- Picture the small town of Dixon.
The stereotypical white picket fences
and red, white, and blue flags flying in front yards,
it's the hometown of Ronald Reagan.
- It's a community, it's about 16,000 population.
Basically kind of a conservative county, in a way.
- A month ago I was at Old St. Pat's in Chicago.
And the usher says, "Where're you from?"
I said, Dixon, and he goes, "Oh, you're the town
that the woman stole the 54 million from."
- It is the biggest case of municipal fraud in history.
The tiny town of Dixon, Illinois, lost an astonishing
$53 million to one government employee.
- If fraud at this magnitude is happening
in Dixon, it can happen anywhere.
- Federal agents and local police carry out--
- Man who evaded police for half a decade
pleads guilty to wire fraud. - Nine top officials accused
of taking $150 million. - James Hollis may be hiding--
- Fraud is a local, national,
and international problem.
Over the past five years, we've seen a steady rise
in fraud schemes, specifically embezzlement schemes
committed by an employee within a finance position.
- Allegedly embezzling thousands
of dollars from her former-- - $6.4 million over 11 years.
- Embezzlement is a $3.7 trillion problem.
Government entities are the second most
frequent victims of embezzlement.
- A nationally renowned horse breeder,
a city employee since the 1980s,
and a world class thief.
- The number one question people ask me
is how does one person in a small town
steal $53 million, and no one know,
and get away with it for 20 years?
- Rita and I worked together from 1991,
up until the time she was arrested in 2012.
When I first started, my capacity was deputy treasurer,
under Rita Crundwell.
She made it easy to work here.
She would always say to me, "If ever you make a mistake,
"don't worry, it can always be corrected."
In October of 2011, Rita was out of town and I needed
my bank statements to produce my treasurer's report.
In the past, Rita would say to me,
"Now be sure and give them the list over the phone,
"of the statements that you want."
I would just run down the list, but that day
I was under the gun, I had too much work to do,
and I just called and said,
I want all of the bank statements.
That's when they came.
I saw this one account that I had never heard of before.
And, what I noticed on it was three large deposits.
And it was in care of her, it was RSCDA,
City of Dixon, in care of Rita Crundwell.
I didn't know who to go to.
I sat on it for a couple of days.
I hid it in my car.
In three days' time, the mayor came into my office,
Mayor Burke, so I told him about it.
He said, "Go and get me a copy of that, right now."
- My initial reaction was that there had to be
an explanation for it, but Kathe kept looking
and she couldn't tie it into anything.
And so, she asked me if I was gonna go to the police
with it, and I said, "No, absolutely not."
- He said, "Kathe, I will take care of this,
"I will go to the FBI, but we cannot say anything because
"if we're not correct, we don't wanna harm Rita in any way."
- I called the FBI, I said, I think there's a cancer
in city hall, but I need to talk with somebody,
and I took the bank statement along.
- The mayor came into the field office, sat down
and discussed with the case agents what they'd discovered.
- I told 'em, I said, I hope I'm wrong about this thing.
And he said, "I don't think you are."
- So we were able to go to the U.S. Attorney's Office
and get a grand jury opened, and during that grand jury,
subpoenas issued for these different bank accounts.
- I was very scared because I was told
you keep it quiet, you say nothing to nobody,
we'll handle the investigation.
So I believe that when the FBI tells you
to keep your mouth shut, you keep your mouth shut.
We had it set up that
if the FBI needed
any kind of documentation from here, I would come in early,
I would make the copies,
I would put them in a sealed envelope,
put 'em on the Mayor's desk.
- Kathe Swanson, she was very instrumental
in determining what accounts were real,
what accounts were fake, how the money
should have flowed through the city of Dixon.
From there, looking at all the massive amounts
of paperwork that came in.
- They wanted one of our reports, so I just took it.
Well, two days later, Rita went looking for it.
And I'm thinking, what am I gonna tell her?
I have to come up with an excuse.
And she came up with the excuse for me.
She said, "Oh, wasn't that the one that was incorrect
"and we sent it back to the accountants to redo it?"
And I said, you know what, you're right.
I had to do this for six months.
I had to keep that status quo in the office.
I had to ask her how her trips were, how her dogs were,
so as not to let on that something was not right,
and I knew about it.
