ETHICS

Curtis C. Verschoor, CMA, Editor

Comptroller Steals
$53 Million from
City Funds
An FBI complaint alleges that
Rita Crundwell, the long-serving
comptroller of Dixon, Ill.,
embezzled $53 million from city of a work-study program. Work- “Piecing Crundwell Together”
funds over two decades. The ing for the city, Crundwell contin- (McClatchy-Tribune Business
city’s annual budget is now only ued to gain new responsibilities News, April 28, 2012), by 2002
about $20 million. and move up in job titles. She was Crundwell was “wowing audi-
appointed comptroller in 1983. ences” at the annual world quarter
She also reportedly played first horse championship and on her

D ixon, Ill., is a town of nearly

16,000 located about 100
miles southwest of Chicago. Its
base during the 1980s for the soft-
ball team of Clifton Gunderson,
Dixon’s independent audit firm at
way to national fame and promi-
nence. She told the local newspa-
per at the time, “I just love to do
major claim to fame has been that the time. She seemed to avoid pol- it, but there is also the agony of
it’s the boyhood home of Presi- itics, having no record of voting defeat that goes with it. There’s a
dent Ronald Reagan. In April since 1998, even in city elections. lot of that, too.”
2012, Dixon began to receive During the years, Crundwell Over the years, Crundwell
national attention again—this pursued an interest in breeding became “one of the nation’s most
time focused on the massive fraud and showing horses. She inherited famous and most successful horse
that the city’s 59-year-old comp- her first farm property from the breeders—her ranch has produced
troller, Rita A. Crundwell, is estate of her mother, who died in 52 world champions,” according to
alleged to have achieved almost 1984, and kept the property after Jim Bret Campbell, spokesman for
single-handedly. her 1986 divorce. Crundwell built the American Quarter Horse Asso-
A May 1, 2012, federal indict- the first horse stables in 1997, ciation (AQHA). “Rita has owned
ment charges Crundwell with wire although her salary at the city was more world champions than any-
fraud and embezzling approxi- a modest $20,000. In 2000, she one else in our industry,” Camp-
mately $53 million from the city undertook a major expansion to bell said (Alyssa Anderson, “Small
of Dixon since 1990. Over a 20- the house, doubling the living Town’s Comptroller Steals $30
year period, this works out to space to nearly 3,500 square feet. million from City’s Coffers,” Left
about $3,300 for every man, She also built a nearly 20,000- Justified, April 22, 2012). Most
woman, and child living in Dixon. square-foot horse barn in 2006 on people assumed that the success of
If Caldwell is found guilty, this another 88-acre property in the her horse farms in Wisconsin and
case would represent one of the area, which she purchased from Illinois generated the income for
largest embezzlements of public Richard A. Humphrey, Sr., a family Crundwell to maintain her lavish
funds ever perpetrated. The prison member. and wealthy lifestyle.
time could be as much as 20 years. Crundwell specialized in breed- According to the government’s
Rita Crundwell graduated with ing horses known as quarter indictment, on December 18,
honors from Dixon High School horses, which can run extremely 1990, Crundwell opened a bank
in June 1971, having begun her fast for short distances. According account in the name of the City of
work at City Hall in 1970 as part to David Giuliani, in his article, Dixon, listing “RSCDA c/o Rita
July 2012 I S T R AT E G I C F I N A N C E 13
 ETHICS
Crundwell” as the account holder. Freightliner Truck for $140,000, a from various vendors, averaging
Between December 1990 and April 2009 Chevrolet Silverado pickup more than $5,380 per month.
2012, Crundwell used her position truck for $56,646, and a 2009 While Crundwell was living it
as comptroller to transfer funds Featherlite Horse Trailer for up, Dixon was experiencing fiscal
between the various bank $259,000. difficulties. City workers, for
accounts maintained by the city. The sworn affidavit also reports example, have had no raises in the
For example, the FBI sworn affi- a review of documents provided past three years. Crundwell cov-
davit states that from September by American Express showing that ered for the missing funds by tak-
2011 through February 2012, a between January 2007 and March ing advantage of the well-known
fiscal difficulties of the State of
Illinois and claiming that the city’s
…Crundwell used Dixon funds to pay for hard times were due to nonpay-
ment by the state. While payments
her own personal and private business from the state were usually late in
arriving, they did come.
expenses, including horse farming Crundwell was known as a
operations, personal credit card smart, hands-on executive. She
