Final Audit Report of the 

Commission on the Los Angeles 

Coumty Democratic Central 

Committee 

January 1, 2007 - December 31, 2008 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(tiie Act). The 

Coinmission generally 

conducts such audits 

when a coinmittee 

appears not to have met 

tiie threshold 

requirements for 

substantial compliance 

witii tiie Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee (p. 2) 

Los Angeles County Democratic Central Committee is a local 

party committee headquartered in Los Angeles. Califomia. For 

more information, see the chart on the Committee Organization, 

p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions 

o Loans Received 

o Other Receipts 

o Transfers from Non-federal Funds 

o Transfers from Levin Funds 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Loan Repayments 

o Other Disbursements 

Total Disbursements 

• Levin Receipts 

• Levin Disbursements 

$ 297,749 

7.700 

10.025 

503,595 

38,845 

$ 857,914 

$ 787.495 

7.700 

79.573 

$ 874,768 

$ 153,473 

$ 156,930 

Commission Findings (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Misstatement of Levin Financial Activity (Finding 2) 

2U.S.C. §438(b). 
Final Audit Report of the 

Cominission on the 

Los Angeles Coimty Democratic 

Central Committee 

January 1, 2007 - December 31, 2008 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Scope Limitation 1 

Unauthorized Activity of Former Treasurer 1 

Audit Hearing 2 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity 3 

Part III. Sunrniaries 

Commission Findings 4 

Part rv. Commission Findings 

Finding 1. Misstatement of Financial Activity 5 

Finding 2. Misstatement of Levin Financial Activity 10 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Los Angeles County Democratic Central Committee 

(LACDCC), undertaken by tiie Audit Division of the Federal Election Commission (the 

Commission) in accordance with the Federal Election Campaign Act of 1971. as amended (the 

Act). The Audit Division conducted tiie audit pursuant to 2 U.S.C. §438(b). which permits tiie 

Commission to conduct audits and field investigations of any political committee that is required 

to file a report under 2 U.S.C. §434. Prior to conducting any audit under tiiis subsection, tiie 

Commission must perform an intemal review of reports filed by selected committees to 

determine whether the reports filed by a particular committee meet the threshold requirements 

for substantial compliance witii the Act. 2 U.S.C. §438(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated the following areas in 

this audit: 

1. the consistency between reported figures and bank records; 

2. the disclosure of individual contributors' occupation and name of employer; 

3. the disclosure of disbursements, debts and obligations; 

4. the disclosure of expenses allocated between federal. Levin and non-federal accounts; 

5. the completeness of records; and 

6. otiier committee operations necessary to the review. 

Scope Limitation 

The former treasurer of LACDCC operated an accounting firm that handled LACDCC's 

accounting, recordkeeping and reporting. The firm also acted as LACDCC's credit card 

processor. The same credit card merchant account was used to process contributions for 

LACDCC and a number of other clients. The Audit staff did not have access to complete records 

for this account and therefore was limited in its ability to verify the proper accounting of 

transactions relating to the account. 

Unauthorized Activity of Former Treasurer 

During tiie 2008 election cycle, LACDCC's former treasurer. Kinde Durkee. was also treasurer 

for many other committees registered witii the Commission. In addition to representing these 

committees as treasurer, her firm, Durkee & Associates, provided accounting services for these 

federal committees and numerous other state and local coinmittees. On September 2.2011. Ms. 

Durkee was arrested and charged with one count of mail fraud and accused of stealing $677,000 

from the campaign account of a Califomia state assembly member. The authorities conducted a 

review of her accounting business and on March 30, 2012, Ms. Durkee pleaded guilty to five 

counts of mail fraud. In her plea, Ms. Durkee admitted to defrauding more tiian 10 and maybe 

50 or more of her clients of at least $7,000,000. 

It is now known that between January 2000 and September 2011, Ms. Durkee, using her 

business. Durkee & Associates, intentionally defrauded her clients m the following ways. 
• Ms. Durkee routinely misappropriated client fiinds by moving, without 

authorization, substantial sums of money out of client accounts, including 

political campaign accounts, into Durkee & Associates' or into other clients' 

accounts. 