- She came to me one morning and she said,
"I don't know if I can handle this any longer."
- My boyfriend Tom would say to me quite frequently,
"Are you sure you're okay,
"is there anything wrong with your kids?
"You don't seem like yourself."
And I would just say, oh, I have a lot of work to do.
There's a lot going on at work,
I need to get a lot of things done.
- You know, over the next months, we'd look at
surveillance of the subject to see what's involved,
the scope of her and her lifestyle.
One of the things the FBI wanted to find out
during the investigation was, did she do this alone?
Was she hiding for somebody else?
She had loved ones, family members that worked
also for the city of Dixon, they were in the area.
She helped support nephews, she'd given loans out to family,
she had a boyfriend who was also involved in a business.
Are they involved?
But once they got hold of the RSCDA account,
it was pretty obvious what she had done.
They could see where the money went from there.
- When we had discovered, through the FBI,
what she was doing and how she was going about
getting the money and putting it into that account,
I felt betrayed.
- You know, while we're doing the investigation
she was able to take $1.5 million from Dixon.
- I would sit and I'd watch her at lunch time
go and get the checkbook to write her check out,
after she called the money up,
and then she would turn around and deposit it
into her account over at the bank.
So the minute we got the money in,
it was gone in the afternoon.
- I called the FBI agent and I said, if we don't
put a stop to this thing pretty quick,
there isn't gonna be anything left.
The night before she was arrested, we had a
budget hearing in here and I thought,
boy are people gonna be surprised tomorrow.
- That morning, I went into the mayor's office.
I said, Jim, I can't do this anymore.
And he just looked up at me and he said,
"Kathe, today's the day."
- So, I just called her on the intercom,
I said, Rita could you stop up here,
and she said, "Sure."
- She came down the hall, I couldn't look at her
because I knew right then and there
they were already in the office waiting for her.
- So, she come up to the door, she said, "Yes, sir."
I said, Rita, these gentlemen would like to
ask you a few questions, and she said, "Sure."
And I was lookin' right at her face,
and her continence never changed at all.
So, with that, I exited the office.
And then, just like that, there's like about
15 of 'em, came into city hall.
Come right upstairs and they shut city hall down.
- We brought in agents from downtown,
used the agents out of Rockford.
Of course the marshals were with us
because of the amount of seizures that were going on.
- They sealed off the stairs, it was quite intense.
- And at that time she was approached.
She was given her Miranda rights and asked
if she would like to talk to us, which she did
give an interview, that lasted about an hour and a half.
During that interview, she was cooperative.
She only thought she'd taken around $10 million.
If somebody gives a partial confession or something,
we want that, it locks their statement in.
And that's what she did.
I think she was a little overwhelmed, surprised.
You know, 20 years of her life and basically
everything she knew, that was all comin' down.
And it hit her like a ton of bricks very quickly and,
people get emotional and they probably later go,
you know what, I maybe shouldn't have done that,
maybe shouldn't have talked, but they do.
- She was in here singin' like a canary.
We never saw her, they took her right out
through the council chambers, and then took her to Rockford.
- And immediately it felt like
this weight had been lifted off my shoulders.
- This afternoon, in the central Illinois town of Dixon,
authorities announced a 60 count indictment
against a woman named Rita Crundwell.
- During the search warrant of her multiple properties,
the two homes in Dixon, the horse farm, also in Dixon
that she owned, conducted on the day she was arrested
and interviewed, we found located in the basement,
in a crawl space of her home, boxes of every record.
And she kept very good records of her fraud.
It helped to see the scope of what she took,
what did she do with the money?
And in '91 was when she took her first money,
which was about $181,000 that year.
But we were able to figure that out
because of the records she kept, and stored in her house.
This case probably one of the most egregious cases
the FBI has worked, considering the size of the victim
and the amount of money taken.
And we're not talking $10,000, a ream of paper,
or some pencils, which you know,
53 plus million dollars is just unbelievable.
- So let's take a look
at how Rita pulled off this scheme.
There were six legitimate City of Dixon accounts
at Fifth Third Bank.
She routinely moved funds into the legitimate
capital development fund. But Rita then set
up an additional
seventh account no one knew about.
To get the process started, she created phony invoices
to justify payments for imaginary capital projects,
such as, fixing sidewalks and street repairs.
