ACC 421-02 Group 4
The Crime
$53 million dollars is what Rita Crundwell embezzled from the city of Dixon over 22 years. It started when she was the city’s comptroller and finance officer in 1990 until 2012 when she was arrested. She was able to pull off this feat by opening a bank account, in the name of City of Dixon and RSCDA, at Fifth Third Bank. She was the sole controller of that account, and was able to transfer funds from the city’s money market account into this account. By creating fictitious invoices, she was able to fool the city auditors that the transfers were legitimate.
With the money in the RSCDA account, she was able to fund the expansion of her horse ranch. She had nearly 400 horses at the time of her arrest. She was also able to fund two homes, two ranches, luxury cars, over a dozen trucks, trailers and farm equipment, along with thousands of dollars in in jewelry. She was able to avoid detection by personally picking up the city’s mail, and if she wasn’t there she would have her family or other city employees pick it up and separate her and the RSCDA account mail from the rest of the city’s mail.
Rita was finally under investigation in October of 2011, when Dixon’s city clerk, Kathe Swanson stumbled onto the bank statements, while Rita was on vacation. These led her to the RSCDA account. She then informed the mayor of Dixon, Jim Burke, who then went to the FBI. The FBI investigated Rita for 5 months, until on April 17th, 2012 they arrested her for embezzlement. She pled guilty on November 14, 2012 and was sentenced on February 14, 2013.
The Lawsuit
Rita Crundwell is not the only guilty party in her embezzlement. The City of Dixon recently received a settlement of $40 million after it sued its auditors and local bank. The city brought suit on June 8, 2012, about a month and a half after Mrs. Crundwell was indicted on charges. Dixon accepted the settlement on September 25, 2013.
http://wqad.com/2013/09/26/quick-timeline-on-rita-crundwell-investigation/
Dixon brought suit against Sam Card Accounting, Fifth Third Bank, and CliftonLarsonAllen. The city received settlements in the amounts of $1 million, $2.85 million, and $36.15 million, respectively. Dixon’s mayor believes that the settlement money will help heal some of the wounds caused by Crundwell’s crime and has agreed to not file any further lawsuits against any of the parties or their representatives.
http://wqad.com/2013/09/25/dixon-awarded-millions-in-settlement-with-auditors/
Professional negligence was at issue here. Crundwell used fake invoices as part of her scheme, something the city’s auditors should have noticed at some point over the past 20 years. The invoices were described as “obvious and should have been obvious… to Clifton [LarsonAllen]”. The video associated with the link below clearly shows the discrepancies between the fake invoices and the real thing. The fakes did not contain the Illinois Department of Transportation seal, lacked a contact phone number, and even contained misspellings.
http://wqad.com/2013/09/26/how-crundwell-did-it-why-auditors-are-also-to-blame/
The millions of dollars the auditors and bank owe to Dixon are certainly painful, but they also bear the embarrassment and shame of not noticing obvious forgeries for over 20 years. An auditor’s job is to catch irregularities and fraud and the fake documents were pretty obvious. The forgeries contained only text instead of a letterhead or seal at the top of the document. Also, the bank should have been more suspicious that only Rita Crundwell’s name was on the accounts that she used there.
CliftonLarsonAllen initially defended itself by stating that it was not hired for the detailed testing needed to detect this kind of fraud. However, the forgeries should still have raised some red flags. Clifton also pointed out that it warned Dixon of the dangers of having one person serve as both the comptroller and treasurer for the city, a gaping hole in internal controls. Dixon has strengthened its controls since Crundwell’s arrest. But ultimately, Clifton should have suspected something was wrong when it discovered Crundwell’s secret bank account in 2010 and did not investigate the matter. The simple fact is that Clifton was hired by Dixon to detect fraud and it failed to do so for 20 years.
http://wqad.com/2013/02/14/lawyers-for-city-of-dixon-say-accountants-share-the-blame/
Coincidence much?
Saying Rita was an avid horse enthusiast would be an understatement. As mentioned above Crundwell owned nearly 400 horses, and one of the Quarter Horse industry’s most successful breeders and owners. Although Crundwell didn’t name all her horses, she did however name those she bred. Some names include: “Have Faith in Money”, “Sum for Me”, and “I Found a Penny”. Supposedly Crundwell chose names that looked and sounded attractive for judges, however their financial connotations only add salt to the wound of the people of Dixon. Who knows? Maybe Crundwell’s decision to name her horses “Jewels by Tiffany” or “Packin Jewels” was a hint that she was purchasing $340,000 of high end jewelry with Dixon taxpayers’ money.
http://abclocal.go.com/wls/story?section=news/local&id=8645208
“Upload”, another one of Crundwell’s horses, also has a ironic spin. Two weeks after Crundwell’s arrest State Senator Dan Duffy (-R) of Barrington announced a new bill requiring all government agencies, schools, and municipalities, to ‘upload’ their current checkbook and statements. “If you look at the city of Dixon’s website, there is almost no financial information available to the public. Without filing onerous Freedom of Information Act requests, the public had no mechanism for holding its city officials accountable or investigating the finances themselves,” Duffy released in a statement on the issue. Duffy hopes Bill 3392 will help keep those in power more accountable and allow the public to act as independent ‘auditors’ if they wish.
Crundwell’s new home for the next 20 years, the Federal Correctional Institute at Waseca, was also the home to another embezzling master, Enron’s former CEO, Jeff Skilling, until it was converted to an all-female institute in 2008.
http://mankatofreepress.com/local/x519261189/Waseca-set-to-welcome-infamous-inmate
winterkenn 