Feinstein Asks for Durkee Campaign Files

7/29/2019 Feinstein Asks for Durkee Campaign Files

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JOSEPH W. COTCHETT (SBN 36324)[email protected] L. FINEMAN (SBN 123870)[email protected] K. LIANG (SBN 228936)[email protected]

JUSTIN T. BERGER (SBN 250346)[email protected], PITRE & McCARTHY, LLPSan Francisco Airport Office Center840 Malcolm RoadBurlingame, CA 94010Telephone: (650) 697-6000Facsimile: (650) 692-3606

Attorneys for Plaintiffs

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

WILLIAM WARDLAW, FEINSTEINFOR SENATE COMMITTEE, and FUNDFOR THE MAJORITY COMMITTEE,

Plaintiffs,

vs.

U.S. DEPARTMENT OF JUSTICE,

Defendant.

Case No. ___________________

COMPLAINT FOR DECLARATORYAND INJUNCTIVE RELIEF

______________________________________________________________________________

COMPLAINT

Case 2:13-cv-00379-GEB-DAD Document 1 Filed 02/26/13 Page 1 of 89


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TABLE OF CONTENTS

I. JURISDICTION AND VENUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. Plaintiffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

B. Defendant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

III. FACTUAL BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

IV. CAUSES OF ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

FIRST CAUSE OF ACTIONADMINISTRATIVE PROCEDURE ACT5 USCS 706(2)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

SECOND CAUSE OF ACTIONADMINISTRATIVE PROCEDURE ACT5 USCS 706(2)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

THIRD CAUSE OF ACTIONADMINISTRATIVE PROCEDURE ACT5 USCS 706(2)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

V. PRAYER FOR RELIEF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

______________________________________________________________________________

COMPLAINT



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Plaintiffs submit this Complaint for Declaratory and Injunctive Relief. As grounds

therefore, Plaintiffs allege as follows:

I. JURISDICTION AND VENUE

1. This case arises under the United States Constitution and the laws of the United

States and presents a federal question within this Courts jurisdiction under Article III of the

United States Constitution and 28 U.S.C. 1331.

2. The United States has waived sovereign immunity pursuant to 5 U.S.C. 702.

II. PARTIES

A. Plaintiffs

3. Plaintiff William Wardlaw is a citizen of the State of California and a resident of

the County of Los Angeles.

4. Feinstein for Senate is a campaign committee registered with the Federal

Elections Committee as a principal campaign committee for the Honorable Dianne Feinstein.

5. Fund for the Majority is a campaign committee registered with the Federal

Elections Committee as a PAC for the Honorable Dianne Feinstein.

B. Defendant

6. Defendant U.S. Department of Justice is an agency of the U.S. Government.

The Department of Justices headquarters are located at 935 Pennsylvania Avenue, N.W.,

Washington, D.C. 20535. The United States Attorneys Office for the Eastern District of

California is located at 501 I Street, Suite 10-100, Sacramento, California 95814.

III. FACTUAL BACKGROUND

7. This is a collateral action brought pursuant to the Administrative Procedure Act,

to seek judicial review of the Department of Justices refusal to produce documents in response

to California state court subpoenas in the matters ofWardlaw v. First California Bank, Los

Angeles County Superior Court, Case No. SC114232 (hereinafter Wardlaw or the Wardlaw

proceeding) andFirst California Bank v. 68 A.D. Democratic PAC, Los Angeles Superiorth

Court, Case No. BC470182 (the Interpleader Action).

______________________________________________________________________________

COMPLAINT 1



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8. Wardlaw is a civil action brought on behalf of several victims of Kinde Durkee,

which seeks to recoup from Durkee, and others that have aided and abetted Durkee, losses

sustained as a result of Durkees conduct. The Wardlawproceeding alleges that Durkee and her

company, Durkee & Associates, LLC, embezzled millions of dollars from Plaintiffs, with the

assistance of Durkees partner, John Forgy, and First California Bank. A copy of the Complaint

is attached as Exhibit 1.

9. The Interpleader Action names as defendants the approximately 400 accounts

which Kinde Durkee controlled in whole or in part, including all of the accounts from which

Durkee embezzled funds. Plaintiffs counsel represents several victims of Durkee and

Defendants in the Interpleader Action, namely:

Latino Diabetes Association

Jose Solorio Assembly Officerholder Committee

Solorio for Assembly 2010

Solorio for Senate 2014

Prosperity for California

Los Angeles County Democratic Central Committee

Holden for Assembly 2012

Feinstein for Senate

Fund for the Majority

10. In March of 2012, the parties in the underlying civil actions stipulated to a

confidentiality agreement and obtained a protective order from the Superior Court. A copy of

the Stipulated Confidentiality Agreement and Protective Order is attached as Exhibit 2.

11. Based upon the same conduct as Wardlaw, Kinde Durkee is also the subject of a

pending criminal action in the case ofUnited States of America v. Kinde Durkee, Case Number

2:11-MJ-274-DAD, in the United States District Court for the Eastern District of California.

12. The subpoenas in the Wardlaw and Interpleader actions seek information

contained on the computer hard drives of Kinde Durkee (hereinafter Durkee Hard Drives)

______________________________________________________________________________

COMPLAINT 2



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which were seized by the Federal Bureau of Investigation in connection with the underlying

criminal investigation.

13. Plaintiffs counsel served United States Attorney Benjamin B. Wagner with two

subpoenas for the production of business records, issued from the Los Angeles County Superior

Court pursuant to 28 C.F.R. 16.21 et seq., in connection with each civil proceedings. The

subpoenas specified the information sought on the hard drives, as well the relevance and

necessity of the information for the civil actions. A copy of the Wardlaw subpoena is attached as

Exhibit 3 and a copy of the Interpleader subpoena is attached as Exhibit 4.

14. In response, the office of United States Attorney for the Eastern District of

California informed Plaintiffs counsel that due to Privacy Act concerns, the Federal Bureau of

Investigation and the Department of Justice could not release the information without an order

from a federal court of competent jurisdiction. Privacy was the sole basis for the Department of

Justices decision to withhold the information and constituted a final determination regarding the

release of the records. However, the United States Attorneys Office informed Plaintiffs that it

would not oppose Plaintiffs attempts to seek a court order compelling compliance.

15. Plaintiffs are informed and believe that Kindee Durkee is not individually

identified in a number of the files on the Durkee Hard Drives, and as such, her personal privacy

is not at stake. However, even if Kindee Durkee is individually identified, the evidence collected

by the Department of Justice is not maintained within a system of records which contains an

inherent indexing or retrieval system. The Durkee Hard Drives are not part of the files that the

Department of Justice maintains on Kindee Durkee, and do not fall within the ambit of the

Privacy Act.

16. Nonetheless, in accordance with the Privacy Act, Plaintiffs counsel made

repeated requests to Kinde Durkee in order to obtain her permission for the Federal Bureau of

Investigation to release the information contained on the Durkee Hard Drives, but Kinde Durkee

was non-responsive to all requests.

17. The information contained on the Durkee Hard Drives cannot be obtained from

any other source. The information contained on the Durkee Hard Drives is relevant to the

______________________________________________________________________________

COMPLAINT 3



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Wardlaw action as the Durkee Hard Drives contain evidence of Durkees pattern of conduct

whereby she used campaign funds from one account to cover her personal and business

expenses, and to reimburse other elected officials campaign funds from which she had also

embezzled.

18. Having exhausted all administrative remedies available to them, Plaintiffs now

seek vacation of the Department of Justices final determination to withhold the subpoenaed

evidence.

IV. CAUSES OF ACTION

FIRST CAUSE OF ACTION

ADMINISTRATIVE PROCEDURE ACT

5 USCS 706(2)(A)

19. Plaintiff incorporates and realleges, as though fully set forth herein, each and

every allegation set forth in the preceding paragraphs of this Complaint.

20. There are compelling reasons to justify the disclosure of the information

contained on the Durkee Hard Drives, whose disclosure may be ordered by this Court pursuant

to the Privacy Act. 5 U.S.C. 552a(b)(11).

21. Defendants final determination in refusing to produce the Durkee Hard Drives

may be reviewed by this Court. 5 U.S.C. 706(2)(A); 5 U.S.C. 706(2)(F). The need for

disclosure of the information outweighs any potential harm to Kindee Durkee.

SECOND CAUSE OF ACTION


5 USCS 706(2)(A)



23. The subpoenaed materials are not implicated by the Privacy Act, which only

proscribes agencies from disclosing records contained in a system of records. 5 U.S.C.

