WASHINGTON — The Federal Election Commission on Thursday raised sharp questions but came to no firm conclusion over Democratic Sen. Dianne Feinstein's bid for greater fundraising leeway in the wake of embezzlement by her former campaign treasurer.
The FEC will take more time to consider whether California politicians who were ripped off by former treasurer Kinde Durkee can solicit additional funds from individuals who already have reached their contribution limit. Feinstein wants contributors who previously maxed out to be able to replace their donations with more money.
"We're all sympathetic to your client," FEC commissioner Ellen Weintraub told Feinstein's attorneys Thursday morning, "but it's still a hard question."
Although the commission's legal staff had recommended rejecting Feinstein's request, the commissioners indicated they thought it was a close call. Several voiced concern over the potential "implications" for other campaigns of granting Feinstein's fundraising request.
"We have to do some special thinking," Commissioner Steven Walther said during the two-hour hearing. "We're in a tight spot, and we need to think this one out."
Feinstein wants contribution limits lifted following revelations that Durkee had embezzled millions of dollars from dozens of state and federal campaign treasuries.
Feinstein's campaign alone reported losing at least $4.5 million under Durkee's scheming last year. The Federal Election Commission's reasoning will apply to other former Durkee clients as well, and also will be closely watched by California's Fair Political Practices Commission.
Durkee, 59, has pleaded guilty to five counts of mail fraud and is awaiting sentencing.
As investigators discovered last year, Durkee commingled funds from her various political clients, repeatedly transferring money from one account to another and using embezzled funds to pay personal and business expenses.
The Federal Bureau of Investigation concluded that Durkee finagled more than $7 million out of more than 50 clients over several years.
"Embezzlement has become a bigger and bigger problem," Weintraub said. "I thought we had seen the worst of it until this case came along."
Prior to Durkee's arrest last year, Feinstein's campaign treasury reported having $5 million on hand. Following her arrest, the bank reported to Feinstein that only $662,000 was actually available. The First California Bank subsequently froze the account.
In response, Feinstein's campaign attorneys earlier this year requested an FEC advisory opinion about the campaign's proposed solution. The campaign — reasoning that the embezzled money was never really in the Feinstein campaign treasury — wanted to collect "replacement contributions" from individuals who had previously maxed out.
"Because the funds embezzled by Durkee were not 'accepted' by the committee or its agents, the donors who provided these funds should be permitted to replace their attempted contributions," Feinstein's attorneys wrote.
The FEC's legal staff acknowledged that some candidates in other cases have been allowed to re-solicit contributions from donors who already have given the maximum, but only when the original checks had been lost or otherwise not deposited. In Feinstein's case, the money had been accepted and was apparently in the Feinstein campaign treasury, even if only for a little while.
Commissioners also pressed Feinstein's campaign attorney Marc Elias on whether the campaign had adequately protected itself against potential embezzlement.
"The campaign committee did what was reasonably prudent," Elias insisted, adding, "I'm not sure what (else) you would have wanted the Feinstein campaign to do."
Individuals are currently permitted to contribute up to $2,500 to a candidate for each election; taking a primary and general election together, this adds up to $5,000.
In the wake of Durkee's embezzlement, Feinstein subsequently loaned her campaign $5 million. With the loan, Feinstein's campaign bankroll had $6.5 million available as of Dec. 31. She has been aggressively fundraising since, including holding a lunchtime event Wednesday at the Sanger, Calif., home of Nisei Farmers League President Manuel Cunha, followed by an evening event in a Fresno home.
Republican Elizabeth Emken, perhaps the highest-profile of the candidates maneuvering to challenge Feinstein, had not yet reported raising any money as of Dec. 31.
The FEC commissioners could take the case up again as soon as their next session, which is in May.
ON THE WEB
MORE FROM MCCLATCHY:
Follow Michael Doyle on Twitter
McClatchy Newspapers 2012