• Ms. Durkee submitted, and caused to be submitted, false information to the Califomia 

Secretary of State and tiie Commission. Specifically, she did not report tiiese money 

transfers in and out of accounts on the reports filed with the Califomia Secretary of State 

and tiie Commission on behalf of her clients. As a result, many of her clients believed 

that their campaign accounts held more money tiian they did. The misrepresentations 

made and facts omitted on these reports were material. The defendant understood that 

part of the scheme included submitting false information to the Califomia Secretary of 

State and the Conunission. 

• Ms. Durkee used the money transferred from client accounts: 

- to pay her personal expenses, including mortgage payments and credit 

card charges: 

- to pay business expenses, including payroll; and 

- to repay unauthorized withdrawals from other client accounts. 

LACDCC provided what documents and information it could obtain to support its belief 

that all the transactions underlying the findings in the report resulted from Ms. Durkee's 

unauthorized activity. Moreover, the kind of activities described in her plea agreement as 

outiined above could account for many of the problems identified durmg the audit and 

cited in this report. 

Audit Hearing 

LACDCC requested a hearing before tiie Commission to discuss new facts that had come to light 

as a result of Ms. Durkee's arrest on September 2. 2011. The Commission granted the request 

and held the hearing on December 14.2011. 

At the hearing. LACDCC representatives described the alleged embezzlement activity of their 

former treasurer and the known extent of the losses incurred by a number of her former client 

conunittees. They stated tiieir belief tiiat LACDCC ".. .lost almost $200,000. given all of tiieir 

accounts, which include state accounts and federal accounts." LACDCC representatives 

questioned whether the committee should be held responsible for reporting unauthorized and 

unknown transactions that it attributed to Ms. Durkee's alleged embezzlement scheme. They 

contend that the issues raised in the Audit report, in light of Ms. Durkee's arrest, did not 

accurately present LACDCC's financial activity. 

Subsequent to the audit hearing, LACDCC representatives provided a detailed discussion on the 

key misstatement components that were highlighted in the Audit report. LACDCC believed that 

all these transactions were the result of Ms. Durkee's embezzlement scheme and subsequent 

cover-up. LACDCC again questioned whether it should be held responsible for failing to report 

the unauthorized and unknown transactions attributed to the former treasurer. The supplemental 

information also included a description of the intemal controls that were in place during tiie 

period that the alleged misappropriations took place, as well as a description of the new 

safeguards and additional practices LACDCC has implemented to ensure greater accoimtability. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration September 6,1994 

• Audit Coverage January 1.2007 - December 31.2008 

Headquarters Los Angeles, Califomia 

Bank Information 

• Bank Depositories One 

• Bank Accounts Four (One Federal Account, One Levin 

Account and Two Non-federal Accounts) 

Treasurer 

• Treasurer When Audit Was Conducted Kinde Durkee^ 

• Treasurer During Period Covered by Audit Kinde Durkee 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid staff and volunteer 

Overview of Financial Activity 

(Audited Amounts) 

Federal Cash-on-hand @ January 1,2007 $ 18,888 

0 Contributions 297.749 

o Loans Received 7,700 

o Other Receipts 10,025 

o Transfers from Non-federal Funds 503,595 

o Transfers from Levin Funds 38,845 

Total Federal Receipts $ 857,914 

o Operating Expenditures 787,495 

o Loan Repayments 7.700 

o Other Disbursements 79,573 

Total Federal Disbursements $874,768 

Federal Cash-on-hand @ December 31,2008 $ 2,034 

Levin Cash-on-Hand @ January 1,2007 $ 381 

Total Levin Receipts $ 153,473 

Total Levin Disbursements $ 156,930 

Levin Cash-on-hand @ December 31,2008 -$ 3,076 

On September 8,2011, LACDCC filed an amended Statement of Organization to change Treasurers. 
4 

Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

A comparison of LACDCC's reported federal activity with bank records revealed a 

misstatement of cash-on-hand, receipts and disbursements in 2007 and 2008. In 2007. 

LACDCC overstated beginning cash-on-hand by $5,228. understated receipts by $8,920, 

understated disbursements by $9,311 and overstated ending cash-on-hand by $5,619. In 

2008. LACDCC understated receipts by $34,277 and disbursements by $33,410. and 

overstated ending cash-on-hand by $4,752. In response to the Interim Audit Report. 

LACDCC amended its reports to correct tiiese misstatements. 

The Audit staff also identified an apparent prohibited or excessive contribution contained 

in tiie 2008 misstated receipts. In response to the Interim Audit Report recommendation. 

