Rita Crundwell and the Dixon Embezzlement

THE $53 MILLION BAMBOOZLE: How the trusted comptroller of a small Illinois town became the biggest municipal embezzler in U.S. history, according to the feds—and no one noticed

Rita Crundwell leaves a Rockford, Illinois, courthouse after a hearing on her embezzlement case in August 2012.   Photo: Ray Whitehouse

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Chart of where Dixon's money went
ONE FOR THEM, TWO FOR ME: The amount that the FBI alleges Crundwell stole from September 2011 to February 2012 is more than Dixon was budgeted to spend on police, fire, and other essentials combined over that period.

The mayor would have been even more aghast had he known what the world soon would: the amount the feds allege that Crundwell stole. Since 2006, according to an indictment filed in May in U.S. District Court, Crundwell filched some $30 million, or an average of $5 million a year—more than half of Dixon’s entire operating budget over that period. From 1990 to 2006, she stole another $23 million, the feds say, bringing the grand total to an unthinkable $53 million.

If the allegations against Crundwell prove true, she not only is the biggest municipal embezzler in U.S. history but ranks fifth among embezzlers of any kind, says Christopher Marquet, CEO of Marquet International, a Boston-based security consulting firm that specializes in employee misconduct. And though the amount that Crundwell is alleged to have stolen does not reach Madoffian proportions, it’s still “an outrageously, grotesquely huge amount,” Marquet says. “That she was able to do that and no one smelled it—it almost seems not possible.”

Crundwell awaits trial on a single count of wire fraud, for which she could face up to 20 years in federal prison and a $250,000 fine. In late September, state prosecutors added another 60 counts of felony theft, each of which carries a sentence of 6 to 30 years behind bars. If she is found guilty of all counts and the judge does not allow her to serve her sentences concurrently, she could spend the rest of her life in prison.

Meanwhile, Crundwell is free on a personal recognizance bond of just $4,500. The bond is so low because a judge deemed that Crundwell does not pose a flight risk—she has been lying low at her boyfriend’s place in Beloit, Wisconsin—and, sources say, because she has been cooperating with the feds. She has not fought the seizure and sale of almost all her assets by the U.S. Marshals Service, including more than 400 horses. Some of their names are almost comical in their irony: I’m Money Too, I Found a Penny, Good I Will Be. “These horses represent some of the best raised and bred in the quarter horse industry,” Darryl McPherson, U.S. marshal for the Northern District of Illinois.

Even though Crundwell pleaded not guilty in May, she acknowledged in the initial FBI interview in Burke’s office that she used “proceeds that she wrongfully obtained” to buy and maintain horses, among other things, according to court documents. Her lawyers, Paul Gaziano and Kristin Carpenter, who declined to comment for this story, are public defenders. Observers expect her to change her plea to guilty in the coming months.

Despite the ongoing liquidation of Crundwell’s property, the City of Dixon stands to get only a fraction of its missing $53 million back. That’s galling enough to the citizens. Further fueling their outrage is that Crundwell pulled off this alleged crime during a period when the city was gasping financially. When the chief of police begged her for the money to buy a few more radar guns, a couple of new squad cars, some new uniforms, only to be told that, sorry, there just wasn’t enough money. When the budget of the city’s beloved Municipal Band had to be cut in half, forcing the townspeople to raise money to make up the difference. When officials were compelled to slash the police, cemetery, and street departments and leave vacant jobs unfilled. “The city is in a fiscal crisis,” said the finance commissioner, David Blackburn, in a City Council meeting in October 2011.

If what the feds say about Crundwell is true and she was able to face the townsfolk with a bright smile every day, “well,” Burke says, “it is sickening. It shows she didn’t give a shit about our town.”

What Crundwell is alleged to have done isn’t the only cause for outrage in Dixon. After the tornado of her arrest passed, many more funnel clouds, equally dark, have dropped: How on earth could this have happened? How could no one have noticed? How was it possible for a small town not to miss that much money?

 

Two hours west of Chicago, perched on the banks of the Rock River, amid the cornfields and pastures that form large green checkerboards across the state’s northwestern farm belt, Dixon could be a back lot for a Capra film on all that is best about small-town America. Limestone courthouse, old-fashioned downtown, flag-flapping front porches—they’re all here. So are two bronze statues commemorating the years that Ronald Reagan spent in town. One shows Dutch astride a horse; the other gleams near the former president’s boyhood home, at 816 South Hennepin Avenue, Dixon’s primary tourist attraction.

Something else—ominous in retrospect—summons a small-town feel: the unusual system of governance. Since 1911, Dixon has been run by the commission form of government, an old model used by only about 50 of the 1,300 municipalities in Illinois. Power is divided among five people: a mayor and four part-time commissioners who oversee their own fiefdoms (public property, public health and safety, streets and public improvements, and finance).