552a(b). The evidence collected from Kindee Durkees hard drives does not constitute a record,

and is not maintained within a system of records from which agency employees retrieve records.

______________________________________________________________________________

COMPLAINT 4



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24. Accordingly, Defendants final determination in refusing to produce the Durkee

Hard Drives based on the Privacy Act is arbitrary, capricious, and otherwise not in accordance

with the law, and may be set aside by this court. United States v. Williams, 170 F.3d 431, 434

(4th Cir. Md. 1999).

THIRD CAUSE OF ACTION


5 USCS 706(2)(A)



26. The outstanding protective order issued by the Superior Court of California for

the District of Los Angeles eliminates any potential privacy concerns the Department of Justice

relied upon in its final determination to withhold the subpoenaed materials.

27. Defendants final determination that there are operative privacy concerns despite

the controlling protective order is arbitrary, capricious, and otherwise not in accordance with the

law, and may be set aside by this court. United States v. Williams, 170 F.3d 431, 434 (4th Cir.

Md. 1999).

V. PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for judgment in its favor and against Defendant as

follows: (1) declare Defendants refusal to produce the information sought by the Wardlaw and

Interpleader subpoenas as arbitrary, capricious, an abuse of discretion, otherwise not in

accordance with the law, or unwarranted by the facts; (2) issue a court order compelling the

production of the information sought on the Durkee Hard Drives; (3) grant such other relief as

the Court may deem just and proper.

Dated: February 26, 2013 COTCHETT, PITRE & McCARTHY, LLP

By: /s/ Justin T. BergerJUSTIN T. BERGER

Attorneys for Plaintiffs

______________________________________________________________________________

COMPLAINT 5



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TABLE OF CONTENTSI. INTRODUCTION 1II. JURISDICTION AND VENUE 3III. THE PARTIES 4

A. PLAINTIFFS 4B. DEFENDANTS 5C. AGENCY, CONSPIRACY, AND AIDING AND ABETTING 6D. UNNAMED PARTICIPANTS 6E. DOE DEFENIJANTS 7

IV. FACTUAL BACKGROUND 7A. KINDE DURKEE & DURKEE & ASSOCIATES WERE TRUSTEDAND WELL-REGARDED 7B. DURKEE'S WORK FOR THE FEINSTEIN COMMITTEES 8C. DURKEE'S THEFT FROM THE FEINSTEIN COMMITTEES . , 10D. FIRST CALIFORNIA BANK HAD KNOWLEDGE OF DURKEE'SSCHEME AND KNO\VINGLY PROVIDED S"LTBSTANTIALASSISTANCE . , 16

1. First California Bank Intentionally Ignored Multiple Red Flagsand Had Knowledge of the Fraud 162. First California Bank Violated Office of ControllerGuidelines For Check-Kiting Detection 253. First California Bank Violated Federal Financial InstitutionsExamination Council's Guidelines by Intentionally Failing toReport DURKEE or Halt Her Activities 274. First California Failed to Follow Its Own InternalOperations Manuals and Shielded DURKEE's Activities fromthe California Department of Financial Institutions 295. First California Violated Its Own Terms and Conditions forBusiness Accounts " 31

E. FIRST CALIFORNIA BANK ACKNOWLEDGES THATDURKEE MISAPPROPRIATED AND CO-MINGLED FUNDS,YET REFUSES TO GIVE DURKEE CLIENTS ACCESS TOTHEIR OWN FUNDS 33

COMPLAINT



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VII. CAUSES OF ACTION " 34FIRST CAUSE OF ACTIONFRAUD AND DEC:EIT~ ~ ~ 5 ~ s s \ ~ o ) e ~ ~ ~ n ~ ~ ~ ~ ~ ~ . ' ? ~ . ~ ' . ~ ? ~ ~ : ~ ' . ~ ~ ~ ~ ~ ' 34SECOND CAUSE OF ACTIONCONVERSION~ ~ ~ 5 ~ S s \ ~ O ) e ~ ~ a ~ 1 ~ ~ ~ ~ ~ . ' . ~ ~ . ~ ' . ~ ? ~ ~ ~ ' . ~ ~ ~ ~ ~ ' 35THIRD CAUSE OF ACTIONBREACH OF CONTRACT~ ~ ~ 5 ~ S s \ ~ ) f e . ~ ~ a . n . t ~ ~ ~ ~ . ' . ~ ~ . ~ ' . ~ ? ~ ~ ~ ' . ~ ~ ~ ~ ~ ' 36FOURTH CAUSE OF ACTIONBREACH: OF THE IMPLIED COVENANT OFGOOD FAITH AND FAIR DEALING~ ~ ~ 5 ~ S s \ ~ ) f e . ~ ~ ~ n . t ~ ~ ~ ~ ~ . ' . ~ ~ . ~ ' . ~ ? ~ ~ : . ' . ~ ~ ~ ~ ~ ' 37FIFTH CAUSE OF ACTIONA1DING A.ND ABETTING :FRAUD~ i ~ d ~ b ~ s s 1 ~ o ) e ~ ~ a . n ~ ~ ~ . I ~ . s . ~ ~ ~ ~ ~ ? ~ ~ ~ ~ . ~ ~ 38SIXTH CAUSE OF ACTIONAIDING AND ABETTING CONVERSION~ l ~ d ~ b ~ s s 1 ~ o ) e ~ ~ a . n . t ~ ~ . I ~ . ~ ~ ~ ~ ~ ~ ~ ? ~ ~ ~ . ~ ~ . ~ 39SEVENTI-I CAUSE OF ACTIONVIOLATION OF BUSINESS AND PROFESSIONS CODE& 17200 et s e UNLAWFUL;.,FRAUDULENT, AND UNFAIRBUSINESS ACTS AND PRALTICES(As Against All Defendants) 41EIGHTH CAUSE OF ACTIONDECLARATORY RELIEF(As Against FIRST CALIFORNIA BANK and DOES 5-10) 42

PRAYER FOR :RELIEF 43JURY DEMAND 45

COMPLAINT 11



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Plaintiff\Villiam Wardlaw, as the Treasurer for Feinstein for Senate and theFund for the Majority, Feinstein for Senate Committee, and Fund for the MajorityCommittee (hereinafter collectively referred to as "Plaintiffs"), hereby bring thisaction for damages and relief against Defendants First California Bank, Durkee &Associates, LLC, Kinde Durkee, John Forgy, and Matthew Lemcke for violationsof California cornman law, as well as violations of the California UnfairCompetition Law ("UCL") (Bus. & Prof. Code 17200, et seq.). Plaintiffscomplain and allege upon information and beliefbased, inter alia, uponinvestigation conducted by Plaintiffs and their counsel, except as to thoseallegations pertaining to Plaintiffs personally, which are alleged upon knowledge.All claims are based upon Californ ia state law.I. INTRODUCTION

1. On Friday, September 2, 2011, federal agents arrested Kinde Durkee("Durkee") in Burbank, California for mail fraud. Durkee was a long-timecampaign treasurer and financial manager for political campaigns and non-profitorganizations. For over 20 years, Durkee held herself out as a campaign treasurerand financial manager with significant experience in accountancy, from which shebuilt legitimacy for herself and her company within the campaign and non-profitworlds. Durkee had served as the campaign treasurer for dozens of politicalcampaigns over the years and was well-known and well-respected in politicalcircles in California.

2. Sadly, Durkee and her company betrayed that respect and trust.According to a federal criminal cOlnplaint filed against her by the United StatesAttorney General, Durkee has embezzled millions of dollars over the years fromher clients. As described by U.S. Representative Susan Davis of San Diego, itnow appears that Durkee was "the Bernie Madoff of campaign treasurers."

3. In the days following her arrest, as Durkee's web of deceit began tounravel, it soon became apparent that there were a number of victims ofDurkee'sCOMPLAINT 1



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fraud, including three canlpaign accounts ofUnited States Senator DianneFeinstein, the long-time Senator for California. Senator Feinstein's strong base ofsupp011ers is the result of her dedicated service to Californians and the Americanpublic. The fraud alleged herein constitutes not only the personal betrayal ofSenator Feinstein, but also an unforgivable crime against the public trust and themillions ofCalifornia citizens who have long supported Senator Feinstein andother public officials and non-profits in this State.