LACDCC provided evidence showing that the receipts should not be considered 

contributions. 

The Commission approved a finding that LACDCC misstated financial activity for 2007 

and 2008. (For more detail, see p. 5.) 

Finding 2. Misstatement of Levin Financial Activity 

A comparison of LACDCC's reported Levin activity with bank records revealed a 

misstatement of cash-on-hand, receipts and disbursements in 2008. LACDCC 

understated receipts by $16,328 and disbursements by $101,669 and overstated ending 

cash-on-hand by $85,341. In response to the Interim Audit Report recommendation. 

LACDCC amended its reports to coirect tiie misstatement of Levin financial activity. 

The Commission approved a finding tiiat LACDCC misstated Levin financial activity for 

2008. (For more detail, see p. 10.) 
Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of LACDCC's reported federal activity with bank records revealed a 

misstatement of cash-on-hand, receipts and disbursements in 2007 and 2008. In 2007. 

LACDCC overstated begiiming cash-on-hand by $5,228, understated receipts by $8,920. 

understated disbursements by $9.311 and overstated ending cash-on-hand by $5,619. In 

2008, LACDCC understated receipts by $34,277 and disbursements by $33,410, and 

overstated ending cash-on-hand by $4,752. In response to the Interim Audit Report. 

LACDCC amended its reports to correct these misstatements. 

The Audit staff also identified an apparent prohibited or excessive contribution contained 

in the 2008 misstated receipts. In response to the Interim Audit Report recommendation. 

LACDCC provided evidence showing that the receipts should not be considered 

contributions. 

The Commission approved a finding tiiat LACDCC misstated financial activity for 2007 

and 2008. 

Legal standard 

A. Contents of Reports. Each report must disclose: 

• tiie amount of cash-on-hand at tiie beginning and end of the reporting period; 

• the total amount of receipts for tiie reporting period and the calendar year; 

• the total amount of disbursements for tiie reporting period and the calendar year; and 

• certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l). (2). (3). (4) (and (5). 

B. Receipt of Prohibited Contributions - General Prohibition. 

Candidates and committees may not accept contributions (in the form of money, in-kind 

contributions or loans) from the treasury funds of the following prohibited sources: 

• corporations (i.e. any incorporated organization, including a non-stock corporation, 

an incorporated membership organization or an incorporated cooperative); 

• labor organizations; or 

• national banks. 2 U.S.C. §441b. 

C. Extension of Credit by Commercial Vendor. 

A coinmercial vendor, whether or not it is a corporation, may extend credit to a candidate 

or political coinmittee provided that: 

• tiie credit is extended in tiie vendor's ordinary course of business (see below); and 
• tiie terms of the credit are similar to the terms tiie vendor observes when extending a 

similar amount of credit to a nonpolitical client of similar risk. 11 CFR §116.3(a) and 

(b). 

D. Definition of Ordinary Course of Business. 

In determining whether credit was extended in the ordinary course of business, the 

Commission will consider whether: 

• the commercial vendor followed its established procedures and its past practice in 

approving the extension of credit; 

• the commercial vendor received prompt, fiill payment if it previously extended credit 

to the same candidate or political committee; and 

• the extension of credit conformed to the usual and normal practice in the coinmercial 

vendor's industry or trade. 11 CFR §116.3(c). 

E. Party Committee Limits. 

A party conunittee may not receive more than $5,000 per year from any one contributor. 

2 U.S.C. §441a(a)(l)(C), (2)(C) and (f); 11 CFR §§110.1(d) and 110.9. 

F. Contributions by Limited Liability Companies (LLCs). 

A limited liability company is a business entity that is recognized as an LLC under the 

laws of tiie state in which it is established. An LLC tiiat elects to be treated as a 

corporation by the Intemal Revenue Service under 26 CFR 301.7701-3 shall be 

considered a corporation pursuant to 11 CFR Part 114. An LLC that makes a 

contribution to a candidate or committee shall provide information as to how the 

contribution is to be attributed and affirm that it is eligible to make the contribution. 11 

CFR §110.1(g). 

Facts and Analysis 

A. Facts 

The Audit staff reconciled the reported financial activity with the bank records for 2007 

and 2008. It determined that LACDCC misstated cash-on-hand, receipts and 

disbursements for both years. The following charts outline the discrepancies and provide 

explanations for the differences. 