The positions pay a pittance—the mayor makes $9,600 a year; the commissioners, $2,700 each, according to the annual budget—which means that most officeholders juggle their duties with full-time jobs and spend limited time at City Hall. The owner of a carpet and flooring store served as finance commissioner for a number of years. He was succeeded by a business teacher and athletic coach down at the high school, Roy Bridgeman, who served for more than two decades. As for Mayor Burke: he runs his own real-estate firm.

The problem is that “the commissioners are just citizens,” says Jim Dixon, a retired attorney who served as mayor from 1983 to 1991 and is a descendant of the town’s founder. “Some of them may not always have been qualified for the areas they were elected to oversee.” Dixon says he pushed, unsuccessfully, to change to the far more common city manager model of government.

Still, the commissioner system made for a neighborly and easygoing approach and seemed to accomplish the goals that gave rise to its adoption in the first place: placing a check on the power of the mayor’s office and curbing the possibility of corruption. It didn’t hurt that it also saved the city money on the salaries that a professional city manager and staff would command.

Until that day this past April—when word spread that the FBI had taken over City Hall and that Rita Crundwell had been frogmarched down the back stairs in handcuffs—the idea that such confidence could be either deeply misplaced or dangerously naive never seemed to occur to anyone.

And even if someone did have ill intent—a silly notion, given that most of Dixon’s officials had known one another for decades—it seemed highly unlikely that they could get away with anything. Not with Rita Crundwell watching the purse strings. She knew the books too well, was too smart and scrupulous. As finance commissioner Bridgeman (who did not respond to a request for an interview) told the City Council upon his retirement in April 2011: “Rita Crundwell is a big asset to the city. She looks after every tax dollar as if it were her own.”

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2 years ago
Posted by ButterBeans

Exactly how is it that the IRS never once stepped in to say something was fishy about this situation. They audit the average joe all of the time over nothing and this woman who was simply a small town employee is living the life of a multi-millionaire, traveling the country showing horses, taking extended time from work and it never raised a red flag?

2 years ago
Posted by Pugs

A couple of points. In the state of Illinois, this type of "fleecing" is part of the accepted practice. You only have to look at the State Government, Cook County, the City of Chicago, the state pension gaming, etc.........to see that this type of behavior is the "norm" in governmental agencies. The attitude within the governmental agencies from a "personal" perspective is "I have mine, you go find a way to get yours"

2 years ago
Posted by armchair

Hope the those that questioned the numbers and got government involved to prosecute her rather than play with her get an article as well.

2 years ago
Posted by bitobliss

Y'all should also take a look into the disappearance of her ex-husband. He disappeared about the time she started embezzling from Dixon.

2 years ago
Posted by mimilona

I grew up in Dixon and was in that high school program with her in 1971. I never really knew her but I am disgusted that she could do this to her friends & neighbors. People who think that the town of Dixon was blind & naive don't understand the small town mentality. You trust your fellow neighbors until they give you cause to mistrust them. The majority of your fellow citizens are honest. Unfortunately Rita was not one of those. I am so sorry for my old friends there who are going through this. But I am sure they will bounce back because they are strong & resilient. I am proud to be from Dixon, Illinois

2 years ago
Posted by Uhlan

A state where this type of swinishness and corruption is not only tolerated, but laughed at and encouraged, is one where I don't buy real estate. Illinois deserves to have its bond rating lowered beyond what it has already been (to an A), and my sympathies to the vast majority of my co-citizens who are downstream from the sewage output of Crundwell and her ilk. Maybe part of her karma is her off-putting and remarkable physical ugliness. She deserves much worse than to look bad.

2 years ago
Posted by Dixonresident

What happened here in Dixon goes beyond theft. It demonstrates moral bankruptancy in those who wield power, as well as their blatant disregard for others. It's not just city hall, folks.
The worst part is that people are so naive to think that Rita is a one-woman wrecking ball. Can one honestly say that this happened over the years without anyone catching on? Sure, crucify Rita through due process and make her a scapegoat, but realize this: the city allowed itself to be robbed blind because of its administrative ineptitude and shoddy bookkeeping.

2 years ago
Posted by not of the crowd

So this happens in Illinois, to a small town.. Well this state and many small towns within Illinois have been stealing and attempting to seize assets from individuals for a long time. This goes on and everyone looks the other way.
If we all step back and think about it honestly and fairly we can see it. However no one says anything unless it affects them or impacts their town directly.
To take this even further, people justify this theft from individuals with the most pathetic excuses.
Next time you complain about Dixon and what happened there remember that jealousy and petty jealousy harbored by numerous individuals has fueled thefts that have been so justified as for the benefit of a town or city for a long time. Remember this when someone's farm or land becomes a target of a town, the state or the city you live in. $53 million is a drop in the bucket and you guys looked the other way, didn't want to rock the boat. Shame on you.