4. From an office in Burbank, California, Durkee operated andmasterminded a multimillion dollar fraudulent scheme. Her company, Durkee &Associates ("D&A") was a front for the scheme. Durkee and her partner, JohnForgy ("Forgy"), as well as her business associate Matthew Lemcke("Lemcke"), all conspired and agreed to take part in and assist this fraudulentscheme. A fraudulent scheme of this size and scope took a number of people andentities to operate.

5. The scheme also required the assistance ofwilling financialinstitutions. In this case, First California Bank was at the heart of the illegaltransfer ofmoney out of Plaintiffs' accounts. Indeed, First California Bankrecently summed it up best, sending a letter to various accounts customers,acknowledging that,

. . . it appears that Durkee had comingled funds belonging tovarious aifferent campaigns and organizations and had madetransfers between accounts on whicll Durkee had signingauthority.We concluded that there was a very high likelihood that thebalance credited to any: given account aid not representa c c u r a t e ~ y tqe funds, if any, actually b e l ~ : m g ~ n g to the c a m p ~ i g n or orgamzatlOn on the account. In certaIn CIrcumstances, It ISapparent that account balances contained funds that hadpreviously been credited to non-related accounts. Theseconditions appeared to be pervasive in the Durkee controlledaccounts.

6. Despite knowledge of this pervasive pattern ofmisconduct, FirstCalifornia Bank continued to provide banking services to Durkee and Durkee &COMPLAINT 2



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Associates, LLC for many years, happy to collect the fees and interest generatedby the scores of accounts Durkee nlaintained at the Bank. Investigation will revealother professionals, including attorneys, accountants, and additional banks hadfull knowledge of the wrongful acts committed by D&A and the individuals.

'7. For years, Durkee and others took advantage of their positions of trustthey were privileged to hold to secretly siphon off money that was intended tosupport causes that are important to the American people. Over the last two yearsalone, it is estimated that Durkee and her co-defendants stole millions of dollarsfrom at least two of Senator Feinstein's campaign committees, Feinstein for Senateand Fund for the Majority (hereinafter, "the Feinstein Committees"). In the wakeof this massive fraud, investigators are still working to determine the full extent ofthe harm intlicted by the defendants on the Feinstein Committees and many otherentities, including numerous non-profit organizations.

8. What is clear, is that Durkee and her cohorts - each with the fullknowledge of the other - abused the trust she gained over decades in the politicaland non-profit world, in order to steal millions of dollars from innocent Americanswho have supported the lifetime of good works performed by committedindividuals like Senator Feinstein and other public servants and entities. By filingthis Complaint, Plaintiffs seek to obtain justice for all who have contributedmoney in support of Senator Feinstein, other elected officials, and the dozens ofnon-profits Durkee has defrauded.II. JURISDICTION AND VENUE

9. Defendants, and each of them, are subject to the jurisdiction of thisCourt by virtue of their business dealings and transactions in California, by havingcaused injuries through their acts and omissions throughout the State of California,and by their violation of California common law. Defendant Durkee &Associates, LLC S principal place of business is at 1212 South Victory Boulevard,

COMPLAINT 3



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Burbank, California. Defendants Kinde Durkee, John Forgy, and MatthewLemcke are all California citizens who reside in the State of California.

10. This Court has subject matter jurisdiction over all causes of actionasserted herein pursuant to Article VI, 10 of the California Constitution. Eachcause of action asserted, including claims alleging violations of Californiacommon law, arise exclusively under the laws of the State of California.

11. The damages suffered by Plaintiffs exceed this Court'sjurisdictional minimum.

12. Each Defendant has suffIcient minimum contacts with California, is acitizen of California, is registered to conduct business in California, has propertyin California, or otherwise purposefully avails itself of benefits from California soas to render the exercise of jurisdiction over it by the California courts consistentwith traditional notions of fair play and substantial justice.

13. Venue is proper because the First California Bank branch at whichthe Feinstein Committees' accounts v",ere held, and through which Defendantsoperated the scheme, is located in L,os Angeles County, in the West Division.Furthermore, the headquarters of Defendant Durkee & Associates, LLC is locatedin Burbank, California, which is located in the County of Los Angeles. Thecampaign accounts that the Defendants embezzled monies from were all located inthe County of Los Angeles. The Defendants all reside in or around the County ofLos Angeles. The wrongful acts alleged in this case all occurred in the County ofLos Angeles. Venue is proper in the County of Los Angeles Superior Court.III. THE PARTIES

A. PLAINTIFFS14. Plaintiff William Wardlaw is a citizen of the state of California and

a resident of the County of Los Angeles.

/ / /

COMPLAINT 4



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15. Feinstein for S { ~ n a t e is a campaign committee registered with theFederal Elections Committee as a principal campaign conunittee for the HonorableDianne Feinstein.

16. Fund for the lVlajority is a campaign committee registered with theFederal Elections Committee as a PAC for the Honorable Dianne Feinstein.B. DEFENDANTS17. Defendant Durkee & Associates, LLC ("D&A") is a California

limited liability corporation 'with a principal place of business in Burbank,California. D&A is a business management firm that specializes in political, nonprofit and small business accounting and financial management. D&A wasincorporated as a California LLC on September 22, 2003.

18. Defendant First California Bank is a California bank headquarteredin Westlake Village, California and at all times maintained an office in LosAngeles County. First C a l i D ~ ) r n i a Bank is a full-service commercial bankchartered under the laws of the State ofCalifornia and is subject to supervision bythe California Departlnent ofFinancial Institutions. The Federal DepositInsurance Corporation insures the Bank's deposits up to the maximum legal limit.First California Bank is a wholly-owned subsidiary of First California FinancialGroup, Inc. (NASDAQ: FCAL).

19. Defendant Kinde Durkee ("DURKEE"), founder and member ofD&A, is a citizen in the State of California and a resident of the County ofLosAngeles.

20. Defendant John Forgy ("FORGY"), a partner at D&A, is a citizenof the State ofCalifornia and a resident of the County ofLos Angeles.

21. Defendant Matthew Lemcke ("LEMCKE"), Manager of ClientServices at D&A, is a citizen of the State ofCalifornia and a resident of theCounty ofLos Angeles. LEMCKE has been employed by D&A since 2001, and

COMPLAINT 5



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was responsible for reviewing client financial reports before submission to uppermanagement including DURKEE.

C. AGENCY, CONSPIRACY, AND AIDING AND ABETTING22. At all times relevant to this Complaint, Defendants, and each of them,were acting as the agents, servants, elnployees, joint venturers, and/or

representatives of each othee, and were acting within the course and scope of theiragency, employrnent and/or joint venture, with the full knowledge, consent,permission, authorization and ratification, either express or implied, of each of theother Defendants in performing the acts alleged in this Complaint.

23. Defendants, and each of them, participated as members of aconspiracy and/or aided and abetted one another in furtherance of the schemesherein alleged, or assisted one another in carrying out the purpose of theconspiracy alleged herein, and have performed acts and made statements infurtherance of the conspiracy in violation of California law. Each of theDefendants acted both individually and in concert with the other Defendants withfull knowledge of their respective wrongful conduct. As such, the Defendantsconspired together, building upon each other's wrongdoing, in order to accomplishthe acts outlined in this Complaint. Defendants are individually sued asprincipals, participants, and/or as aiders and abettors in the wrongful conductcomplained of, and the liability of each arises from the fact that each has engagedin all or part of the improper acts, plans, schemes, conspiracies, or transactionscomplained of herein.

D. UNNAMED PARTICIPANTS24. Numerous individuals and separate business entities participated

actively during the course of and in furtherance of the wrongdoings alleged, andmany acts were done in the course of: and in furtherance of, the conspiracy withintent to defraud. The individuals and entities acted pursuant to agreement and in

COMPLAINT 6



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concert with each other. They also acted as agents for principals, in order toadvance the objectives of the conspiracy.

E. DOE DEFENDANTS25. The true names and capacities, whether individual, corporate,

associate, or otherwise, ofDefendants Doe 1 through Doe 5, inclusive, areunknown to Plaintiff, who therefore sues said Defendants by such fictitious namespursuant to Section 474 of the California Code ofCivil Procedure. Plaintiff isinfomled and believes, and on that basis alleges, that each of said fictitious DoeDefendants is in some manner responsible for the acts, conduct, and occurrencesalleged herein, as either actual perpetrators or co-conspirators, aiders and abettors,or prirnary officers and/or managers with knowledge and control of theperpetrators' activities. Plaintiffs will seek leave of the Court to amend thisComplaint to allege the true names and capacities of the Doe Defendants when thesame are ascertained, as well: as the manner in which each fictitious Defendant isresponsible for the damages sustained by Plaintiff.