These phony invoices trigger Rita's transferring money
from the city's legitimate capital development fund
into her secret account.
It had a similar name to look like
a legitimate city account.
From her secret account, she wrote checks for her
personal expenses, such as spa visits, jewelry,
real estate, a motor coach, and of course, quarter horses.
She did this process 179 times.
- The fraud that took place in Dixon
is very textbook classic.
It is those where we set up a side account,
we mask it in the name of a government,
and that one individual has control of
money going in and money going out.
- It usually is simple.
It doesn't have to be a complicated process.
And I think that if she made it more complicated
she might've gotten caught sooner.
- I made up my mind that I was gonna go to the press.
I'd never seen so many news media in my life.
This is a traumatic, upsetting event
that the citizens and council are experiencing.
Rita Crundwell will be placed on administrative leave
without pay until the issues are settled.
Every effort will be made to acquire assets
for the benefit of the city.
- Crundwell is now free after posting a $4,500 bond,
only fueling the outrage.
- Excuse us.
- Any idea why she wouldn't talk to us today
and just apologize to the people of Dixon?
- Can't answer any questions.
- The public was pretty up in arms
and people were picketing out in front of city hall and
every day was a news media deal.
- Rita, why did you steal $53 million
from the people of Dixon? - Get your ass outta here.
- How were you able to get away with this for two decades?
- My first thought was, Dixon has that much money?
That you could embezzle that much money
from a little tiny place like this.
- I think she's a very smart lady and got by with
a lot of stuff because people just trusted her so well.
More than anything.
- Do you think you were just
smarter than everybody else, Rita?
- You know, you have a trusted employee
and it's human nature to trust 'em.
- You know I hear a lot of people that say,
Rita was a nice person.
She was a nice person because she had to be a nice person.
- Smaller communities where we're electing
individuals that we know well, we go to church with them,
we're much more on an intimate basis
with our governing bodies, and I think what you find is that
smaller governments to some extent maybe lend themselves
more to the notion of a trust an increased trust factor.
- Before Rita, the largest municipal fraud
in U.S. history was a case in Washington, D.C.
In this particular fraud, a network of friends and family
stole $48 million over a 20 year period.
When you compare D.C. to Dixon, the amount of money
that Rita was able to steal from this small town
all by herself, makes this case even more shocking.
- One statement from a town official,
he said, "Rita watches over every penny
"as if it were her own," and every penny almost was her own.
- Now let's congratulate your 2011
world champion, Good I Will Be, owned and shown
by Rita Crundwell of Dixon, Illinois.
- She was leadin' a big lifestyle.
I thought, and I think everybody in town thought,
that it was all due to these horses, you know,
there'd be stories in the paper that she's got
another national champion, and she'd have pictures.
And then were stories that she'd sold horses
for two and $300,000, so that was the image
that she was conveying, that was the image that I had.
- I must've went by Rita's horse farm 15 times,
you know, and I always asked my wife,
who has that many quarter horses?
- It was really kinda mind boggling and see the spread
that she had, it's like, oh my gosh.
- Nobody ever questioned the magnitude of that money.
- She told people that her parents were
investors in Campbell Soup Companies.
I mean certainly her parents could've owned many acres
of farmland, which is very high-revenue.
I honestly didn't think too much about it.
Curious, but like everyone else, you just kind of,
oh, hm, interesting.
- I do know for a fact, several people,
many people, benefited from her money.
And I suspect 85% of it was cash.
- Co-workers at the city thought that she inherited
a lot of money, and that she got involved in it,
and was very successful.
Of course the family knew that she didn't so,
you know, was it ever clear exactly what their belief was?
It was, if they're benefiting, it's
don't look a gift horse in the mouth, right?
- One of the things that really struck me about this story
with the horses were the names that she gave them.
- I Execute Class.
- Subconsciously, or ironically to send a message
to the town, the irony there is obvious.
I'm Money Too
She Scores
Packin' Jewels
Me Myself and I
Jewelry by Tiffany
Careful Who U Invite
Ain't I a Natural
I Found a Penny
- She Scores, makes me cry because
she's one of my favorite mares.
And, by Execute, so--
- Can you tell me a little bit why
She Scores is so special to you?
