Regulators scrutinize bank's handling of Kinde Durkee accounts
State banking regulators have opened an inquiry of First California Bank to examine how it handled the many accounts controlled by Kinde Durkee, a longtime treasurer for politicians and nonprofit organizations who has been accused of defrauding a state assemblyman.
The Department of Financial Institutions, which oversees state-chartered banks, “will examine documents and transactions related to the accounts,” said Alana Golden, a spokeswoman for the agency. She said the effort was “preliminary” fact gathering. “We are providing support to the investigation (by the FBI and Justice Department) by examining the accounts, ownership of the accounts and transactions,” she said in an email.
On Wednesday, three department officials were to begin a review of records at the bank’s Westlake Village headquarters, according to an email sent by a senior attorney at the agency.
They will spend at least three days examining records, according to the attorney, Tony Lehtonen. “The bank has been informed of the investigation and has promised its full cooperation,” he wrote in a memo for lawyers representing some of the politicians.
First California Bank Chairman C.G. Kum declined to comment, saying the bank doesn’t discuss regulatory matters.
The day before her arrest, FBI investigators interviewed Durkee, who ran Durkee & Associates, and they said she “admitted that she had been misappropriating her clients' money for years and that the forms she filed with the state were false.”
Durkee had signature authority over more than 400 bank accounts, according to the affidavit. Many of the accounts, if not all of them, appear to be held at First California Bank.
Federal prosecutors have indicated that the mail fraud charge may be just the beginning of their probe into Durkee’s financial dealings. Daniel V. Nixon, Durkee’s attorney, could not be reached for comment.
Banking attorney L. Richard Fischer, an expert in money laundering and suspicious activities with Morrison & Foerster, said financial institutions are required to establish reasonable procedures to prevent fraud, as well as to report suspicious transactions to their principal regulator.
But, noting that Durkee had control over the accounts, he wrote in an email, “It is difficult to fault the bank for honoring the instructions of Durkee to move the funds under these circumstances.”
Fischer also suggested that the best course for the bank was to pursue legal action to allow the courts to settle claims for the money. “The bank didn’t empower Durkee to control the accounts; instead, it appears the campaign committees did.”
First California Bank has told the account holders it will do exactly that, turning records over to a Los Angeles Superior Court judge to sort out how much money remains in each account. It could not be immediately determined whether the bank had followed through; no case had been entered into the court’s online records.
First California Bank’s main emphasis is lending to small and medium-sized businesses with revenue of up to $25 million a year. Founded as Camarillo Community Bank in 1979, the institution moved its headquarters to Westlake Village in 2008.
-- John Hoeffel and E. Scott Reckard