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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Simple is elegant. And the strategy used by Crundwell, the feds say, was in some ways very simple, at least for a person who knows her way around bank statements and balance sheets. Crundwell essentially shell-gamed a variety of city tax funds, then doctored the books to make balance statements look as if they matched, authorities allege.

The scheme, the feds say, started with the Illinois Fund, a money market mutual fund open to Illinois municipalities. Towns deposit their revenues from taxes, fees, federal grants, and the like into the account, hoping to maximize the interest they earn while the money is waiting to be spent.

The City of Dixon—in the person of Crundwell—could make withdrawals from the Illinois Fund. According to authorities, Crundwell wired money from there into various city accounts, such as the “corporate,” “motor fuel,” and “capital development” funds, and a city money market account. She fattened the capital development fund by transferring money from the other accounts into it.

From that capital development fund, she would write checks made out to “Treasurer.” “Anybody looking at it would conclude that it must be a payment to the Illinois state treasurer and she was the treasurer on the other end of the check,” explains Carol Jessup, an accounting professor at the University of Illinois Springfield and a former internal auditor for the Illinois Capital Development Board who has studied Dixon’s finances. Instead, Crundwell deposited the money into the secret RSCDA account, the feds say.

If what the feds allege is true, Crundwell succeeded for so long by cleverly exploiting the weaknesses in the system. For starters, accounting regulations were far more lax in 1983, when Crundwell took over as comptroller. “No one paid much attention to government reporting [back then],” says Jessup. “Government accounting was much more about budgets and the management of cash.”

Today, it would be nearly impossible for someone—even a government official—to open a bank account in a city’s name without city authorization, the way Crundwell allegedly did at First Bank South in 1990, adds forensic accountant Dennis Czurylo, a former special agent in the Internal Revenue Service’s criminal investigation division. Once that account was established, it got lost in the shuffle of takeovers: First Bank South gave way to Grand National Bank, which was bought by Old Kent Bank, which was in turn gobbled up by Fifth Third. New employees trying to get up to speed on old accounts would have little reason to question what appeared to be just another city account. (A spokesman for Fifth Third Bank declined an interview request from Chicago.)

What’s more, Crundwell knew that the State of Illinois was often late—sometimes by as much as a year—in making certain payments to its municipalities. So Crundwell would tell the mayor and the City Council that the state was late in sending payments “when in fact,” the federal indictment alleges, “she had fraudulently transferred those funds to the RSCDA account for her own use.”

The financial documents that Crundwell prepared for Dixon were unorthodox, to say the least. With Chicago, Jessup went line by line through the budget and financial statements that Crundwell prepared for Dixon’s last fiscal year, which ended on April 30, 2012. Jessup calls the budget an “obtuse mix of loan balances and interfund transfers with revenues, all labeled as revenue. Tracing the inflows and outflows . . . is impossible.”

Even an Accounting 101 student knows you can’t mix assets and revenues. That mixing took place on the budget, a document that auditors don’t routinely see. The people who do see it are Dixon’s mayor and commissioners—who, as you’ll recall, work part-time and are paid just a few thousand dollars each. “If the finance commissioner [Crundwell’s boss] is paid $2,700, how motivated do you think he’s going to be to do this job?” Jessup asks.

Because Crundwell was the only one who could make heads or tails of the books, it was far easier to just let her handle everything. Dixon’s leadership essentially allowed a closed-loop system in which one person controlled all aspects of depositing and spending money, plus keeping the books. “You always want to split those duties up,” says Czurylo. “In a normal organization, you would never see that kind of concentration of duties.”

The one who has come in for the most heat in the still-simmering mess is Burke. In the days following Crundwell’s arrest, an angry group took to the sidewalk in front of City Hall to demand answers; letters to the editor of the Sauk Valley Telegraph and comments in the blogosphere savaged him. “The only time it really got to me was when some people I knew well confronted me at the County Market grocery store,” the mayor says. “And this lady, boy, was she giving me a grilling.”

Jessup has some sympathy for Burke. “There’s so much more to being a mayor than the budget and finances. He has so many headaches. I’m sure that in his heart he thought the money was in trustworthy hands,” she says. “He’s responsible for being naive.”

What about the auditors, who are supposed to detect fraud? Audits, cautions Jessup, are not guarantees. For starters, responsibility for the financial statements on which the audit is based falls on whoever provides those statements—in this case, the City of Dixon. The auditor gathers and views evidence that backs up the numbers, based on standard sampling methods. The samples chosen might not show fraud. In fact, says Burke, 21 audits over the years failed to turn over any red flags.

There’s yet another complication: Dixon had two sets of auditors. Clifton Gunderson (now CliftonLarsonAllen), the firm on whose team Crundwell had played softball, compiled the data; since 2006, a solo auditor, Samuel Card, analyzed it to comply with federal regulations triggered when Dixon received an influx of federal cash. It’s possible that the mayor and commissioners did not fully understand the scope of the work being done by each auditor. Neither Card nor representatives from CliftonLarsonAllen would comment for this story, citing a pending lawsuit filed against them by the City of Dixon for failing to “apprehend and/or disclose numerous accounting irregularities,” among other allegations.