26. Bank Doe Defendants Doe 6 through Doe 10 are financial institutionsat which DURKEE, D&A, and/or the other named Defendants maintainedaccounts into which Plaintiffs' funds were transferred, misappropriated, or comingled, without authorization, or which otherwise knowingly providedDefendants with substantial assistance in the course of their scheme.IV. FACTUAL BACKGROUND

A. KINDE DURKEE & DURKEE & ASSOCIATES WERETRUSTED AND WELL-REGARDED

27. DURKEE is a veteran campaign treasurer who resides at 3907 LewisAvenue in Long Beach, California, a property she owns along with her husbandand business partner, John Forgy. Durkee is also reported to own another propertylocated at 1212 South V i c t o l ~ Y Boulevard, in Burbank, California, also with JohnForgy, which is the headquarters ofD&A. D&A is also reported as having anCOMPLAINT 7



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additional address at 601 South Glen Oaks Blvd., Suite 211, Burbank, CA 91502,and owns numerous other properties.

28. According to reports, DURKEE began her career in campaign financein the 1970s on various campaigns, as a protege of veteran campaign treasurerJules Glazer. Due to the relative dearth of professional campaign treasurers in thestate, DlJRKEE and D&A quickly garnered a great number of clients, whom theyhave maintained over the years, without raising suspicions. As a professionalcampaign treasurer, D&A functioned as a banker and accountant, which involvedkeeping track of all of the incoming and outgoing funds and following state andfederal guidelines for campaign finance reporting. Professional campaigntreasurers typically have full control of a candidate's political accounts.

29. In addition to serving as treasurer for numerous campaign committeesover the years, DURKEE and D&A rnanaged the finances of dozens of non-profitcorporations which include

30. Bef()fe her arrest, DURKEE, through D&A, had signing authorityover 400 committee and nonprofit bank accounts. Since 1972, she has workedfor 5 presidential campaigns and 4 gubernatorial campaigns. In addition,DURKEE, through D&A, has worked as treasurer for numerous senate,congressional, state and local candidates. DURKEE and D&A reportedly usedproprietary reporting software to handle mandatory electronic filings to both theFederal Election Comn1ission and the California Secretary of State.

31. It is reported that DURKEE gave no outward sign of lavish spending.However, investigation now shows that DURKEE has transferred thousands ofdollars to herself and spent the same on others.

n. DURKEE'S WORK FOR THE FEINSTEIN COMMITTEES32. DURKEE first worked as treasurer for Senator Diane Feinstein in

support of her 1992 campaign for Senate, and has worked on each reelection

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campaIgn SInce. DURKEE was working for Senator Feinstein's campaigncommittees at the time of her arrest.

33. As treasurer, one ofDURKEE and D&A's principal roles was toensure that all federal campaign financial disclosures were made timely andaccurately. Over the two decades during which they served Senator Feinstein'scampaigns, DURKEE and D&A never failed to make those disclosures and alwaysrepresented that the accounting was accurate.

34. Another principal responsibility ofDURKEE and D&A was to ensurethat all of the carnpaigns' expenditures were fully paid. Again, over the twodecades during which they served Senator Feinstein's campaigns, DURKEE andD&A never failed to cover a requested campaign expenditure. Campaign billswere always paid on time. As such, there was no indication that the FeinsteinCommittees' balances were less than they were supposed to be.

35. As an additional safeguard, and as was standard practice, SenatorFeinstein's campaigns required DURKEE and D&A to provide campaign staffwith regular reports that detailed the receipts, expenditures, and balances, of eachof the Feinstein Committees' accounts. These regular reports showed receiptsconsistent with internal fundraising records maintained by the FeinsteinComnlittees independent from DURKEE and D&A. Similarly, the expendituresreported by DlJRKEE and D&A were always consistent with the expectations ofthe Feinstein COlnmittees' staff.

36. Furthermore, the Feinstein Committees' fundraisers had access toDURKEE and D&A's online database of contributions. The records in thatdatabase reconciled with both the regular campaign reports, and the Committees'own records.

37. Accordingly, until the day ofDURKEE's arrest, there was never anyindication that the Feinstein Committee's accounts, or any of the accounts

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DURK.EE has handled for Senator Feinstein's campaigns over the years, have heldless than they were supposed to, or less than what DURKEE and D&A reported.

38. DURKEE and D&A's false reporting masked the systematicembezzlement of the Feinstein COlnnlittees' funds. As described in the followingsection, DURKEE and D&A used their web of accounts -- primarily held atDefendant First California Bank - to siphon away the money; and it is only FirstCalifornia Bank that had the knowledge to put a stop to the embezzlement.

C. DURKEE'S THEFT FROM THE FEINSTEIN COMMITTEES39. Over the course of the past year, DURKEE - with the substantial

assistance of her co-Defendants - has used the Feinstein Committees' money tocover her personal and business expenses, and to reimburse other elected officials'campaign funds from which she had also embezzled. Examples of the scaminclude the following:

40. On March 10,2011, DURKEE, through D&A, transferred $17,000.00into a D&A account number xxx1251 (First California Bank), from the Feinsteinfor Senate Merchant Account, also at First California Bank. This transfer was notauthorized or otherwise necessary or appropriate.41. On May 3, 201 ] , DURKEE, through D&A, transferred $6,000 intoD&A account number xxx1251 at First California Bank, from a Feinstein forSenate Merchant Account, also at First California Bank. On May 27, 2011DURK.EE, through D&A, transferred $4,000 into D&A account number xxx1251at First California Bank, frorn a Fund for the Majority account, also at FirstCalifornia Bank.

42. On May 2, 201:1 DURKEE, through D&A, transferred $6,000 intoD&A account number xxx1251 at First California Bank, from a Feinstein forSenate Account, also at First California Bank.

43. In order to conceal these unauthorized transactions, DURKEE,through D&A, systematically and intentionally misrepresented the balances andCOMPLAINT 10



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were two unauthorized wire transfers of $30,000 and $50,000 to account number:2 xxxxxxxx2092, which is an ; ccount not affiliated with Plaintiffs in any way.3 48. In a Balance SUlnmary dated July 2, 2011, Defendants represented4 that the Feinstein for Senate account had a balance of $2,312,402.47. In actuality,on June 30, 2011, the aCCOUIIt had an ending balance of $266,424.67, and total6 expenses of $134,303.22. Among those expenses were the following two checks,

totaling $75,000,. neither of,Nhich was authorized:7:39

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DATE CHECK NUMBER AMOUNT6/1/11 55013 $50,0006/6/11 55014 $25,000

49. In sum, DURKl ~ ~ appears to have treated Plaintiffs' accounts in thesame way she treated dozens of others, including Assembly members' campaignaccounts, as detailed in the Federal Bureau of Investigation's ("FBI") CriminalComplaint against DURKEF

50. According to the affidavit of FBI Special Agent Reginald L.Colenlan, DURKEE, througl1D&A,

transferred monet from her clients' bank accounts to her firm's bankaccounts without er clients' knowledge or authorization. I t alsoappeared that DURKEE refunded a portion of the misappropriatedmonea- when needed to cover checks or when misappropriations hadbeen etected.DURKEE made such unauthorized transactions and misappropriations on aregular basis, and did not reI)ort the transactions on forms required by theCalifornia Secretary of State for cmnpaign funds.

.5l. According to the FBI's investigation, the moneys transferred byDURKEE from client accou nts "have been used to pay her personal expenses,including mortgage payments and American Express charges, as well asbusiness expenses."

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52. According to the criluinal complaint, DURKEE admitted to the FBI,"that she had been misappropriating her clients' money for years and thatforms she filed with the state were false."

53. With respect to Assemhllyman Jose Solorio, the criminal complaintreveals dozens of unauthorized transactions, following a pattern nearly identical tothat seen in Plaintiffs' accounts. For example,

on a ~ ~ r o x i m a t e l y October 1,2010, a cashier's check madepayable to SolOrIO for Assembly 2010 in the amount of$300,000 was deposited into an account for D&A, numberxxxx83658, at City National Bank. . . . The source of the$300,000 cashier's check appears from bank records to befroID a money market account in the name of Solorio forAssembly 2010 held at First California Bank.54. Within days of the deposit, DURKEE misappropriated much of the

$300,000 to pay her own expenses, and to cover misappropriations from otheraccounts. Specifically, a check signed by DURKEE was issued from the Soloriomoney market account for $125,000, and payable to the Con1mittee to Re-ElectLoretta Sanchez; and four checks, for $32,000, $21,000, $25,000, and $15,000,signed by DURKEE, were issued from the Solorio money market account anddeposited into D&A's business account.55. The $32,000 check taken from the Solorio money market account wasdeposited into a D&A account at First California Bank, account number xxx125 1.From that account, DlTRKEE issued a check for $36,000, payable to D&A, anddeposited the funds,

into a D&A account at First California Bank, accountnumber xxx0865. From there, $30,000 was withdrawn inthe form of a check apparently signed b KINDE DURKEEmade payable to D&A and marked for -Jlayroll.' The$30,000 check was deposited into First California Bankaccount number xxx9123."

