KAUFMAN LEGAL GROUP 

A PROFESSIONA L CORPORATIO N 

October 6,2011 

Direct (213) 452-6550 

VIA EMAIL & FEDERAL EXPRESS 

Bill Antosz 

Audit Division 

Federal Election Cominission 

999 E Street NW 

Washington D.C. 20463 

Re: Los Angeles Countv Democratic Central Cominittee - C00300731 

Response to Draft Final Audit Report/Request for In-Person Hearing 

Dear Mr. Antosz: 

On behalf of the Los Angeles County Democratic Central Committee ("Cominittee"), we hereby 

formally respond to the Audit Division's Draft Final Audit Report, pursuant to Commission 

Directive 70 on Processing Audit Reports. Additionally, the Cominittee requests an in-person 

hearing before tiie Commission, in accordance with the Procedural Rules for Audit Hearings, as 

set forfh in tiie Federal Registers of July 10,2009 (Vol. 74, No. 131) and August 7,2009 (Vol. 

74, No. 151). 

Back^ound 

The Committee is currently undergoing an audit of its activities for tiie 2007-2008 election cycle. 

On September 2,2011, tiie Audit Division issued its Draft Final Audit Report ("Audit Report"), 

containing two findings: (1) misstatement of financial activity, and (2) misstatement of Levin 

financial activity. 

Since the issuance of the Audit Report, new facts have come to light that have changed the 

Committee's understanding of the transactions giving rise to the proposed findings. On 

September 2,2011, Kinde Durkee, the Committee's then treasurer (and tiie treasurer for tiie 

entire length of the audit period), was arrested by federal agents and subsequently formally 

charged witii mail fraud, in violation of 18 U.S.C. section 1341. (See Criminal Complaint, 

United States of America v. Kinde Durkee, September 2,2011, enclosed as Exhibit A.) 

The Criminal Complaint against Ms. Durkee alleges that Ms. Durkee engaged in a pattem of 

embezzlement, using her clients' funds to pay her personal expenses, and then subsequently 

transferring fimds between her clients' accounts in an effort to cover the resulting shortfalls. 

777 S. Figueroa Street, Suite 4050 Los Angeles, GA 90017 main 213.452.6565 £ax 213.452.6575 www.kauf1nanleg0lgroup.com 

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Bill Antoz, Audit Division 

Federal Election Commission 

October, 6,2010 

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According to the complaint, she covered up her embezzlement by filing false campaign finance 

reports. 

Since her arrest, it appears that Ms. Durkee, who served as a professional treasurer for hundreds 

of local, state, and federal candidates and committees, appears to have embezzled what is alleged 

to be millions of dollars from her clients, in what may be the largest fraud of this type to date. 

The scheme appears to have gone previously undetected for years. 

Based on infonnation obtained from Ms. Durkee's bank, it is now clear that the Coimnittee is 

among Ms. Durkee's vast number of victims. Between its federal and non-federal accounts, the 

Coinmittee estimates that it has lost approximately $200,000, based upon what it has been able to 

ascertain thus far. To make matters worse, the Committee's remaining funds, along with the 

fimds of a vast majority of Ms. Durkee's clients, have been frozen by her bank and made the 

subject of an interpleader action filed in Los Angeles County Superior Court. (See Complaint, 

First Califomia Bank v. 68^^ AD Democratic PAC et al. Case No. BC470182, filed September 

23,2011, enclosed as Exhibit B.) 

Immediately upon learning of Ms. Durkee's actions, the Coinmittee removed her as treasurer and 

retained our firm to replace its prior legal counsel in these proceedings. While the Coinmittee 

has obtained some limited financial information from the bank, it is still attempting to obtain 

complete infonnation to conduct a thorough review of its prior activities. Nonetheless, we detail 

below our reasons for requesting an audit hearing, and the changes that we propose to the Final 

Audit Report and the public record of this process: 

Discussion 

1. Proposed Audit Finding 1 - Misstatement of Financial Activitv 

Followmg Ms. Durkee's arrest, the Coinmittee reexamined the financial transactions that 

gave rise to the Audit Division's proposed findings. These transactions bear a striking 

resemblance to the transactions at issue in the Criminal Complaint. Based on our review 

of records we have been able to access thus far, it is clear that Ms. Durkee engaged in 

unauthorized transactions that had no relation to the Committee's activities. Although we 

are still in the process of piecing together Ms. Durkee's malfeasance with respect to the 

Committee's finances, it is clear that her unauthorized activities are fhe basis for most, if 

not all, of the misstatements that ultimately appeared on the Conunittee's campaign 

finance reports. 

The Audit Report contains a list of discrepancies resulting m the over and understatement of the Committee's cash balance, receipts and disbursements. From the list, the 

Audit Division discusses a series of checks totaling $15,000 that Ms. Durkee wrote to her 

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Bill Antoz, Audit Division 

Federal Election Commission 

October, 6,2010 

Page 3 of5 

business in December, 2008.^ These fiinds were eventually repaid to the Coinmittee by 

December, 2009. When asked about this set of transactions earlier this year, Ms. Durkee 

claimed that she removed the fimds from the Conunittee's bank account while conducting 

an audit of credit card contributions, and then repaid the amounts once her audit was 

complete. 

As noted in the Audit Report, none of these transactions were authorized or known by 

anyone in the Committee's leadership prior to the audit. While Ms. Durkee's imtial 

explanations seemed plausible at the time, the Committee now believes that they were 

part of Ms. Durkee's overall scheme of embezzlement and subsequent cover-up using 

funds that were comingled with others and records that were completely falsified. 

