Democrats scramble to replace cash

Reporting from Washington and Sacramento —  A suspected embezzlement scheme that has ensnared hundreds of campaign accounts of Democrats has sent candidates scrambling for new cash as they prepare for an election season that could reshape California’s political landscape.

Just when they need to start hiring staff and commissioning polls, many candidates have no idea how much might have been taken from them or how much they have left, and they cannot find out: As many as 400 political accounts have been frozen by the banks holding the funds since the Sept. 2 arrest of treasurer Kinde Durkee.

She controlled funds for numerous politicians, predominantly Democrats, and it could be years before litigation sorts out who is owed what.

“It couldn’t happen at a worse time,” said Rep. Laura Richardson (D-Long Beach), who is expected to face Rep. Janice Hahn (D-San Pedro) in a tough June primary in a newly drawn district. “I hope for my sake, and for all of my colleagues, that we’re able to recoup the funds.”

More than a dozen state and federal candidates in next year’s election have had funds frozen. Scores of others who have not announced their plans or will not be on the 2012 ballot also employed Durkee, which complicates their efforts to promote themselves now by, for example, spending money to raise funds for future races.

Party officials may not be able to provide their usual help. The Los Angeles County Democratic Party lost $220,000 to Durkee and has $85,000 more stuck in related legal limbo. Durkee also handled the finances of numerous smaller Democratic clubs that provide campaign foot soldiers and are now scrambling to meet payroll.

Some lawmakers are taking dramatic action.

Rep. Loretta Sanchez (D-Garden Grove), a top target of Republicans next year after they took a drubbing in California in 2010, had $378,000 in cash as of June 30, according to her last public campaign finance report. That is as good as gone, she has told supporters. She is asking for help to replace it — as soon as possible.

“As we rebuild our campaign, it’s critical that we show we still have the financial strength to fend off Republican attacks,” she said in a note to backers after Durkee’s arrest.

“We have a report due September 30th to show our campaign’s cash on hand. If you are able to donate $10, $20, $100, or up to $5,000 to me today … it would go a long way to helping me continue to fight for you,” the note said.

U.S. Sen. Dianne Feinstein, who is up for reelection next year, had about $5 million in her campaign accounts when Durkee was taken into custody. The wealthy senator’s aides have said she plans to put an equal sum of her own money into her campaign.

“We will do what we have to do, believe me, to have a very strong campaign,” Feinstein said in a Capitol hallway interview.

On Friday, Feinstein’s campaign sued Durkee, her company and her bank, First California Bank, alleging that it ignored “numerous red flags” as the treasurer moved funds among accounts she controlled there.

Few candidates have Feinstein’s personal resources. California’s representatives in Washington say they may ask the Federal Elections Commission for leeway on campaign limits, which would allow them to go back to maxed-out donors to replenish their campaign coffers.

In Sacramento, the state Fair Political Practices Commission will meet this week to consider similar requests from state lawmakers.

“We’ve had a lot of candidates calling us about what they can do,” said commission Chairwoman Ann Ravel. “There is a lot of concern and fear.”

The Legislature and governor could also raise the contribution limits temporarily, Ravel said.

Durkee was arrested on one count of mail fraud and later released on $200,000 bond. The federal indictment against her says she moved $677,000 from one assemblyman’s campaign account and used it to buy such items as airline tickets, ice cream and food at a Disneyland restaurant.

The document says she has acknowledged taking clients’ money “for years.” Her attorney did not return calls from The Times.

Next year will be a double whammy for many California politicians, long nestled safely in lopsided districts drawn by the Legislature and needing few votes in partisan primaries to hold onto their seats. Now, the state’s political maps have been redrawn by a citizen commission to create more swing districts.

In addition, the top two vote-getters in primaries now will face each other in the general election, even if they belong to the same party. Many incumbents will have to ramp up spending on research, mail, campaign events and advertising. To do that, they’ll need cash.

As a freshman state legislator, Assemblyman Roger Hernandez (D-West Covina) may be a vulnerable target in this newly Darwinian environment. To protect himself, he had about $100,000 on hand for his reelection contest as of June 30, state records show.

Three weeks before Durkee’s arrest, he added to that with a $1,500-a-seat fundraiser at AT&T Park, where supporters watched the San Francisco Giants blank the Pittsburgh Pirates 6-0.

Now Hernandez is starting over, creating a new campaign account, hiring a new treasurer and contemplating more fundraisers.

“It’s very frustrating,” Hernandez said. “A hundred thousand dollars is a lot of money.”

State Sen. Lou Correa (D-Santa Ana) said he had hundreds of thousands of dollars in campaign funds under Durkee’s control and assumes that he won’t have access to that money for the foreseeable future. Correa will be termed out in 2014 and has his eye on a 2018 run for state attorney general.

“You’ve got to shake it off and move ahead,” Correa said. “On the positive, I’ve got my health. I’ve got a wonderful family.... I’ve got years to get back on my feet and six or seven years to raise the money I need” for a statewide run.

Los Angeles City Councilman Tom LaBonge’s campaign account is frozen, but he has not announced plans to run for anything. Nonetheless, Durkee also handled a political account he used to pay office expenses and support community groups, so he is scheduling a fundraiser to replenish it.

Richardson, the Long Beach congresswoman, said in an interview that she had to reach into her own pocket to pay $3,500 in campaign expenses because her regular account is frozen. Her potential top rival next year, Hahn, did not employ Durkee and has full access to her campaign coffers.

Adding to her woes, Richardson does not know what campaign finance numbers she is supposed to report to the Federal Elections Commission for the month.

“It’s going to be an ongoing problem for everybody,” Richardson said.

richard.simon@latimes.com

patrick.mcgreevy@latimes.com

Times staff writer Nicholas Riccardi contributed to this report.