- She's just a great mare and she won seven world champions,
and she just has a special place in my heart.
- The idea of a small town, high school educated,
municipal clerk who was able to both
completely pull the wool over her town's eyes,
but you know, the second half of her double life,
which was this grand, high stakes horse empire.
By day she's wearing meek, municipal clothes
and by night she's dripping with jewels and furs.
- Is that what she said?
This is funny.
- I met Rita in 2005 at the American Quarter Horse
World Finals, in Oklahoma City, Oklahoma.
- I love it.
- We always stalled at the same area every year.
She kept in a small little circle.
You didn't see a lot of people walkin' up to her,
or congratulatin' her, and I think, you know,
I was in awe of her, I mean, Rita was a showman
and she was very good at what she did.
When she won, she deserved it, I mean she really did.
- The Oklahoma City Leading Owner Award
was no surprise, since Rita Crundwell of Dixon, Illinois
has won the award now for eight consecutive years.
Congratulations, Rita.
- Rita was very polished all the time.
She always had a fitted, short top on,
and had beautiful jewelry on while she was showing.
There'd be times she would go back to back in classes.
She'd be out there for two hours, her horse trainer
would bring her another horse, she'd change her jacket,
and go back out there again.
Everybody was like, how did Rita come across all this money?
And we were told that Rita had a boyfriend that passed away
and he was much older than her and left all her money
to her, and it was believable.
I saw her pull up one day with a brand new, custom made
Sundowner trailer just to haul the horses in.
And you know, the word was out, it was $250,000.
Rita, how did you sleep at night?
How did you go to bed and not think,
whose lives I'm infecting here?
I mean, it's crazy, how did you sleep at night?
- She lived quite a life.
A totally different life than what she portrayed here.
- I had learned that she had a house in Florida.
I always thought that she just went down
and stayed at her boyfriend's mother's house.
- The other thing that was shocking to me
from a mayoral standpoint, she took off four months
out of the year, why did you need her?
- Rita taking time off
was unusual because most fraudsters
don't wanna take time off because they're scared
that their fraud scheme will be discovered.
But Rita was so confident that she took tons of time off.
- 'Cause she was a friend, after the council meeting
they all came to her house and then she had cocktails.
- Yes, she would have people from the city go to her house,
she'd have a barbecue.
She had a pool in her yard.
- They were not unlike parties that other,
say doctors, lawyers, or anyone
with sustenance here had.
So, I mean again, that was not really questioned.
- Thank you. - Could you tell
us about your pretty pony.
- I bred Skipper W. Mare that belonged to Terry Stevers,
by Mr. Touchdown Kid, I leased Terry's alt mares
for two years and I got all the colts out of 'em.
- Rita's wealth was not necessarily a red flag,
but what should've been a red flag was
looking at the neighboring town right next door to Dixon,
and that town was Sterling.
Sterling has a similar population size,
a similar annual budget, but yet Sterling
had a surplus, when Dixon had a huge deficit.
Now Dixon may not have felt the impacts of Rita's fraud
because they were borrowing a lot of money
during the time Rita was embezzling
a lot of the city's money.
18 months before Rita was arrested, the city manager
of Sterling, Illinois, actually wrote a letter
to the city of Dixon, and said, why do you all
have this huge deficit, because we have a surplus.
He was trying to alert the city of Dixon
that something seemed wrong.
- Former Dixon comptroller, Rita Crundwell,
made her second federal court appearance.
The main topic of that hearing was the care and concern
of the 300 plus horses that Rita owns.
- I was directed by Magistrate Judge Mahoney,
of the U.S. District Court, to seize and care for
horses belonging to former city of Dixon
comptroller, Rita Crundwell.
- We have 400 horses, and they are on 22 farms in 13 states
that span 17 federal judicial districts.
You know, this case is remarkable, and
it's unprecedented.
- In this particular case, there's been an agreement
to sell the assets before a guilty plea is entered
or a trial for which could, may or may not
result in a conviction.
The reason for that is because these are live animals.
The horses eat, they breathe, they require daily care,
and they're expensive.
We're spending about $200,000 a month
for the care of the horses.
It's a lot that goes into an animal.
This is the defendant's trophy room.
Not many people have a herd of 400 show horses,
many world champion horses.
Our interest would be to try to get all $53 million.