56. According to the FBI, the $30,000 was used by DlTRKEE to make herpayroll.

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September 30, 2010 reported that there was cash-on-hand in the amount of$729,135.56. Bank records j ~ J r Solorio for Asselnbly 2010, however, show thatthe actual balance as of September 30,2010 was only $33,175.81.

65. This report was subsequently amended by filings in November 2010,and in none of the amended reports was there any mention of the checks in theanlount of $300,000 and $377,000.

66. Based on its investigation, the FBI concluded that KINDE DURKEEdevised a material scheme to defraud Jose Solorio and the Solorio for Assembly2010 campaign, and obtained money from them by means ofmaterially false andfraudulent pretenses, representations, and promises.

67. As alleged above, DURKEE and her co-Defendants misappropriatedfunds from Plaintiffs in the same manner as described by the FBI with respect toother politicians' and non-profits' accounts.

D. FIRST CALIFORNIA BANK HAD KNOWLEDGE OFDURKEE'S SCHEME AND KNOWINGLY PROVIDEDSUBSTANTIAL ASSISTANCE

68. A fraud of the scale alleged herein could not have occurred, and didnot occur, without the knowing involvement of First California Bank. Inexchange for fees and profits, First California Bank intentionally ignored dozensof red flags, ignored its duties and obligations under state and federal law, andallowed DURKEE to perpetrate the scheme.

1. First California Bank Intentionally Ignored Multiple RedFlags and Had Knowledge of the Fraud

69. DURKEE and D&A maintained multiple million-dollar plus accountswith First California Bank, rnany of them on behalf ofwell-known political figuresin California. DURKEE and D&A used a single branch of First California Bankto conduct its fraudulent operations. That branch office was located at 1888

COMPLAINT 16



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74. "Funds transfer a c t i v i ~ y is unexplained, repetitive, or showsunusual patterns." As described above, DURKEE regularly made highlyquestionable and suspicious fund transfers among the dozens of accounts shenlaintained at First Califonlia Bank, including frequent transfers out of clientaccounts and into D&A's accounts, and frequent transfers between client accountsto cover overdrafts.

75. "Payments or receipts with no apparent links to legitimatecontracts, goods, or services are r e ( ~ e i v e d . " First Bank ofCalifornia allowedDURKEE to make regular payments between client accounts, with only oneapparent - and illegal - reason: to cover overdrafts.

76. "Funds transfers are sent or received from the same person to orfrom different accounts." As described above, DURKEE made multipletransfers from client accounts, on the same day, to D&A accounts. For example,on July 5, 2011, DURKEE rnade two wire transfers from Feinstein for Senateaccount number xxx9311, one for $30,000, and the other for $50,000, both toaccount xxxxxxxx2092, which is not affiliated with Plaintiffs in any way. Threeweeks after the transfers, on July 28, 2011, DURKEE transferred $80,000 backinto account xxx9311 from account xxxxxxxx2092. This movement ofmoneywas purely for the purpose of artificially inflating the balance of accountxxxxxxxx2092, and any monitoring by a bank officer would have alerted the Bankto the transactions' illegality.

77. "Unusual transfers of funds occur among related accounts oramong accounts that involve the same or related principals." As described inprior paragraphs, DURKEE regularly transferred funds among the variousaccounts at First California Bank that she controlled, for no apparent legitimatereason. As one example, on September 30, 20 I0, DURKEE deposited a check for$36,000 misappropriated frOlIl Assemblyman Solorio's account into a D&Aaccount at First California Bank, account nUITlber xxx0865. The same day,COMPLAINT 18



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DURKEE issued a check frOln account number xxx0865 in the amount of $3 0,000,made out to D&A, and deposited that check in yet another First California BankD&A account, account number xxx9123. There could be no legitimate reason forsuch transfers, and bank offie ers knew so.78. "A customer or group tries to persuade a bank employee not tofile required reports or maintain required records. . . . A business orcustolner asks to be exempted from reporting or recordkeepingrequirements." As discussed in this section, First California Bank failed tofollow its own internal guidelines, industry standards, and federal law regardingthe n10nitoring and reporting of suspicious account activity. Whether the Bank didso at the request ofDURKEE- ~ or of its own accord, it violated its duties.

79. " Many funds t ransfers are sent in large, round dollar, hundreddollar, or thousand dollar a mounts." A vast majority of the withdrawals andchecks issued from the Feins tein Committees' accounts at DURKEE's requestwere sent in large, round dolJar, thousand dollar amounts, as exemplified in thefollowing chart:

-ACCOUNT NO. xxx0607DATE08/09/1008/18/108/18/1009/08/110/01/1 010/12/10-10/15/1010/18/1 010/19/1010/26/1 011/12/1 0-

CHECK NUMBER AMOUNT10131 $5,00010132 $3,00020014 $5,00010133 $5,00010136 $5,00010134 $5,00010139 $5,00010142 $5,00010140 $5,00010143 $6,00020016 $5,000

COMPLAINT 19



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11/19/1011130/1012/06/1 012/17/1012/31/101/19/11-2/23/113/14/113/23/113/23/114/18/114/22/115/02/115/18/115/27/116/01/116/17/117/08/11-7/07/117/08/117/11/117/14/117/19/117/19/117/28/11-8/1 7/118/30/11ACCOUNT NO. xxx7787DATE12/08/1012/09/10

COMPLAINT

10144 $3,00020017 $5,000'20018 $5,000'20019 $10,00010146 $3,00010147 $3,00010149 $3,000'Wire transfer $1,00010150 $3,00021000 $4,00021001 $5,00010153 $3,00021003 $10,00010156 $3,000Wire transfer $4,00010155 $5,00010158 $4,50010162 $2,00010166 $2,00010164 $2,00010165 $2,00010160 $2,00010159 $2,00010163 $2,00010161 $2,00021002 $25,00010169 $9,000

CHECK NUMBER10011002

20

AMOUNT$25,000$10,000



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/101111

111111

1111111111111] ]111

111111

2/22/2/28/2/28/3/10/3/14/3/21/3/28/3/30/4/06/4/18/4/26/4/27/5/2/15/3/15/3/15/11/5/23/8/2/1

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1

ACCOUNT NUMBER xxDATE08/09/1008/09/1008/09/10-08/10/1 008/12/1008/13/1 008/18/1 0-08/18/1 008/20/10

COMPLAINT

1003- $10,0001004 $25,0001005 $10,0001006- $3,0001007-Wire transfer-

$15,000$17,000

Wire transfer $6,0001008-1010

$4,000$18,000

1009 $11,0005102-5103-5104

$14,000$5,000$5,000

5105-5106$10,000$10,000

Wire transfer-5107-5108-5109

$6,000$5,000$12,000$10,000'Wire transfer $100,000

x9311AMOUNTHECK NUMBER$10,0000963$10,0000964$10,0000965$12,0000966$10,0000967$20,0000968$5,0000969$3,0000947$1,0000941

21



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08/30/1 009/07/1 009/20/1 009/23/1 009/27/1 009/29/1 010/08/1 010/08/1 010/15/1 0-10/18/1010/25/1 011/04/1 011/08/1011/09/1 011/12/1 011/16/1 0-11/19/1 011/22/1 011/23/1 011/30/1 012/0311012/0911 012/17/1 012/23/1012/28/1 012/31/1002/01/1102/17/1102/22/11-02/2311102/23/11

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~ 0 9 7 0 $10,000~ 0 9 7 1 $8,000~ 0 9 5 9 $20,00010954 $100,000~ 0 9 7 2 $14,0000954 $25,000

~ 0 9 5 5 $40,000_0956 $4,000l0959 $10,00010960 $3,000~ 0 9 5 7 $20,000

' ~ 0 9 5 8 $15,00020960 $8,00020961 $10,00020963 $5,00010961 $2,60010964 $3,00020964 $10,00020965 $20,00020966 $5,00020967 $40,00020968 $5,00020969 $15,00020970 $13,00010965 $3,20010969 $3,00020971 $24,00050285 $10,00050286 $10,00050287 $13,00010977 $3,000