2007 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1,2007 

$24,116 $18,888 $5,228 

Overstated 

Receipts $312,959 $321,879 $8,920 

Understated 

Disbursements $299,683 $308,994 $9,311 

Understated 

Ending Cash Balance 

©December 31,2007 

$37,392 $31,773 $5,619 

Overstated 
The understatement of receipts resulted from the following: 

• Offset to operating expenditures not reported 

• Unexplamed differences 

Net Understatement of Receipts 

The understatement of disbursements resulted from the following: 

• Disbursements not reported 

• Disbursements reported with incorrect amounts 

• Reported disbursements that did not clear bank 

• Reported voided disbursements 

Net Understatement of Disbursements 

+ $9,245 

325 

$8,920 

+ $847 

+ 9.389 

98 

827 

$9,311 

2008 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1.2008 

$37,392 $31,773 $5,619 

Overstated 

Receipts $501,758 $536,035 $34,277 

Understated 

Disbursements $532,364 $565,774 $33,410 

Understated 

Ending Cash Balance 

@ December 31.2008 

$6,786 $2,034 $4,752 

Overstated 

The understatement of receipts resulted from the following: 

• Unreported advance from credit card processor (see below) 

• Unreported transfers from non-federal account (see below) 

• Reported transfer from Levin fiind that was never made 

• Unexplained differences 

Net Understatement of Receipts 

+ $7,700 

+ 42.596 

16.272 

+ 253 

$34,277 

The understatement of disbursements resulted from tiie following: 

• Unreported repayment of advance from credit card processor 

• Unreported disbursements to credit card processor (see below) 

• Unreported disbursements 

• Reported disbursements with incorrect amounts 

• Reported disbursements that did not clear bank 

• Reported voided disbursements 

• Reported disbursement paid from Levin account 

Net Understatement of Disbursements 

+ 

+ 

+ 

+ 

$7,700 

15.000 

7.877 

26.873 

1.374 

66 

22.600 

$33,410 

LACDCC misstated tiie cash balances tiiroughout 2007 and 2008 due to tiie errors 

outlined above and unknown adjustments from prior reporting periods. LACDCC 

overstated the cash balance on December 31.2008. by $4,752. 
Advance from and Repayment to Credit Card Processor-$7,700 

LACDCC's federal account received advances from its accounting firm and credit card 

processor. Durkee & Associates, on credit card proceeds that were being delayed. The 

advances totaled $7,700 and occurred between December 22 and December 26. 2008. 

Durkee & Associates prepared and dated checks to repay the advances on the days it 

received them, but the checks did not clear tiie bank until Febmary 17,2009. LACDCC 

did not report the advances of $7,700 and the repayments of the same amount, as noted 

above. 

In addition to the reporting issues relating to these transactions, the Audit staff considered 

the $7,700 received from Durkee & Associates an advance or an extension of credit 

outside tiie ordinary course of business. See 2 U.S.C. § 431(8)(A)(i) or 11 CFR §§ 

100.55,116.1(e), 116.3. As such, tiie $7,700 received by LACDCC is a contribution and 

eitiier an excessive contribution of $2,700 ($7,700 less the allowable contribution limit of 

$5,000) or a prohibited contribution of $7,700. depending on whetiier Durkee & 

Associates, as a limited liability company, elected to be treated as a partnership or a 

corporation for tax purposes. 

Disbursed to Credit Card Processor-$15,000 

On December 31,2008, three checks totaling $15,000 were drawn from tiie federal 

account. Each check was payable to Durkee & Associates. LACDCC did not report the 

checks on its disclosure reports. LACDCC's former counsel explained that Ms. Durkee 

withdrew the funds from the federal account as part of the reconciliation process to 

identify possible errors involving the deposit of credit card contributions. LACDCC 

retumed the funds to the federal account once it determined that there were no problems 

with credit card contributions. As was the case with the redeposit of the $45,000 to the 

Levin account (see Finding 2) however. LACDDC re-deposited the $15,000 in the federal 

account montiis later. Durkee & Associates retumed the money in four increments 

between May and December 2009. 