While the law requires the Committee to disclose its receipts and disbursements (2 U.S.C. 

§434(b)(l), (2) and (4); 11 C.F.R. §104.1 et seq.), these unauthorized transactions do not 

appear to be properly characterized as such. Ms. Durkee's apparent scheme to embezzle 

and cover-up her theft has no relation whatsoever to the Committee's activities. Thus, 

the Cominittee questions whether it should be held responsible for reporting the 

unauthorized and unknown transactions that are at the heart of this embezzlement 

scheme. 

2. Proposed Audit Finding 2 - Misstatement of Levin Financial Activitv 

With regard to fhe Levin account, the Audit Division pointed out several transactions that 

we now believe are directly traceable to Ms. Durkee's unauthorized manipulation of the 

Committee's accounts and records. 

Of these transactions, the Audit Division discussed two at length. The first was a series 

of checks written to Durkee & Associates from the Levin account in December, 2008, 

totaling $45,000.^ Ms. Durkee's purported reason for removing these fimds from the 

Levin account was the same as given for the $15,000 federal account transactions 

discussed above: an audit of credit card contributions. However, as the Audit Division 

pointed out, credit card contributions were not deposited into the Levin account during 

the audit period. Additionally, it appears that it took Ms. Durkee until March of 2010 to 

repay the fimds to the Levin account. 

The second set of transactions discussed at lengtii was a $35,000 transfer to fhe Pasadena 

United Democratic Headquarters ("Pasadena United") made in December, 2008, which 

was not completely repaid to the Levin account until January, 2010. Ms. Durkee 

explained the first transfer as an error. The Coinmittee learned of the transfer for the first 

time during the audit. At that point, she advised the Committee that the fimds were 

^ On the same day, Ms. Durkee made a mysterious, unreported, and unexplained transfer from the Committee's nonfederal account to die federal accoimt, without which the federal account may have been overdrawn. 

^ We note diat the checks used for these transactions break with the check nmnbering sequence by 1,000. The 

account later shows a retum to normal sequencing after these transactions. 

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Bill Antoz, Audit Division 

Federal Election Commission 

October, 6, 2010 

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supposed to have been transferred from her credit card processing account to Pasadena 

United; however, they were erroneously transferred &om the Levin account. 

Again, as pointed out in the Audit Report, none of these transactions were authorized or 

known by anyone in the Committee's leadership prior to the audit. The Conimittee now 

strongly believes that these transactions follow the same pattem of unauthorized shifting 

of fimds as are detailed in the Criminal Complaint, and as are evidenced by the financial 

records the Committee has reviewed thus far. Thus, the Committee again questions 

whether it should be held responsible for reporting these unauthorized and unknown 

transactions that are at the heart of the embezzlement scheme. 

3. Intemal Controls 

Up until the time of her arrest, Ms. Durkee maintained what appeared to be a professional 

operation designed to safeguard her clients' interests. Because of her experience and 

reputation, the Committee and many others entmsted her with their accounts. (See 

Sewell, Burbank Accountant Held in Fraud Case, L.A. Times (Sep. 5,2011), enclosed as 

Exhibit C.) In fact, at the time of her arrest, it was reported that Ms. Durkee had hundreds 

of client accounts under her control. (Id) 

The Coinmittee understood that Ms. Durkee's office divided up the financial and 

reporting tasks between her employees. An "account executive" was responsible for the 

day to day management of the Committee's finances, while another employee was 

responsible for preparing the Committee's campaign reports. The Committee was 

advised that account reconciliations were performed by a third Durkee employee. 

Payments were only permitted to be made if they were autiiorized by one of two 

designated officers of the Committee, neither of whom was employed by Ms. Durkee. 

The Committee received regular financial reports that tracked the Committee's internal 

records of its activities - as well as the Committee's disclosure reports. The disclosure 

reports were not only reviewed and signed by Ms. Durkee, but also were reviewed by the 

Committee's outside counsel. Thus, the Coinmittee believed that it had sufficient controls 

in place to avoid any misconduct. 

Despite these controls, it now appears that Ms. Durkee engaged in a complex 

embezzlement scheme that appears unmatched by any prior case on record. Because the 

Committee relied on the financial information that was purposely manipulated by Ms. 

Durkee, the Cominittee had no way to identify the malfeasance tiiat was occurring. The 

Committee has retained a new firm to provide its bookkeeping and compliance services, 

and is taking steps to ensure that the Commission's "Best Practices" are followed. 

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Bill Antoz, Audit Division 

Federal Election Coinmission 

October, 6,2010 

Page 5 of5 

Conclusion 

As stated above, the Committee's former treasurer has been charged wifh mail fraud and alleged 

to have embezzled millions of dollars from a wide range of clients. The Committee, along with 

many others, is a victim of her complex embezzlement scheme, and many of the transactions that 

are part of the Audit Report were neither authorized nor known to the leadership of the 

Cominittee prior to fhe audit. 

Therefore, the Committee believes the Audit Report, in its current form, does not adequately 

reflect tiie circumstances giving rise to the purported findings, and requests that the Commission 

revisit the issues raised in the Audit Report in light of the new facts presented by the Committee. 

We look forward to the opportunity to discuss these issues more fully at the requested hearing, 

and to respond to any questions that the Cominission may have. 

Should you require any additional infonnation, please feel free to contact me at (213) 452-6550. 

Very tmly yours. 

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