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02/24/11 ;0288 $10,00003/02/11 ire transfer $18,00003/10/11 ire transfer $50,00003/14/11 ire transfer $6,00003/14/11 ;0289 $6,00003/21/11 ;0290 $27,000-03/23/11 10980 $3,00003/24/11 ;0292 $25,000-03/28/11 ;0294 $10,00003/30/11 ;0295 $2,00003/31/11 ;0296 $5,00004/06/11 ;0291 $25,00004/06/11 ;0291 $25,00004/07/11 10997 $27,500

14 80. I'vements of funds occur from one bank to another,Suspicious meand then funds are moved back to the first bank." DURKEE frequently moved

16 t California Bank and City National Bank. Forhe SaIne funds between Firs17

aint against DURKEE describes an unauthorizedxample, the crinlinal compl-18 ssemblyman Solorio's account at First Californiaransfer of $300,000 from A,19 :ity National Bank. Within days of that transfer, mostank, to a D&A account at (20 rred b a ( ~ k to various other of DURKEE's accountsf the $300,000 was transfe21 imilar pattern occurred with subsequentt First California Bank. As22 81 check.isappropriation of a $377,123 erdrawing accounts and "bouncing" checks. One ofepeatedly ov24 as DURJ(EE's repeated overdrawing of accounts.he most obvious red flags w2 1-.) alone, on the Feinstein Committees' accounts,ver the course of one year'26 mnts, incurring overdraw fees, on 68 occasions. ThisURKEE overdrew the accc27 rnal revie'w of the activity. First California routinelylone would require an inte28 ply charging the account a "NSF-aD Charge". Thisovered these checks by sim

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frequent overdrafting was blatant and obvious, as exemplified by the followingexcerpt from one of Plaintiffs' monthly statelnents:

FEINSTEIN FOR SENATE PAGE

ACCOUNT ~ 3 l 1

NITHDRA1'lALSDATE DESCRIPTION AMOUNT

- - - ~ - - - - - - - - - - - - - - - - - - - - - - - - - -04/20/11 NSF-OD CHARGE CHECK #0000010998 35.0004/:20/11 NSF-OD CHARGE CHECK #0000010996 35.0004/22/11 NSF-OD CHARGE CHECK #0000050302 35.0004/22/11 NSF-OD CHARGE CHECK t/OOOOOl1003 35.00

Suspicious intercompany transfers. As detailed above, DURKEEfrequently transferred round sums of Jmoney between D&A accounts at FirstCalifornia Bank. All banks review accounts for such intercompany transfers.

Checks where the signor and payee are the same. DURKEEsigned scores of checks payable to D&A. This is considered by Bank Examinersto be one of the prime indications of fraud.

Funds stay in accounts for only a very short time. Often the verysame day funds were deposited into client accounts - and even in anticipation ofsuch deposits - DURKEE depleted those funds through checks and transfers to theaccounts of D&A and other clients.

Check kiting (using circular payments among a web of accountsto cover payments made on overdrawn accounts, masking insufficient funds).DURKEE so thoroughly and rapidly depleted her clients' funds that she constantlyhad to shuffle money between accounts in order to prevent checks from bouncing.For example, as described above, on July 5, 2011, DURKEE made two wiretransfers from Feinstein for Senate account nUlTlber xxx9311, one for $30,000, andCOMPLAINT 24



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the other for $50,000, both to account xxxxxxxx2092, which is not affiliated withPlaintiffs in any way. Three weeks after the transfers, on July 28, 2011, DURKEEtransfelTed $80,000 back into account xxx9311 from account xxxxxxxx2092.Similarly, on August 31, 2011, D i l l ~ K E E transfelTed $100,000 out ofFeinstein forSenate account nmnber xxx7787 and into unaffiliated account numberxxxxxxxx8333. The very same day, DURKEE transfelTed the $100,000 back intothe Feinstein for Senate account nmnber xxx7787 from account numberxxxxxxxx8333.

2. First California Bank Violated Office of ControllerGuidelines For Check-Kiting Detection

81. The Office of the Controller of the Currency ("OCC") publishesdetailed guidelines to assist banks in detecting check kiting schemes such as this.According to the OCC, exarrlples of suspicious circumstances which may indicatea check-kiting scheme include:

"Several accounts with similar names, owned or controlled by thesame individuals." As detailed above, DURKEE controlled dozens of accountsheld at First California Bank" "Regular or excessive drawings against uncollected funds." Asdescribed above, DlJRKEE regularly drew on funds that were deposited the sameday, or not yet even deposited.

"Frequent daily negative ending balances or overdrafts thateventually clear or are covered in a short time frame." DURKEE incurredoverdraft fees on 68 items drawn on the three Feinstein Committee accounts in justone year. Notably, First CaEfornia Bank does not appear to have prevented herfrom doing so even once during that time. It is standard banking practice forbranch managers to review all overdrafts on the branch's accounts on at least adaily basis. Accordingly, First California Bank knew of this pattern of overdrafts,yet allowed DURKEE to continue overdrawing accounts, unabated.COMPLAINT 25



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"Identifiable patterns of transactions such as deposits, transfersbetween accounts, withdrawals, and wire transfers, often with similar orincreasing amounts." As illustrated in the charts above, DURKEE regularlywithdrew round thousand dollar amounts from the Feinstein Committee accounts. "Frequent, large deposits drawn on the same institution." Again,D U R I < ~ E E shuffled money between her accounts in large, round thousand dollarmTIounts.

"Deposits drawn on other institutions by the same maker orsigner." As described above, DURKEE transferred funds between City NationalBank and First California Bank on a regular basis.

"Large debits and credits of even dollar amounts." This was doneon a regular basis as detailed above.

"Frequent check withdrawals to the same institution, with them a k e ] ~ listed as payee." DURKEE frequently signed checks to D&A, anddeposited those checks in D&A accounts held at First California Bank.

"A low average daily balance in relation to deposit activity."Despite receiving regular deposits from donors to the Feinstein Committees, theFeinstein Committee accounts simply never grew, as DURKEE constantly tappedthem for her own wrongful use.

82. In sum, there were dozens of transactional improprieties, everymonth, done with the FULL KNOWLEDGE of First California Bank. Yet, asdescribed in the following section, First California Bank failed to report DURKEEor shut down her accounts. Instead, First California continued to actively providebanking assistance to DURKEE and D&A as they raided their clients' coffers, allin the name of profit and greed.

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COMPLAINT 26



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3. First California Bank Violated Federal FinancialInstitutions Examination Council's Guidelines byIntentionally Failing to Report DURKEE or Halt HerA c t i v i t i e ~ 83. Had First California Bank complied with its duties under California

law, as mirrored in federal law (12 CFR 208.62), and the guidelines described inthe foregoing, it would have rIlonitored and reported DURKEE and D&A' swrongful activities, and would have ceased providing assistance to DURKEE andD&A in furtherance of their scheme.

84. Such monitoring and reporting of suspicious financial transactions,especially in the post-September 11 era, is an important and routine part ofmodembanking. Banks are even shielded from liability for reporting. Specifically, 31U.S.C. section 5318(g)(3) provides complete immunity from any claims understate or federal law for reporting, stating, in pertinent part, that anyone reportingsuspicious activity "shall not be liable to any person under any law or regulation ofthe United States, any constitution, law, or regulation of any State or politicalsubdivision of any State, or under any contract or other legally enforceableagreernent (including any arbitration agreement), for such disclosure or for anyfailure to provide notice of such discJlosure to the person who is the subject of suchdisclosure or any other person identified in the disclosure."

85. Simply stated, First California Bank had no legitimate reason not toreport DURKEE and D&A's activities, except for the continued profit to the Bank.