Ms. Durkee provided a list of credit card contributions totaling $61,491 tiiat were 

deposited into tiie shared credit card merchant account and identified as contributions to 

LACDCC. These credit card contributions apparentiy represent the funds Durkee & 

Associates withdrew from LACDCC's bank accounts (Levin account ($45,000) and the 

federal account ($15,000)) while reconciling the credit card merchant account. Based on 

available records of Durkee & Associates, the Audit staff could not determine whether 

Durkee & Associates used LACDCC funds diuring the period it held them. 

Transfer from Non-federal Account-$15,000 

LACDCC failed to report a transfer received from its non-federal account m the amoimt 

of $15,000. According to LACDCC's former counsel, tiie $15,000 was erroneously 

transferred from LACDCC's non-federal account to its federal accoimt on December 31, 

2008. the same day it wrote the checks to the credit card processor. Without receipt of 

tiiis transfer, LACDCC's federal bank account would have had a negative balance of 

$7,044 on December 31, 2008. 
LACDCC transferred $15,000 on November 9.2009, to retum tiie funds to tiie nonfederal account. LACDCC's former counsel stated the purpose for the original transfer 

was unclear, and that no one from LACDCC's management was informed of, or 

consulted about, the erroneous $15,000 transfer or the retum of those funds. Rather. 

LACDCC management became aware of these transactions solely as a result of this audit. 

The Audit staff could not determine the reason for the transfer from the non-federal 

account based on available records. The Audit staff verified that the fimds were retumed 

to the LACDCC's non-federal accoimt. 

The non-federal account transferred less than its share of allocated federal/non-federal 

costs during the audit period. As such, the federal accoimt could have accepted the nonfederal transfer without resulting in overfunding. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff presented the misstatements noted above to LACDCC representatives, 

which included the former treasurer, Ms. Durkee^ of Durkee & Associates, during the 

exit conference. The representatives did not provide any information to explain the 

misstatements, but indicated that they would file amended reports to correct these errors. 

The Interim Audit Report recommended that LACDCC: 

• file amended reports to correct the misstatements; and. 

• amend the cash balance of its most recent report with an explanation that the 

amendments are due to audit adjustments from a prior reporting period. 

The Interim Audit Report furtiier recommended that LACDCC should also provide 

information conceming the $7,700 advance from its credit card processor to establish that 

it was made in the ordinary course of business. The information should include: 

• the specific terms that Durkee & Associates apply to such extensions of credit; 

• whetiier similar terms are offered to nonpolitical customers of similar size and 

risk of obligation; 

• the rationale for why Durkee & Associates chose the time it did to negotiate 

LACDCC's checks representing repayment;. 

• information about Durkee & Associates' tax status; and 

• any otiier information LACDCC believes might clarify the transactions. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation. LACDCC amended its reports, 

correcting the misreporting. Also, LACDCC amended tiie cash balance on its May 2011 

monthly report and noted that the adjustment was pursuant to the Audit staff's direction. 

To establish tiiat tiie advance of $7,700 from its credit card processor was made in tiie 

ordinary course of business, LACDCC's response explained that Durkee & Associates 

considered short-term advances to its clients as benefits encompassed in its 3 percent 

See "Unauthorized Activity of Former Treasurer" in the Background Section on page 1. 
10 

credit card transaction fee. It provided a listing of 45 short-term advances that Durkee & 

Associates made to both its political and non-political clients dating back to 2001. 

LACDCC sufficientiy demonstrated that the $7,700 from Durkee & Associates had a 

business purpose and was not for the purpose of influencing a federal election. As a 

result, the transaction is not considered a contribution. 

D. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report. LACDCC requested an audit hearing to 

discuss new issues related to this matter. 

E. Audit Hearing 

During tiie audit hearing, LACDCC representatives described the alleged embezzlement 

activity of their former Treasurer. Kinde Durkee. LACDCC representatives indicated 

tiiat transactions involved with the alleged embezzlement should not be characterized as 

activity of the committee and did not require reporting. Subsequent to the audit hearing. 

LACDCC provided a description of the intemal controls tiiat were in place during the 

period that the alleged misappropriations took place and addressed additional practices 

implemented to ensure greater accountability. 

Commission Conclusion 

On June 7.2012. the Commission considered the Audit Division Recommendation 

Memorandum m which the Audit staff recommended the Coinmission find that 

LACDCC misstated its financial activity for 2007 and 2008 including any transactions 

associated with the alleged embezzlement activity. 

The Commission approved tiie Audit staffs recommendation. 