was in charge of picking up the
payments, real estate, and vehicles. city’s mail at the post office,
according to the affidavit. One of
Crundwell’s relatives—who isn’t a
total of approximately $2.8 mil- 2012, Crundwell incurred charges city employee—performed this
lion was received representing of more than $2.5 million on her task at her direction. Crundwell
Dixon’s share of distributions personal credit card account. Fifth was out of town frequently
from the state of Illinois. During Third Bank records show that all because of her horse business, tak-
the same period, the affidavit of these charges were paid by ing an additional 12 weeks of
states that Crundwell transferred online payments with City of unpaid time in 2011 in addition to
$1.8 million into the RSCDA Dixon funds. Charges included the four weeks paid for by the city.
account she controlled. Between more than $339,000 for jewelry She told a horse enthusiasts’ publi-
September 2011 and March 2012, cation in 2003 that her coworkers
she withdrew $3.3 million from at City Hall had been accommo-
For guidance in applying
the account. Of this amount, only dating, saying, “They are used to
$74,274 was related to city the IMA Statement of me being gone in August, October,
operations. Ethical Professional and November.” She said she car-
The FBI affidavit also alleges Practice to your ethical ried a portable computer back and
that Crundwell used Dixon funds forth, giving her access to her city
dilemma, contact the IMA
to pay for her own personal and e-mail, and also called City Hall
private business expenses, includ- Ethics Helpline at (800) every day.
ing horse farming operations, per- 245-1383 in the U.S. or In spite of not being in her
sonal credit card payments, real office all the time, she was able to
Canada. In other coun-
estate, and vehicles. The affidavit fool a number of mayors, finance
identified Crundwell’s vehicle tries, dial the AT&T USADi- commissioners to whom she
purchases that used funds said rect Access Number from reported, and other city council
to be fraudulently obtained from www.usa.att.com/ members. Jim Dixon, the mayor
the city, which included a 2009 from the mid-1980s to the early
traveler/index.jsp, then the
Liberty Coach Motor Home for 1990s, said, “She was pretty much
$2.1 million, a 2009 Kenworth above number. in charge…she was the go-to per-
Tractor Truck for $146,800, a 2009 son.” And former Finance Com-
14 S T R AT E G I C F I N A N C E I July 2012
missioner Roy Bridgeman praised used for legitimate purposes. that are believed to be flawed.
her upon his leaving office last CliftonLarsonAllen, as Clifton Headquartered in Milwaukee,
year, saying, “She looks after every Gunderson became known after Wisc., Wipfli is one of the 25
tax dollar as if it were her own.” its January 1, 2012, merger that largest U.S. accounting firms and
It took the sharp eyes of Kathe made it the eighth-largest U.S. has an office in Dixon.
Swanson, Dixon city clerk, to accounting firm according to It’s ironic that President Rea-
uncover the fraud in late 2011. Accounting Today, was Dixon’s gan’s popular often-quoted saying,
Swanson had made a routine audit firm for many years through “Trust, but verify,” should be so
request for all bank statements so fiscal 2005. At that time, it recom- relevant in his own hometown so
she could prepare the monthly mended that Samuel S. Card, a long after his departure. SF
treasurer’s report in Crundwell’s CPA from the nearby town of
absence. She noticed the “secret” Sterling, Ill., perform the audit. Curtis C. Verschoor is the Emeritus
account with Crudwell’s name Thereafter, Dixon continued to Ledger & Quill Research Professor,
and took it to Mayor Jim Burke, retain the Clifton Gunderson firm, School of Accountancy and MIS,
who notified the FBI. Over the but only to accomplish a compila- and an honorary Senior Wicklander
years, Crundwell misled the inde- tion of its financial statements and Research Fellow in the Institute for
pendent audit firm hired to not to express a professional audit Business and Professional Ethics,
express its opinion on Dixon’s opinion on them. both at DePaul University, Chicago.
financial statements by allegedly The city plans to hire a new He was selected by Trust Across
creating fictitious invoices pur- firm to handle the audit for the America as one of North America’s
ported to be from the State of Illi- fiscal year that ended in April. At Top Thought Leaders in Trust-
nois to show that the funds she its May 8, 2012, meeting, the City worthy Business Behavior–2012.
was fraudulently depositing into Council hired the firm of Wipfli His e-mail address is
the RSCDA account were being LLP to restate the earlier audits curtisverschoor@sbcglobal.net.

July 2012 I S T R AT E G I C F I N A N C E 15
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