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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.

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