86. Moreover, reporting is simple. The federal SAR form (FinCEN Form109), even provides straightforward instructions, including a section entitled"When To File A Report," and can be filed electronically. (See Exhibit A). TheSAR reports provide the federal Financial Crimes Enforcement Network("FinCEN") with critical and detailed information. For example, the SAR form

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provides the following guidance for cOD1pleting the "Narrative" portion of theform:

"Describe conduct that raised suspicion. "Explain whether the transaction(s) was completed or only attempted. "Describe supporting documentation and retain such documentation

for your file for five years. "Indicate a time period, if it was a factor in the suspicious

transaction(s). . . ."Retain any admission or explanation of the transaction(s) provided

by the subject(s) or other persons. Indicate when and to whom it was given. "Retain any evidence of cover-up or evidence of an attempt to

deceive federal or state examiners, or others. "Indicate where the possible violation of law(s) took place (e.g., main

office:, branch, agent location, etc.). "Indicate whether the suspicious activity is an isolated incident or

relates to another transaction . . . . "Indicate any additional account number(s), and any foreign bank(s)account numbers which may be involved in transfer ofmoney. "Identify any ernployee or other individual or entity (e.g., agent)

suspected of improper involvement in the transaction(s).(Exhibit A).

87. Had First California Bank accurately completed and submitted SARsin connection with some or all of DURKEE and D&A's suspicious transactions,the scheme would have been stopped in its tracks.

88. Even absent suspicious activities, banks are required to complete aCurrency Transaction Report ("CTR") for submission to FinCEN for anytransaction over $10,000.

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4. First California F'ailed to Follow Its Own InternalOperations Manuals and Shielded DURKEE's Activitiesfrom the California Department of Financial Institutions

89. In order to ensure compliance with state and federal law, FirstCalifornia maintains internal operations manuals that provide additional guidanceto managers and branch staff regarding suspicious transactions. Standard industrypractices dictate that banks have four types of programs in place, known in theindustry as the "four pillars,'" to prevent fraud. Those four pillars are: (a) internalcontrols to ensure ongoing con1pliance; (b) independent testing of compliance; designation of an personnel responsible for compliance; and (d) training onpotentially fraudulent transactions and money laundering activities. Therequirements for these pillars have grown increasingly demanding over the pastdecade, particularly as they relate to recognition of suspicious transactions.

90. The Bank Secrecy Act requires banks to adopt internal writtenpolicies to monitor and ensure compliance with the Act. The OCC furtherrecommends that the following internal controls be implemented to detect andprevent fraud: "Officer approval on drawings against uncollected funds, overdrafts,and wire transfers. Such authority should be strictly enforced and not exceed anindividual's lending authority.

"Daily reports on drawings against uncollected funds, overdrafts,large items, and significant balance changes.

"Designated individual to regularly review internal reports to spotanomalous conduct and to ensure proper investigation when warranted.

"Secondary level of adrninistrative control that is distinct from otherlending functions to promote objectivity when granting significant drawingsagainst uncollected funds or overdrafts.

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'. "Regular overdraft activity reports to the board or an approvedcommittee thereof.

"Periodic review through an independent audit function to assess andreport on the adequacy of all established internal controls in this area."91. According to First California Bank's latest annual filing with theSEC, it maintains internal controls to protect against fraud. Specifically, the Banktold the SEC and Bank Examiners:

We are subject to certain operational risks, including, but notlimited to, aata processing system failures and errors, customeror employee fraud, security breaches of our computer systemsand catastroj)hic failures resulting from terrorist acts or naturaldisasters. We maintain a system of internal controls tomitigate against such occurrences and maintain insurancecoverage for such risks that are insurable, but should such anevent occur that is not prevented or detected by our internalcontrols and uninsured or in excess of applicable insurancelimits, it could have a significant adverse impact on ourbusiness, financial condItion or results of operations.

92. The transfers and activities undertaken by DURKEE and herassociates with the Feinstein Committees' accounts at First California Bank hadInany of the features that should have triggered such internal controls, and SARand CTR reporting, yet First California Bank never reported DURKEE and D&A'stransactions. First California Bank knowingly ignored and violated its owninternal policies, and federal law, that allowed DURKEE and D&A to engage inthe highly suspicious and improper transactions described above. First CaliforniaBank had the duty and ability to tenninate its assistance ofDURKEE and D&A'sfraud:, and to terminate DURKEE and D&A's accounts.

93. Moreover, First CalifoTI1ia Bank failed to report DURKEE andD&A's activities to the California Department of Financial Institutions. FirstCalifornia Bank also concealed DURKEE and D&A's activities, and the dozens ofred flags raised by those activities, from the annual examinations of the Bankconducted by the Department of Financial Institutions pursuant to Section 1900 ofthe California Financial Code.COJVIPLAINT 30



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5. First California Violated Its Own Terms and Conditions forBusiness Accounts

94. First California Bank's standard terms and conditions for businessaccounts includes an explicit provision requiring First California Bank to close anaccount that is being used for fraud or other suspicious activity. The terms andconditions state:

ACCOUNT TERMINATION. You and we agree that eitherof us n1ay close your Account and terminate this Agreement atany time with or"without cause. We will provide written noticeto you in advance if we decide to terminate your Accountrelationship for any reason other than abuse of the accountrelationship or to prevent a loss. . . . Further, for securityreasons, we may r e ~ u i r e you to close your Account and to opena new account If: tliere is a change in authorized signers;there has been a forgery or fraud reported or committedinvolving your Accouni; any Account checks are lost orstolen; you have too many transfers from your Account; or ,any other provision of our Agreement with you is violated.After the Account is closed, we have no obligation to acceptdeposits or pay any outstanding checks. You agree to hold usharmless for refusIng to honor any check drawn on a closedaccount. In the event that we close your Account, we may mailyou a Cashier's Check for the applicable remaining Accountbalance. The termination of thIS Agreement and closing of anaccount will not release you frOlTI any fees or other oblIgationsincurred prior to the date: upon whicn this Agreement isterminated and an account IS closed, any fees assessed by us inthe p r 9 c e ~ s of c l o ~ i n g an acc:ount, or from your responsibilityto ITIaIntaIn sufficIent funds I II an account to cover anyoutstanding checks or other debit iteiTIs.

MISCELLAN:EOUS PROVISIONS. If you or your Accountbecomes involved in any legaJ proceedings, your use of theAccount may be restricted.You agree not to use the Accountin any illegal activity.

95. First California Bank knew that DURKEE and D&A were regularlyand improperly siphoning money from client accounts to pay for personal andbusiness expenses, and engaging in check kiting and other account manipulationsin order to shield their embezzleiTIent. As described above, these were not isolatedincidents. DURKEE and D&A engaged in the same conduct with respect to

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dozens of accounts, over several years. First California Bank knew that DURKEEand D&A were defrauding dozens of clients, including Plaintiffs.

96. First California Bank allowed this conduct to continue because theaccounts DURKEE and D&A controlled were a significant generator of fees forFirst California Bank, and provided funds that First California Bank could investat a profit for as long as the fllnds sat in the accounts.

97. Despite its knowledge of the fraud, First California Bank providedsubstantial assistance to DURKEE and D&A in furtherance of their scheme todefraud and steal from Plaintiffs, other public officials, and non-profits acrossCalifornia. First California Bank failed to comply with any of its responsibilitiesor obligations with respect to the Feinstein Committees' accounts. Rather, FirstCalifornia Bank was at the center ofDlfRKEE's fraudulent scheme, and far fromshutting down the scheme or halting its own involvement in that scheme, itfacilitated the scheme by providing DURKEE and D&A with extraordinary accessto its elnployees, infrastructure and banking services.

98. First California Bank's assistance allowed DURKEE and D&A tosteal Dlillions of dollars from their clients, including Plaintiffs, other electedofficials, and non-profits across California and the country. In another example ofFirst California Bank's knowing facilitation of the embezzlement, the Bankreportedly allowed DURKEE to electronically transfer funds in and out of a nonprofit organization's account despite the fact that DURKEE did not havesignature authority on the account. Without the knowing cooperation ofBankmanagement, DURKEE could not have done so.

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E. FIRST CALIFORNIA HANK ACKNOWLEDGES THATDURKEE MISAPPROPRIATED AND CO-MINGLED FUNDS,YET REFUSES TO GIVE DURKEE CLIENTS ACCESS TOTHEIR OWN F'UNDS99. Just days after DURKEE's arrest, First California Bank sent Plaintiffs

a letter acknowledging that it had allowed DURKEE to Inisappropriate and co-mingle client funds. The letter states, in pertinent part: "the account balancesshown on [the Bank's] records . . . . lllay include funds belonging to other clientsof Durkee which were comingled by Durkee with your funds."

100. Despite this acknowledgment, the Bank refused to provide Plaintiffswith what little remained of their funds unless Plaintiffs agreed to fully indemnifythe Bank. Simply put, the Bank is holding Plaintiffs' funds hostage.

