Ignorance, Arrogance and Political Power

The combination of ignorance and arrogance is a most destructive one, for sure. Add political power to the mix, and we have a real disaster in the making.

Let's look at an example of how campaign contributions to politicians are managed, or mismanaged, as the case may be. It can be instructive as to how our public officials often treat citizen taxpayer monies in the course of their political stewardship and fiduciary responsibilities.

It also may tell us something meaningful about the politicians' professionalism and knowledge of fundamentals with respect to safeguarding entrusted donor or taxpayer funds.

California Democrats Dig for Answers tells a simple tale of the total lack of controls with respect to campaign and related donor funds given in support of hundreds of Democratic politicians in California.

The story is one of both fiduciary mismanagement and insider theft associated with political contributions. The pertinent details are as follows:

"Democratic Party leaders in California sifted through the damage allegedly caused by a campaign treasurer accused of stealing more than $1 million, but they were still struggling Wednesday to even gain access to bank accounts that hold their money.

Federal prosecutors charged longtime treasurer Kinde Durkee, 58 years old, with fraud last week. Ms. Durkee, released on a $200,000 bond, worked as treasurer for nearly 200 candidates and causes, according to election records, and controlled more than 400 political accounts.

Ms. Durkee's attorney, Daniel Nixon, said, "We're going through the evidence and meeting with the government to learn the extent of the charges against Ms. Durkee." He said he couldn't comment further."

In the vast majority of cases, the ongoing fraudulent transactions were enabled by the treasurer having exclusive access to hundreds of bank accounts associated with democratic campaigns and causes.

In my view, this incident is a strong indictment of just how ignorant and/or arrogant our politicians often act when managing money entrusted to them by their supporters and taxpayers, too.

Although this pattern of theft involved primarily "volunteered monies", we are left to imagine how much thought these same politicians would be likely to give to the proper care and handling of "conscripted" taxpayer funds. So the next time you hear a politician claiming to be "doing the people's work," hold on tight to your wallet.

A simple, basic and fundamental rule of elementary management is referred to as the principle of segregation of duties. It's common sense based and very similar to the reasoning behind the separation of powers or checks and balances set forth in our constitutional form of government.

The rule is a simple one and easy to understand. No single person should be in a position to initiate, approve and review the same action. These are incompatible duties if performed by the same person. Segregation of duties is critical to effective internal control; it reduces the risk of both erroneous and inappropriate actions.

Simply put, the same person who writes the checks doesn't control or have exclusive access to the bank account. And a person who writes the checks doesn't also balance the checkbook.

That's not only placing too much power in the hands of any individual, but it is a total disregard of the fiduciary responsibility undertaken by the donee when entrusted with donor funds given for a public purpose. In this case, the purpose being the political support of Democrats.

Finally, it's an inappropriate and unnecessary temptation for the trustee or steward of the funds, in this case the campaign treasurer. Good people can do bad things when proper controls aren't in place. When that happens, everyone suffers the consequences.

Except the politicians, that is. They just go about raising more funds. As the article says:

"On Tuesday night, Democratic party leaders and clubs met in Southern California to figure out how to recover as election season kicks into gear. Party leaders advised state Democrats on the protocol for hiring new treasurers and how to deal with banks. Democratic groups were provided with a checklist for hiring a new treasurer, as well as a list of treasurers, attendees and organizers said.

"A lot of people took out checkbooks" to make contributions to help refill the Los Angeles County party's coffers, said meeting attendee Agi Kessler, chair of the Democratic Party of the San Fernando Valley. She said her organization didn't lose money in the alleged fraud.

On Wednesday, party leaders met with donors to try to quickly raise more cash to meet payroll and basic expenses.

"We're in emergency fund-raising mode and trying to recapture as much as we can,'' said Eric C. Bauman, chairman of the Los Angeles County Democratic Party. Mr. Bauman believes his group lost at least $200,000—most of its cash on hand. He said he raised enough in the past 24 hours to meet payroll and pay "several critical bills."

Go figure. At least the donors know the risks this time around.

Thus, either ignorance (the Democratic party leaders didn't know the principle of segregation of duties) or arrogance (they chose to disregard the rule) resulted in hundreds of California Democratic politicians granting exclusive access and total control to one person, the treasurer.

Sadly, this is all too often the mindset and caliber of fiduciaries we have in our political system today. My guess is that although this involved the California Democratic party, the ignorance and arrogance of our politicians is not restricted to one state or even one political party.

What should we do, now that we know this? Well, we should be very careful to whom we entrust our hard earned money. My take is that we should not give the politicians any more money than is absolutely necessary to do the limited things we want them to do. That goes for taxes, too. We should undertake to starve the political beast, in other words.

Of course, we have a very long way to go to get to that happy state of starvation, but that's no reason not to get started now.

Thanks. Bob.