As the GEICO commercial for car insurance goes: "15 minutes can save you 15% on car insurance." In the case of campaign bank accounts, 15 minutes could save a candidate's entire campaign war-chest.
It is a scandal that is unfortunately not new to American politics: a campaign aide thought to be trusted by the candidate and his campaign colleagues surreptitiously embezzles hundreds of thousands of dollars. The candidate suffering the loss is then left without explanation for how it happened – other than to admit (with extreme embarrassment) that he or she had granted the aide unfettered control over the campaign's bank account. In addition to the financial loss and embarrassment, a campaign may be vulnerable to a possible enforcement action and liability for the reporting errors caused by the embezzlement.
These types of allegations are becoming a routine story facing the campaign community. The treasurer for Congressman Frank LoBiondo was recently sentenced to 30 months for embezzling over $450,000 from his campaign accounts and last year the former treasurer for the NRCC was sentenced to 37 months for embezzling over $800,000 from it and over 80 other committees he had served over a ten year period.
The most recent example is Kinde Durkee, a veteran Democratic campaign treasurer who was arrested by the FBI on September 2 for allegedly embezzling hundreds, perhaps millions of dollars from an array of political clients, including Congresswomen Loretta Sanchez and Susan Davis and Senator Dianne Feinstein.
According to press reports, Sanchez's campaign account, which should have had nearly $380,000 in cash at the end of June, may have been wiped out entirely. Some of Durkee's clients, including Senator Fenistein, have been unable to determine the extent of their damage because they did not have access to their own bank account information. Consequently, Feinstein not only filed suit against her former treasurer, but also against the bank that held the campaign account – alleging that the bank was complicit in Durkee's fraud and embezzlement scheme. State regulators have also launched an inquiry into the bank's handling of accounts controlled by Durkee.
So what can campaigns do to best protect themselves from such conduct?
While campaigns cannot be expected to adopt elaborate internal controls, implementing a few simple practices could help to mitigate such financial malfeasance. The FEC has developed a more comprehensive set of internal controls for political committees that are designed to prevent misappropriation as well as unintentional errors. Campaign treasurers are advised to review and implement the FEC's policies and procedures, but the following practices can be easily implemented, involve no more than two people and only require about 15 minutes of time.
First, campaign bank statements should never be addressed to just one individual. Instead, such statements should be mailed (or made electronically accessible) to at least two people: one responsible for administering the campaign's finances (e.g., depositing contributions, preparing checks, paying campaign expenses, and filing the campaign's finance reports); and the other responsible for periodically comparing the campaign's bank statements with its FEC reports (or a state equivalent). If there is a discrepancy that reconciliation does not resolve, something is amiss and an internal audit can be taken. Reconciling a bank statement and campaign finance report is not difficult; it's what people do (or at least are supposed to do) when they balance their check books. It consists of making adjustments for outstanding checks and/or deposits in transit so the bank statement balance matches the campaign finance report balance.
Second, the individual reconciling the campaign's bank statement with its FEC reports should sign all checks. Each check presented for signature should be accompanied by an invoice or other supporting documentation for the payment. This practice will prevent a campaign aide with control over the bank account from issuing checks to himself and then hiding that fact by recording them as payments to vendors.
In a number of embezzlement cases, it was ultimately discovered that campaign staff had been writing checks to themselves – but avoided detection by recording them as payments to recurring campaign vendors or consultants. In such cases even reconciliation of the campaigns' bank statements and FEC reports would not have revealed the scheme. But by simply having another person review or sign the checks, the misappropriation could have been prevented.
The amount of time required for a campaign to reconcile a campaign's bank statements with its campaign reports each month and to review and sign the campaign's checks is nominal – probably 15 minutes or less (and if the candidate cares as much about its campaign funds as much as he or she does about car insurance, it is time well spent) . It's a task easily accomplished by a part-time campaign staff member, or even a volunteer who drops in periodically for this purpose. Taking these steps and others will protect the campaign from both financial harm and public embarrassment.
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