101. In a subsequent letter, dated September 16, 2011, First CaliforniaBank again acknowledged that it had allowed DlJRKEE to shuffle Inoney betweenthe accounts to such an extreme degree that the proper balance of the accountssimply cannot be determined. Specifically, it stated:

The more we investigated the situation, the more' itappears that Durkee had comingled funds belonging to variousdIfferent campaigns and organizations and had made transfersbetween accounts on whidi Durkee had signing authority.We concluded that there was a very high likelihoodthat the balance c r e d i t { ~ d to any given account did notrepresent accurately the funds, if any, actually belonging tothe campaign or organization on the account. In cerfaincircumstances, it is apparent that account balancescontained funds thathad previously been credited to non-related accounts. THESK CONDITIONS APPEARED TOBE PERVASIVE IN THE DURKEE-CONTROLLED

ACCOUNTS(Exhibit B).

102. These "pervasive" conditions are precisely the type that led the Bankto know of DURKEE's scheme years ago.

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VII. ~ C A U S E S OF ACTIONFIRST CAUSE OF ACTION

FRAUD AND DECEIT(As Against Defendants DURKEE, D&A, FORGY, LEMCKE,and DOES 1-10)

103. Plaintiffs incorporate by reference all of the previous allegations asthough fully set forth herein.

104. As alleged herel][}, Defendants DURKEE, D&A, FORGY, LEMCKE,and DOES 1-50 provided Plaintiffs with fraudulent account summaries and profitand loss statements, on a weekly or mlonthly basis, from at least August 2010 toAugust 2011. Those fraudulent reports and statements misrepresented the amountof withdrawals from the accounts and the account balances. The reports andstatements failed to disclose the unauthorized withdrawals from the accounts madeby Defendants to cover their own personal and business expenses, and toreimburse other campaign funds for embezzled funds.

105. The wrongful acts and olmissions on the part of Defendants, as hereinalleged, were Inade with the intent to induce Plaintiffs, and each of them, tocontinue to utilize Defendants' services and entrust Defendants with campaigncontributions and other funds.

106. At all times alleged, Plaintiffs were ignorant of Defendants'fraudulent intentions and, in the exercise of reasonable diligence, did not discoveror uncover their wrongdoing because Defendants, and each of them, intentionallymisreported the available balances, income, and expenses in weekly and n10nthlystaten1ents. Furthermore, on inforrr1ation and b e l i e f ~ Defendants misappropriatedfunds from other clients' funds when necessary to cover legitimate expenses thatneeded to be paid from Plaintiffs' accounts.

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107. As a direct and Iegal result of said fraud, deceit, and/or concealmenton the part of Defendants, and each of them, Plaintiffs have been damaged in anamount exceeding the jurisdictional minimum, according to proof.

108. The above-described fraud, deceit, and/or concealment on the part ofDefendants, and each of thenl, was intended to and did deprive Plaintiffs, and eachofthern, of millions of dollars. These acts were accomplished by Defendants bymeans of fraud, deceit, concealment, oppression, and/or malice and, as such,warrant the imposition of exemplary and/or punitive damages as againstDefendants, and each of them.

109. WHEREFORE, Plaintiffs, and each of them, pray for judgmentagainst Defendants, and each of them, as set forth herein.

SECOND CAUSE OF ACTIONCONVERSION

(As Against Defendants DURKEE, D&A, FORGY, LEMCKE,and DOES 1-10)

110. Plaintiffs incorporate by reference all the allegations contained in theComplaint as though fully set forth herein.

I l l . At all times alleged, Plaintiffs were the owners of the fundsmaintained in the subject accounts, or had the right to possession of the funds thatwere :maintained in the accounts.

112. At all times alleged, Defendants DURKEE, D&A, FORGY,LEMCKE, and DOES 1-50, and each of them, wrongly drew on Plaintiffs' fundswithout authorization and without permission for their own personal and wrongfuluse. Defendants, and each of them, were direct beneficiaries of the conversion asthey obtained financial benefits including, but not limited to, the payment ofpersonal and business debts and liabilities.

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113. As a legal result of the conversion by Defendants, Plaintiffs, and eachofthern, suffered damages including, but not limited to, the amount of moneyconverted, as well as the time and nl0ney expended to recovery said wrongfullyconverted funds including, but not limited to, attorneys' fees and costs.114. Punitive damages should also be awarded pursuant to Civil Codesection 3294 as the conduct of Defendants, and each of them, was malicious,oppressive and/or fraudulent, in conscious disregard for the rights of Plaintiffs.

115. WHEREFORE, the Plaintiffs, and each of them, pray for judgmentagainst Defendants, as set forth herein.

THIRD CAUSE OF ACTIONBREACH OF CONTRACT

(As Against Defendants DURKEE, D&A, FORGY, LEMCKE,and DOES 1-5)

116. Plaintiffs incorporate by reference all the allegations contained in theComplaint as though fully set forth herein.

117. Agreements were entered into between Defendants and Plaintiffs fortreasury services on behalf of Plaintiffs.118. Plaintiffs fully performed all conditions, covenants, and promisesrequired of them under the Agreements.

119. Pursuant to the Agreements, Defendants agreed to processcontributions and other income to Plaintiffs, process legitimate expense requestsfrom Plaintiffs' accounts, and provide Plaintiffs' with accurate profit and lossdetail and account summaries for each of Plaintiffs' accounts on a regular basis.In return, Plaintiffs paid D e f ~ ~ n d a n t s for their work.

120. In violation of their prornises and obligations under the Agreements,Defendants, and each of them, breached their obligations to Plaintiffs by, amongother things, making unauthorized withdrawals from the Accounts for their own

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benefit; converting Plaintiffs' funds for their own use; and failing to provideaccurate account summaries and profit and loss statement.

121. As a direct and legal result of Defendants' breach, Plaintiffs, and eachof therrr, have been damaged im the anl0unt exceeding the jurisdictional minimum,according to proof.

122. WHEREFORE, Plaintiff;; pray for judgment against Defendants, andeach of them, as set forth herein.

FOURTH CAUSE OF ACTIONBREACH OF TH:E IMPLIED COVENANT OF

GOOD FAITH AND FAIR DEALING(As Against Defendants DURKEE, D&A, FORGY, LEMCKE,

and DOES 1-5)123. Plaintiffs incorporate by reference all the allegations contained in the

Complaint as though fully set forth herein.124. As alleged herein, agreernents were entered into between Defendants

and Plaintiffs for treasury services on behalf of Plaintiffs.125,. Plaintiffs fully performed all conditions, covenants, and promisesrequired of them under the Agreen1ents.126. Pursuant to the Agreements, Defendants agreed to process

contributions and other income to Plaintiffs, process legitimate expense requestsfrom Plaintiffs' accounts, and provide Plaintiffs' with accurate profit and lossdetail and account summaries for each of Plaintiffs' accounts on a regular basis.In retmTI, Plaintiffs paid Defendants for their services.

127. Implied in the Agreements was a covenant by Defendants that theywould act in good faith and deal fairly with Plaintiffs, and each of them, andwould not do anything to deprive Plaintiffs, and each of them, of the benefits ofthe Agreelnents.

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128. In violation of the implied covenant of good faith and fair dealing,Defendants, and each of them, made unauthorized withdrawals from the Accountsfor their own benefit; converted Plaintiffs' funds for their own use; and failed toprovide accurate account SUITLmaries and profit and loss statement.129. As a direct and legal result ofDefendants' breach, Plaintiffs, and eachof theIn, have been damaged in the ar[lount exceeding the jurisdictional minimum,according to proof.

130. WHEREFORE, Plaintiffs pray for judgment against Defendants, andeach of them, as set forth herein.

FlFTH CAUSE OF ACTIONAIDING AND ABETTING FRAUD

(As Against Defendants FIRST CALIFORNIA BANK and DOES 5-10)131. Plaintiffs reallege and incorporate all the paragraphs of the

Complaint, as though fully set forth hereafter.132. Defendants D U R K E E ~ D&A, FORGY, LEMCKE, and DOES 5-10,

as discussed above, made material lnisrepresentations and omissions to Plaintiffsregarding the status of the funds in accounts held at First California Bank and CityNational Bank.

133. As set forth in the Con1plaint, First California Bank had actualknowledge of the fraud being perpetrated on Plaintiffs by DURKEE and herassociates.

134. As set forth in this Complaint, First California Bank substantiallyassisted DURKEE and her associates in perpetrating their fraud upon Plaintiffs.Specifically, First Cali

Documents

Feinstein Asks for Durkee Campaign Files