Finding 2. Misstatement of Levin Financial Activity 

Summary 

A comparison of LACDCC's reported Levin activity with bank records revealed a 

misstatement of cash-on-hand, receipts and disbursements in 2008. LACDCC 

understated receipts by $16,328 and disbursements by $101,669 and overstated ending 

cash-on-hand by $85,341. In response to the Interim Audit Report recommendation. 

LACDCC amended its reports to correct the misstatement of Levin financial activity. 

The Commission approved a findmg that LACDCC misstated Levin financial activity for 

2008. 

Legal standard 

A. Reporting. 

If a state, district or local party conunittee's combined aimual receipts and disbursements 

for federal election activity {FEA) total $5,000 or more during tiie calendar year, tiie 

committee must disclose receipts and disbursements of federal funds and Levin funds 

used for FEA. 11 CFR §300.36 (b)(2). 
11 

B. Contents of Levin Reports. Each report must disclose: 

• the amount of cash-on-hand for Levin funds at the begiimmg and end of the reporting 

period; 

• tiie total amount of Levin fund receipts for the reporting period and the calendar year; 

• the total amount of Levin fund disbursements for the reporting period and the 

calendar year; and 

• certain transactions that require itemization on Schedule L-A (Itemized Receipts of 

Levin Funds) or Schedule L-B (Itemized Disbursements of Levin Funds). 11 CFR 

§300.36 (b)(2). 

Facts and Analysis 

A. Facts 

The Audit staff reconciled the reported Levin financial activity with the bank records for 

2007 and 2008. Staff determmed that LACDCC misstated cash-on-hand, receipts and 

disbursements for 2008. The following chart outlines the discrepancies for 2008 and 

provides explanations for the misstated Levin activity. 

2008 Levin Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

©January 1.2008 

$960 $960 $0 

Receipts $135,990 $152,318 $16,328 

Understated 

Disbursements $54,685 $156,354 $101,669 

Understated 

Ending Cash Balance 

©December 31. 2008 

$82,265 $(3,076)'' $85,341 

Overstated 

The imderstatement of receipts resulted from the following: 

• Unreported transfer from federal account 

• Unreported contribution 

• Refimd of contribution reported as a negative receipt instead 

of a disbursement 

Understatement of Receipts 

+ $6,328 

+ 5,000 

5.000 

$16,328 

The understatement of disbursements resulted from the following: 

• Unreported disbursements to Durkee & Associates (see below) 

• Unreported transfer to non-party committee (see below) 

• Otiier unreported disbursements 

+ $45,000 

+ 35,000 

+ 32,941 

^ The negative ending cash balance resulted from an outstanding check that was not negotiated until 

February 2009. During the period that it was outstanding, the Levin bank statements showed a positive 

cash balance. 
12 

• Disbursement incorrectly reported as transfer to federal account^ - 16.272 

• Refund of contribution reported as a negative receipt instead 

of a disbursement + 5.000 

Net Understatement of Disbursements $101,669 

LACDCC misstated its Levin ending cash balances for 2008 due to the errors outlined 

above. On December 31.2008. the conunittee overstated the Levin cash by $85,341. 

Amount Disbursed from Levin Fund-$45,000 

Between December 5 and December 22.2008. four checks made out to Durkee & 

Associates totaling $45,000 were drawn on the Levin account. LACDDC did not report 

the checks on its Schedule L. According to LACDCC's former counsel, Durkee & 

Associates closely examined its credit card merchant account^ at the end of 2008 and 

determined that a number of clients had received duplicate transfers relating to credit card 

contributions. Durkee & Associates concluded that reversing all credit card transfers 

made to its clients was the best way to avoid potential reporting issues. Durkee & 

Associates would then re-transfer tiie correct amount of credit card contributions based 

upon a reconciliation of its merchant account. 

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

audit period. As such, there seemed to be no reason for Durkee & Associates to 

withdraw funds from this account. LACDCC deposited credit card contributions into tiie 

federal account. However, between December 5 and December 22.2008. LACDCC did 

not have $45,000 in its federal bank account (See Finding 1. above). The $45,000 

withdrawn from the Levin account was not re-deposited until March 23. 2010. 

LACDCC made an earlier attempt to redeposit the money in March 2009. LACDCC's 

former counsel provided a check in the amount of $45,000 made out to the Levin Fund, 

along with a deposit ticket dated March 13,2009. However, this check never cleared and 

was not posted to the accoimt. 