I don't know that the herd's ever gonna bring
anything close to that.
Our purpose today is to let the perspective buyers know
that what we have here is a very valuable herd.
- Out of the office we start with
Good I Will Be--
Preliminary estimates are that
we should expect 1,500 people here on the farm.
We're being told by the experts that we should anticipate
what is sometimes been referred to as
the Willy Nelson concert crowd.
- $500 real now heard here, and another one of 1,500,
another one on the half, now
five, 600!
600, 600, 700, 800--
- It's amazing what millions of dollars can buy you,
and how fast they can disappear in two days.
- 25, 50
80, double 80, and now 80
- We're here to bid on some horses
and hopefully we can bring back, some of the money
back to Dixon, Illinois.
- I've been in the horse business all my life,
and I've never seen anything like this
no place in the United States.
- I think it's absolutely gorgeous
and I've been doin' this for 30 years
and I can tell ya, I've never started a horse sale
with one as good as this one.
and 200,000, yeah, 200.
Yeah, 250, 250, yeah three.
250, hear 300
now 500,000, yeah 500
500, even 600, and 25 and 625.
Thank you, thank you, that's 750.
750, now 775, 750, give me 775,000.
Sold in $775,000.
- I was glad to see what that horse went for, Willy.
They had told me earlier that it would probably go for
anywhere from 500,000 to a million dollars.
So, it was really gratifying to see that.
That's 11.875 grosses, if you--
- 97,000 plus dollars of horse semen
that she actually had stored and frozen
for breeding purposes, that was sold.
- 55, now 55, now 656, now 65, now 70--
- Today we've recouped about 7.4 million.
Our goal is to recoup several million more.
Much of the money will not be recoverable,
and that's not unusual in a fraud case.
- I was able to track down some people
who knew Rita as a child, and they described
just a normal kid who was very smart, very pretty,
very charming, and had a great love of horses.
Her mother also showed horses.
So you could see where Rita's interest developed.
She always got the best horses to show.
She was sort of the golden child.
- Rita is a Dixon High School graduate.
And when she was still in high school,
she spent one of them days
with the city government, you know.
And, she caught on and everything worked well
and she did her job very well, at least we thought.
I guess the rest is history.
- I want her to be prosecuted to the full extent of the law.
- Boy, I guess I don't know.
- If guilty, yeah, I, white collar crime is crime.
I mean, because someone is
blue collar and it's a violent crime,
doesn't make it less of a crime.
- In the face of overwhelming evidence,
Rita pled guilty to wire fraud and money laundering,
on November 14th, 2012.
Three months after her guilty plea,
Rita arrived at the federal courthouse for her sentencing.
She faces a maximum of 20 years in prison.
The hardship Rita caused Dixon
would be the central focus of the hearing.
- The prosecution put together a PowerPoint presentation.
For each year of her crime spree,
they had a couple of boxes outlined in black,
where they would relay the budget committee's
discussions of what needed to be cut.
But then on every page, they had a box outlined in red.
And during these drastic cuts to the Dixon budget,
there were comments like, Rita spent $6000
on a custom-made saddle.
Miss Crundwell upgraded her motor coach.
She upgraded that thing five times,
until she finally bought one that was $2.1 million.
But particularly, in year 2008, is when she
crossed the $5 million threshold.
And again in 2009, more than five million.
And again in 2010, she stole more than $5 million.
And I think she did that because beginning in 2008
was the start of the recession, and she had the best excuse.
- Showing all of her assets made everybody realize
that she just kept buying
and the people of Dixon were suffering.
- The thing that bothers me is,
how many projects, and/or services,
have not come about in the city of Dixon
because the tax dollars weren't there.
If people ask, well who's suffered because of this?
Everybody in this city suffered.
- And of course it was a domino effect.
Later on, we found out in the city.
Repairs and raises and layoffs and,
it was a big impact on Dixon.
- I think a lot of people were talking about
whether if anybody else was involved in this situation.
Somebody else had to know about it.
- She may have taken money away
from people who really needed it.
And that to me is a worse crime.
- Yeah.
- I was trying to recognize the pain she caused to the city.
But, in spite of that, life is never over 'til it's over.
And, I literally believe that anybody
right up to their last breath has got
the possibility to change their life around.
