported by me at the hearing i n the 

above case before the Federal Electio n Commission. 

Date: December 14, 2011 

Kyle P. Johnson 

Officia l ReporterHeritage Reporting 

Corporation 

Suite 600 

1220 L Street, N.W. 

Washington, D.C. 20005-4018