2 years ago
Posted by Nobmam

I am shocked that there is corruption in Illinois, shocked!

Terms limits is the answer. I will bet my hard earned honest money that Madigan has this going on as well.

2 years ago
Posted by MARK CZ

Rita Crundwell is an interesting case study regarding checks and balances and lack there of. Sure, she stole all of this money. What's interesting - small town mentality or not - is no one felt the need to provide a thorough review of Rita's work. These are public funds. If I'm Rita C., I would welcome a complete and thorough review of all of my accounting activities just for liability protection. The fact this did not occur and that Rita's work activity was not seriously reviewed shows a general lackadaisical attitude of the mayor and or the city council.

2 years ago
Posted by MizzO52732

She took Millions from a city that remained in working order.

I say let her run for governor of IL.

2 years ago
Posted by Justsayin2

I am also from a small town here in Illinois about 80 miles east of Dixion, it is known in our town that our Mayor has a construction company, and guess who gets all the contracts in our town to build a pavilion in a village park or put in sidewalks that the village needs, street repairs being paid with stimuis money or any other village project. The Mayors construction company always seems to win the bids on these projects, (maybe it's because he opens them) he also uses village workers and equipment on these projects. Unethical practices are always a part of government, sometimes it's just a bit larger story when the FEDS get involved.

2 years ago
Posted by Trustme

Now do any light bulbs finally go off, on how it is possible that the state of Illinois owes $130 billion ?

How many state workers, city workers, commissioners, alderman, mayors, and all the many people they come into contact with, are pilfering from "the system" just as Rita has been doing ? If you have hundreds and thousands of people bid rigging, shuffling funds, way over pricing contracts for work, and just generally skimming off the system, it easily adds up to billions. Here is this small town, losing MORE THAN HALF its entire annual budget, and not one soul caught on.

For the people who suggest that type of thing cannot possibly happen in their own city, or town, or muni. - well that may be true of that one type of activity with that one situation in Dixon. But there are hundreds of different ways the system can be "milked." It just doesn't happen in government - its in business too.
If everyone started asking more common sense questions, like where does the money go, who gets it, and why so much, or why aren't we making budget, then hidden pilfering can be brought to the surface. The state needs to make whistleblowing, and reporting, a well rewarded opportunity, and protecting the people who uncover the shady practices. Thats just for starters. Taxpayers here just send in their money, and maybe vote once in 4 years, and that's it. No one wants to get involved, or be "nosy" into people's business. We'd all rather sit comfortably sit at home, in front of our computers and laptops and Ipads, and read about these stories, and pretend it's not happening in our little town or city or business or church or whatever organization that has a budget.

2 years ago
Posted by syedr

I am wondering where are those millions we are raising from Illinois Lottery? Our licence plate fee has doubled in last five years, tolls has increased 100%, 100% increase in power bill, these corrupt politicians are embezzling money from people and apparently no one can do anything.

1 year ago
Posted by PoppyMo

First of all when some one is employed by the government,wether it is at state, city, or Federal level it is very much your business to inquire and be informed about what they are doing with your money. The money they make and the money they handle,afterall, does come from you. Unfortunately we are too trusting or just plain complacent and we would rather not become embroiled in our government processes... well guess what... that attitude is what got us in the mess we are in now. From being indebt to no one and one of the greatest countries in the world to being one of the most corrupt. I am not to well liked in my husbands family because I questioned where a house painter nephew got the money to buy his bimbo girlfriend a bigger set of boobs and take her on lavish trips and buy expensive vinter reserve wine. When his mother was bragging how good he was with his money, I asked her where it was all coming from. Guess what... he is now in Huntsville serving a thirty year sentence.

1 year ago
Posted by llmequon

I agree with Stout--she's a sociopath. They can fool people for a long time--trust me. And unless you're looking for it, embezzlement can be hard to detect. Everyone out there, whether a city government, small business or large business--or even just some individual with a financial adviser--needs to take note. Separate duties and LOOK for the red flags!

1 year ago
Posted by Santos

Don't ever think the "more modern form of city government" with a city manager is perfect either.
these guys can "waste" a city into bankrupcy..

9 months ago
Posted by Listen2me

I've 2 words for Dixon, and small towns everywhere: OUTSIDE AUDITORS

Like large corporations, the books of any city should be audited every year by outside auditors to assure proper handling of all accounts to catch people like Crundwell early in the game and to improve internal procedures.

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