LACDCC's former counsel stated that LACDCC management was not informed of, or 

consulted about, the $45,000 originally witiidrawn from the Levin Fund account, the 

merchant account check issued to LACDCC in March 2009 or the merchant account 

check issued to LACDCC in March 2010. LACDCC management became aware of 

these transactions only as a result of the audit. During audit fieldwork, the former 

^ LACDCC disbursed $22,600 from its Levin account to a vendor, but it reported this transaction as a 

$16,272 transfer to the federal account; this is the amount that could have been transferred from the Levin 

account had the disbursement been paid properly from the federal account. The $22,600 is included in the 

$32,941 of disbursements that were not reported. LACDCC also did not report the transfer of $6,328 - the 

federal share of the $22,600 expenditure - from its federal account to the Levin account. 

^ This merchant account was a shared account that received credit card contributions for LACDCC and 

Durkee & Associates' other political committee clients, many of which had the same treasurer as 

LACDCC. 
13 

treasurer, Ms. Durkee^ contended that Durkee & Associates had since improved its 

intemal controls to avoid this type of situation in the future. LACDCC forwarded a 

description of the intemal control improvements to the Audit staff. These intemal 

controls include general changes to accounting and recordkeeping procedures, but do not 

specifically detail procedures that would minimize the risk of commingling LACDCC 

proceeds with tiiose of otiier committees and Durkee & Associates. 

Amount Transferred from Levin Account-$35,000 

On November 25,2008. LACDCC made a transfer of $35,000 from tiie Levin account to 

a non-party committee, Pasadena Area United Democratic Headquarters (Pasadena 

United), which is another Durkee & Associates client. LACDCC did not report the 

transfer on its Schedule L. LACDCC's former counsel explained that the transfer was 

supposed to be made from Durkee & Associates' credit card merchant account to 

Pasadena United, but the funds were taken from tiie Levin account in error. 

The former Treasurer refunded the $35,000 to the Levin Fund account from the Durkee 

& Associates merchant account in three increments between December 17. 2009 and 

January 28.2010. The former Treasurer explained that this was more efficient than 

transferring $35,000 from Pasadena United to tiie Levin account and then transferring 

$35,000 to Pasadena United from the Durkee & Associates merchant account. The 

former Treasurer believed this was an appropriate resolution because the merchant 

account was the intended source of the funds. 

LACDCC's former counsel stated that no one from LACDCC management was informed 

of. or consulted about, tiie error, tiie method of reversing tiie erroneous transaction, the 

timing or reportmg of the error, the retum of fimds or any other aspect of the corrective 

effort imdertaken by the former Treasurer. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff presented the misstatements of Levin activity to tiie representatives for 

LACDCC during tiie exit conference. The representatives did not provide any 

information to explain tiie misstatements, but indicated that they would file amended 

reports to correct the errors. 

The Interim Audit Report recommended that LACDCC: 

• file amended reports to correct the misstatements of Levin activity; and. 

• reconcile the cash balance on its most recent report to identify any subsequent 

discrepancies that could affect the recommended adjustments to cash. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, LACDCC amended its reports 

correcting the misreporting. 

^ See "Unauthorized Activity of Former Treasurer" in the Background Section on page 1. 
14 

D. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, LACDCC requested an audit hearing to 

discuss new issues related to this matter. 

E. Audit Hearing 

During the audit hearing, LACDCC representatives described the alleged embezzlement 

activity of their former Treasurer, Ms. Durkee. LACDCC representatives indicated that 

transactions involved with the alleged embezzlement should not be characterized as 

activity of the committee and did not require reporting. Subsequent to tiie audit hearing. 

LACDCC provided a description of the intemal controls that were in place during the 

period that the alleged misappropriations took place and addressed additional practices 

implemented to ensure greater accountability. 

Commission Conclusion 

On June 7.2012, the Coinmission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended the Commission find that 

LACDCC misstated its Levin financial activity for calendar year 2008. 

Due to the extraordinary circumstances surrounding this audit, the Commission 

acknowledges that LACDCC may wish to file amended reports that would include 

additional clarifying language regarding the actions of the former treasurer relative to the 

previously undisclosed activity. 

The Commission approved the Audit staffs recommendation.