- Rita was given close to the maximum sentence,
19 years and seven months.
- I was in a seat where I could look at her.
She would not look at anybody.
And all I could think about was, you know,
for 20 years I worked side by side with this woman.
And I never knew her, I never really knew her.
- The judge ordered Rita to pay
the city of Dixon restitution,
and he imposed an agreed forfeiture judgment
in the same amount.
This means Rita's restitution is over $100 million.
Based on her $65 per month prison salary,
it would take her over 120,000 years to pay back the city.
- I knew that when they were going to take her,
right then and there, I closed my eyes
so I could listen to the click of the handcuffs.
I knew that justice was served.
They took her so quickly, she didn't even have time
to turn around and say goodbye to her family,
because they were sitting behind her.
She was gone.
- At a time when the city of Dixon is suffering,
and different department heads are having to make
drastic cuts to their budget, the defendant sends out
budget covers, and those covers have cartoon characters,
one was of a cat that was scared, another one
has a big dollar sign being cut in half,
just prior to the defendant's arrest, showed an individual
in the ocean with a life preserver.
Well at the same time, she's stealing millions of dollars
from the city of Dixon to fund her dream.
So, that's what our argument was.
- Thank you all.
- I couldn't come to work the next day.
I sat home crying, frantically.
And all I could think about was, did she have a blanket
last night, was she cold, you know, where did they take her?
So, it's like, first you're angry, you're upset,
you're betrayed, then,
your emotions of, is she okay?
And to me, it was so confusing for me and, I just,
I couldn't understand why I was feeling like that.
- Jim big day yesterday for you
up in federal court.
After thinkin' about it now for almost 24 hours,
what do you think about went down?
- Well you know, I've heard from people, Jim,
that say, oh, she's gonna go to one of those
country club prisons and it won't be so bad after all.
- She did appeal her sentence, stating that the
19 years was unduly harsh.
She lost her appeal, and since then there hasn't been
anything further, so at that point the FBI then
works with the, we're at work with the U.S. Marshals
along the way to work on forfeitures,
determine what she has that was seized.
Thousands of man hours were spent by the FBI alone
when investigating, and then too seizing
and documenting all the evidence.
At this point we don't really spend any more time
as the investigation led that we could not prove
that anybody else was aware of the fraud scheme,
and was part of it.
- Dixon voters need to clean house if they are to
rid themselves of this ongoing corruption and incompetence.
Shameful scandal from the hometown of Ronald Reagan.
- As citizens we look at it like, you guys dropped the ball
and you're still here like nothin' happened,
and we keep having to have cameras in our city
for stuff that's no good for our city, and we're sick of it.
So, thank you.
- You have not been doin' your job,
you've been doin' what's good for you,
not for the people of Dixon.
As far as I'm concerned, you're all fired,
thank you very much.
- This is what goes on in the town,
it's nothin' but greed, abuse of power, and corruption.
- That's right.
- And until we get rid of some of these people,
it'll always be there.
When did I create the sign?
Just about a week before they was even havin'
the first meeting after Mrs. Crundwell.
And I thought it'd be appropriate.
- And that's the way a lot of people think
in Dixon right now, and I do.
I changed my complete,
what I thought of that man.
- The city council and the mayor
all should have known what was going on.
They should've known about the fraud,
they should've been looking for it.
They were all complacent in their duties
to just let her do everything.
- One person, or one event, does not define Dixon.
- People are very angry and rightfully so.
Lot of it's directed at probably people that governed.
And that's kind of unfortunate, because those people,
they did the best they could with what they had.
- Officials in Sterling figured out
there was something wrong.
How in god's name did another city
see the red flags and this city didn't?
- We have to change our form of government
to something that is gonna work, that's more professional,
that's more modern day, and that's at least capable
of handling the problems we have before us.
I think we need to--
- So, I was vilified.
We would have the same people comin' up here,
meeting after meeting, and suggesting that,
and asking for my resignation.
I mean there was nothing that ever
prepared me for this kind of an experience.
- It hurt him, shocked him, the way that the anger was,
you know especially against him and the city council.
You know, he felt responsibility for it,
it was just the fact that because he was the mayor
and it went down on his watch.
- My question today is to the auditors.
Why did you never tell the mayor and the council
that our internal auditing were completely lacking
and needed to be changed?