To prevent a repeat of the current catastrophe, things in City Hall will “change dramatically,” promises Stan Helgerson, one of two interim commissioners who reviewed Dixon’s books after Crundwell’s arrest. The city has eliminated the position of comptroller, hiring instead a $95,000-a-year finance director named Paula Meyer, who started in mid-September. Formerly the dean of business services at Sauk Valley Community College—the very school Crundwell hoped to attend more than 40 years ago—Meyer is charged with financial planning and budgeting. She will have numerous sets of eyes on the books, including those of every City Council member. Dixon’s commission form of governance, however, remains.

But the most fundamental question, if what the feds say is true, is not how Crundwell pulled off this brazen bamboozle but why. Why would someone with deep roots in her town, without so much as a parking ticket to her name, damage the very people who had provided her with so many opportunities? Especially when it was likely that she would eventually be caught?

Research shows that a desire for the trappings of luxury is a major motivation for male embezzlers. Female embezzlers are more often driven by the desire to take care of their families. Linda Grounds, a clinical and forensic psychologist in Portland, Oregon, who has evaluated more than two dozen women charged with stealing from their employers, has identified two other patterns common among female embezzlers. One is addiction—to alcohol or gambling, for example. Another is to “meet their emotional needs by spending money on themselves and others.”

Women in the latter category are often extremely intelligent and, on the surface, “likable, courteous, gracious, personable, well-spoken,” says Grounds. Underneath, however, they have “this quality of immaturity. . . . They don’t have a strong sense of self-esteem, and they’re kind of needy of approbation, of approval.” Compounding this is denial that their crimes will be discovered: “They don’t think forward to what the consequences are going to be when they are caught.”

Brehm, the Nebraska woman who competed against Crundwell, sensed in Crundwell a desperate need for approval. “I feel sorry for her, that she felt that she needed to take this kind of money and present this number of horses to feel like she was accepted in the horse world,” Brehm says. “It’s almost like she felt she had to set the bar higher for herself, and that once she did, she had to maintain that image.”

Cindy Hale, a journalist who has written four books on equestrians and judged numerous quarter horse competitions, says, “For someone who for whatever reason has poor self-esteem or an addiction to recognition, it’s hard to walk away. You’re at this event and there’s an entire sea of people and you’re throwing parties and rubbing elbows with celebrities and politicians and highflying CEOs and oil people. And I can see how someone’s whole identity becomes wrapped up in being that person.”

Martha Stout, a clinical psychologist in Boston who taught at Harvard Medical School and wrote The Sociopath Next Door, offers another perspective. While she stresses that she cannot diagnose Crundwell or anyone who isn’t a patient, she notes that many embezzlers are sociopaths. “The central trait of sociopathy is a complete lack of conscience,” she says. “If you don’t have a conscience—if you can’t truly love—then the only thing that’s left for you is the game. It’s all about controlling things, manipulating people, lying. The sociopath is ice-cold inside, and though he or she may spend a great deal of energy attempting to look like us—to appear ‘normal’—sometimes this coldness is the giveaway.”

One thing about Crundwell always nagged at Burke: She had a quality that was “like an invisible screen.” She was friendly, yes. Cheerful, always. But there was a part of her that couldn’t be reached. “I’ve known her for years and years, and even when she was working for the city in her teens, it was there,” the mayor says. “It was hard to define. . . . I couldn’t put my finger on what it was.”


On a crisp fall day, under a painfully bright blue sky, Rita’s Ranch, desolate for these many months, once again teems with life. There are ranchers in jeans and boots and cowboy hats; auctioneers in blue blazers and red ties, their voices barbed and twangy; families with kids, gawking under their sunglasses. And, with their coats gleaming against the high sun, their noble heads and curious eyes lifted to the crowd of some 2,000 people, the creatures who lured them here. Horses.

Conspicuously absent from this carnival-like scene, redolent with the smell of hay and dung and funnel cakes sold from stands that sprang up overnight, is the person whose initials brand the buildings yet: Rita Crundwell. The live auction to sell off 319 of her prized horses, her lavish saddles and bridles, and her 10-horse trailers that included suites with standup showers, flat-screen TVs, and microwave ovens, is underway.

Some people are clearly here to buy: The first horse auctioned—Good I Will Be, a multiple world champion—goes for three quarters of a million dollars. Another 146 horses, along with related items, brings in an additional $2.4 million. (The total haul for the two-day September auction was nearly $5 million.)

Some attendees are here for other reasons. Says Jeff Kuhn, the current streets and public improvements commissioner for Dixon: “I came to see where Dixon’s money went.”

Kuhn’s wife, Jeanne, taking in one of Crundwell’s custom trailers parked on the grounds, shakes her head. “The emotions are so varied,” she said. “From disgust, to amazement, to—look at all this beautiful stuff. And it is beautiful.”

She pauses, shakes her head. “To think,” she says, not finishing her sentence.

She moves on, with her husband close behind, her boots crunching the gravel.

Photo gallery



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.

1 year 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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