REGION — The dog days of summer may be over, but the campaign to win Darrell Issa’s seat in the 49th Congressional District is just starting to heat up.
Democratic candidate Mike Levin shared a nine-minute documentary on his website on Aug. 29 accusing his opponent, Republican candidate Diane Harkey, of running a so-called Ponzi scheme that bilked senior investors out of their life savings.
On the same day, Harkey’s campaign ran a TV ad entitled, “Predatory,” accusing Levin of representing the now-defunct mortgage lender Countrywide Financial and filing eviction proceedings against homeowners during the 2008 financial crisis.
Both campaigns stand by their incendiary allegations while simultaneously disputing the veracity of each other’s claims.
Levin’s video claims that Harkey spent $1.5 million funding her own campaign using money that was supposed to be invested in construction projects through Point Center Financial Inc., a now-defunct real estate lending company owned by her husband. Harkey was listed as secretary and her husband, Dan Harkey, as president.
In early 2009, the Securities and Exchange Commission opened an investigation into Point Center Financial Inc. and Dan Harkey, which led to judgements including breach of fiduciary responsibility and 11 counts of financial elder abuse, awarding more than $12.5 million to victims and investors.
Several of those seniors who lost money investing with Point Center are featured in the video. Point Center Financial Inc. filed for bankruptcy that same year.
“As you saw in the video, she admitted at one point that she had benefited from the company,” said Parke Skelton, campaign consultant for the Levin campaign. “She was basically using profits from a Ponzi scheme to further her political career.”
Near the end of the documentary, viewers are shown the Harkeys’ home in a gated community in Orange Country. “Right before the company collapsed she put the house in her name, so they wouldn’t lose it,” Skelton said.
According to Skelton, Diane Harkey and husband Dan were divorced in 2014 to protect the assets.
“[Diane Harkey] says that they separated in 2008 but as far as we know they’re still living in the same house,” Skelton said. “[Dan Harkey] voted at that address in the June primary. It’s incredibly suspicious.”
In response to the video allegations and Skelton’s comments, Bryan Shroyer, Harkey’s campaign spokesman, described Levin’s video as a “fabrication.”
“The video is false, and it should be taken down,” Shroyer said.
Shroyer points out that the plaintiffs did not prevail in the case against Diane — only Dan Harkey was found guilty.
“Regarding the additional accusations, sometime after their divorce, Diane and Dan made the decision to reside together in order to better take care of a close relative who is in need of constant care,” Shroyer said.
The video also quotes an article from the March 17, 2009, Orange County Register in which Harkey said that her political spending included money from her husband’s earnings. But Shroyer dismissed the comment.
“Diane had a 30-year career in business and made her own money,” he said. Shroyer went on to deny another allegation from the video that during the lawsuit Harkey had appealed to the state treasurer to have her salary reduced in order to plead financial hardship.
“Absolutely not,” Shroyer said, adding that Levin’s documentary was just a “distraction.”
“It’s clear that Levin doesn’t want to talk about the issues because he’s out of step with voters in the district on issues like taxes, health care and immigration,” Shroyer said.
And Harkey’s campaign still accuses Levin of being involved in evicting homeowners.
“Levin’s defense is pretty weak,” Shroyer said. “On Oct. 6, 2008, Gov. Jerry Brown announced an $8.7 billion predatory lending settlement with Countrywide. Ten days later, Levin represented Countrywide for the first time, knowing full well what kind of practices they had been engaged in.”
“We answered this in the primary,” Skelton said in response to the allegations.
But former 49th Congressional Democratic candidate Paul Kerr, one of Levin’s challengers in the June primary, also accused Levin of unfairly evicting struggling homeowners.
Skelton explained that over a decade ago Levin was employed at a law firm called Bryan Cave doing environmental compliance work. Bryan Cave also represented Bank of America, which bought Countrywide in 2007.
“When the mortgage market collapsed in 2008, an unscrupulous lawyer from L.A., named Mitchell Roth, recruited over 2,000 desperate homeowners to file frivolous lawsuits against several lenders that included Countrywide,” Skelton said. “The suits claimed, without merit, that the mortgages weren’t valid.”
Skelton added that despite the fact that Roth collected monthly retainers from the clients but did nothing to advance the suits, they still had to be answered.
“Nearly every lawyer at Bryan Cave was assigned to file answers to some of them —including Mike,” Skelton said. “They were not foreclosure proceedings, and after the suits were dismissed, the owners who had brought the actions were referred to loan modification to help them stay in their homes.”
Both the documentary and the ad are still running. The last poll taken over a four-day period at the end of June shows Levin ahead of Harkey 44 percent to 41 percent, with a margin of error of +/-4.6 percent.