Thread: Staggering $30M theft from tiny Ill. city

Staggering $30M theft from tiny Ill. city

By JASON KEYSER | Associated Press – 14 mins ago...

CHICAGO (AP) — Allegations that a finance officer for a small northern Illinois city was able to steal a staggering $30 million from government coffers to run a nationally renowned horse breeding business inspired calls Wednesday for more rigorous oversight in small communities that typically face less scrutiny.

Dixon's mayor pledged new measures to protect the city's finances a day after FBI agents arrested longtime comptroller Rita Crundwell. She is accused of using the money to fund one of the nation's leading horse breeding operations and feed a lavish lifestyle that kept her outfitted with cars and hundreds of thousands of dollars worth of jewelry.

According to a criminal complaint, the siphoning of city funds went undetected for years until another staffer filling in as vacation relief became suspicious and discovered a secret bank account. How an enormous sum — it dwarfed the city's current annual budget of $20 million — could be stolen and escape the notice of a yearly audit left many puzzled.

A Chicago-based corruption watchdog, the Better Government Association, called it a wakeup call for state and local officials to put in place better safeguards, especially in smaller towns that lack rigorous oversight.

"Tens of billions of our tax dollars flow through 7,000 plus units of government in Illinois every year. And we can only watch a few of them," said the association's president, Andy Shaw. "Most of them don't have inspector generals. Most of them don't have auditor generals. Most of them don't have watchdog groups looking closely. ... It's ripe for rip-offs."

Dixon, a city of about 16,000 people west of Chicago where Ronald Reagan grew up, was especially vulnerable because Crundwell, who has been comptroller since the early 1980s, had control over all of the city's finances, a common arrangement in smaller cities and towns.

Federal prosecutors say she stole $3.2 million since last fall alone and misappropriated more than $30 million since 2006.

Agents searching her home, office and farms in Dixon and Beloit, Wis., seized seven trucks and trailers, three pickup trucks, a $2.1 million motor home and a Ford Thunderbird convertible — all allegedly bought with illegal proceeds. Authorities also seized the contents of two bank accounts she controlled.

Between January 2007 and March of this year, she is accused of racking up more than $2.5 million on her personal American Express card — including $339,000 on jewelry — and using Dixon funds to pay back the charges.

Prosecutors say she used $450,000 in stolen funds for operations at her Meri-J Ranch, where she keeps about 150 horses.

Crundwell is one of the top horse breeders in the nation. Her ranch produced 52 world champions, according to the American Quarter Horse Association in Amarillo, Texas, the world's largest equine breed registry and membership organization.

"Rita has owned more world champions than anyone else in our industry," said Jim Bret Campbell, the association's spokesman.

He said she mainly showed her horses in halter classes, competitions where the animals are led by hand rather than ridden and are judged on their beauty. A November photo from the association's 2011 world championship in Oklahoma City shows a smiling Crundwell posing in a white cowboy hat and spotless white shirt beside a horse named Pizzazzy Lady.

She is so widely known that the association announced her arrest on its website and promised those inquiring more information when it was available.

"People are shocked," Campbell said of the reaction from the industry.

Dixon placed Crundwell on administrative leave without pay and named a new interim comptroller.

Trying to explain how that much money could disappear unnoticed, Mayor James Burke said Dixon has struggled financially with big infrastructure expenditures, reduced revenues and cash flow problems made worse because the state is far behind on income tax disbursements. That provided plausible reasons to think the extra hole in the budget was related to those financial problems, he said.

How Crundwell could sustain such an extravagant lifestyle on an $80,000 salary was mostly attributed to her success in the horse industry, Burke said.

"She definitely was a trusted employee, although I've had some suspicion for quite a while just because of her lifestyle she lived," Burke said in an interview. "But there wasn't anything that was brought to my attention or that I could see that would give cause to think that there was something going on."

He said the city has appointed an independent panel that includes a certified public accountant, a banker and an attorney to recommend internal financial controls.

Marianne Shank, director of the Illinois Government Finance Officers Association, said more training is needed for officials in setting up such controls, including requiring dual signatures in issuing checks, monthly cash flow reports to document budget shortfalls and comprehensive annual financial reports.

"The concern I hear most often is that there are not enough staff to have checks and balances," she said.

Auditors also talk of the need to divide up financial duties among different staff members, each one acting as a potential check on the other, said Steve Carter, city manager for Champaign, Ill.

"It's a good lesson for all cities that these things happen and can be very dramatic if you're not careful and really stress the importance of having those checks and balances in place," he said.

Staggering $30M theft from tiny Ill. city - Yahoo! News

Feds: Illinois city official actually stole $53 Million

By The Associated Press
4:30 p.m., May 1, 2012

DIXON, Ill. — The former financial officer for the small northern Illinois city of Dixon stole millions of dollars more than originally thought, federal prosecutors said Tuesday as they announced plans to try to seize her trucks, boats, horses and even unborn foals she owns.

A federal grand jury on Thursday returned an indictment charging Rita Crundwell with one count of wire fraud for allegedly siphoning more than $53 million from the city of 16,000 since 1990 into a secret account she controlled. Prosecutors originally alleged she had taken $30 million.

Prosecutors contend she used the money to pay for a lavish lifestyle as she worked as comptroller in Dixon, the boyhood home of the late President Ronald Reagan.

Prosecutors filed a civil lawsuit Thursday seeking 311 registered quarter horses and dozens of foals that are expected to be born this spring. A news release announcing the suit said prosecutors plan to sell the horses and "apply the proceeds toward restitution to the city of Dixon." Prosecutors said the horses are subject to forfeiture because Crundwell either bought or "maintained them with criminal fraud proceeds."

At the same time, the indictment seeks criminal forfeiture of two residences, a horse farm in Dixon and a home in Florida. It also seeks a $2.1 million motorhome, more than a dozen trucks, trailers, motorized farm equipment, a pontoon boat, and cars, including a 1967 Chevrolet Corvette roadster. The indictment also seeks the forfeiture of more than $224,000 in cash from two bank accounts.

Federal prosecutors allege Crundwell created phony invoices that she characterized as being from the state of Illinois. She then allegedly put that money from a city account into another account, which she repeatedly used for personal use.

According to the news release, she said she used the state's much-publicized dire financial straits to her advantage, telling city officials that the state was late in payments as a way to conceal her transfers of funds and her spending.

If convicted, Crundwell faces a maximum sentence of 20 years in federal prison.

The former comptroller will be arraigned May 7 in U.S. District Court in Rockford. Crundwell's attorney was not in his office Tuesday and in a recorded message he said he would not be back in the office until Wednesday. Crundwell could not be reached; the phone rang unanswered at a listing for her.

Feds: Illinois city official actually stole $53M | UTSanDiego.com