- People would often ask questions about,
why are these revenues so small?
How come we haven't gotten this money?
So on and so on.
But no one ever followed up on that.
Whatever Miss Crundwell told them,
they swallowed it, hook, line, and sinker.
- So who really is responsible for finding fraud?
Is it the auditors who did the annual audit for the town?
Is it the bank where the city held their bank accounts?
Is it the city council, who ran the town?
Or is it the residents?
- The local media felt all along that
the commission form of government
was the sole reason for this whole embezzlement.
I mean, we are the outstanding community around here.
And it got here with this form of government that we've got.
- I mean essentially you have a handful of city leaders,
who have their own little fiefdoms,
don't really communicate a lot with each other.
But more importantly, they're part time jobs
that pay a pittance.
All of them actually, they have other jobs.
For instance, one of the city officials owned a
carpet store, another was a high school business teacher.
I mean these are the people who are responsible for
keeping track of what's going on.
- There was not the oversight from a governing board
perspective, really diving down and diving deep into
what the operating budget looked like,
how the dollars were being allocated,
be it to public safety, capital projects,
or any of the other public services.
- In reporting this story I found that
she had made the books and the numbers so complex
and convoluted that, I mean, none of the town officials
knew what these numbers meant.
So, when they had a question, and maybe sometimes
they would think, this looks a little odd,
someone else would say, well go to Rita,
she'll explain it to you.
- To trust a single person for any financial function
is a mistake, so you don't trust one person
to be in charge of the credit card, and its payments.
You don't trust one person to be in charge
of the water billing, collecting the money, billing
the money, you have to separate out these functions.
Dixon's case was an extreme example of this because,
they had, not only did they not separate
individual functions among multiple people,
they didn't separate any functions among any people.
- Rita picked up the mail, made deposits,
updated the journals and ledgers,
prepared and signed checks, moved investment monies,
and reconciled the bank accounts.
There was very little segregation of duties
Rita literally did it all.
- While Rita was out of town, she would have
an employee pick up the mail for her,
to keep for her when she got back.
And I know that statement was one of them.
- There's been no policies in place all these years.
Maybe Rita was smarter than all of us because she knew
there were no policies in place.
- It was clear to me that the city of Dixon was a victim,
and I thought I could make a difference
and help the city and the taxpayers out.
- Do I believe the city of Dixon
had any responsibility themselves to identify the fraud
that was committed by Rita Crundwell,
and I think unequivocally the answer is no.
- I did not meet Rita Crundwell when I was
prosecuting this case, and nor have I ever met her.
For purposes of my prosecuting this case
for the city of Dixon she was for all
intents and purposes, irrelevant.
The issue was, who was responsible for identifying
the fact that she was stealing the money.
- Rita developed too cozy of a relationship
with so many people that were involved in this thing.
She directed the audit, I mean, she was the one that really,
in my mind, selected Clifton to continue
to do the auditing and so forth.
- Clifton is a top 10 public accounting firm
in the United States.
The city of Dixon was a client of Clifton's local office.
They were hired by the city to do the annual audit.
And in addition, they were involved
in the city's day-to-day operations.
- They made a conscious intentional decision to get all
of the money for every financial aspect of that city.
They made that decision, they were there.
Either Clifton was at the city hall,
or the city hall people were dropping
financial documents off there at least once a day.
- What has come to light in the depositions
of one of the partners at Clifton,
he testified that they did all the accounts payable,
they actually cut checks, they did payroll,
they did other consulting services.
Aside from the fact that they will have to defend
against the accusation that they should've discovered
this fraud, I think they have a bigger issue to defend,
and that is, an independence issue.
- An auditor provides an opinion
on a company's financial statements,
similar to how a food critic provides a review
of the dining experience at a restaurant.
An auditor reviews the accuracy of the financial statements,
similar to the way in which a food critic
provides a thoughtful, unbiased review
about the food at a restaurant.
Auditors are not responsible for developing
the financial statements on the company's behalf,
just like a food critic is not responsible
for preparing the restaurant's meal.
People rely on the opinion of auditors
to make business decisions,
just like people rely on the food critics review
to decide whether to eat at a restaurant.
Now imagine if the food critic was the one
who prepared the food, then ate the food,
and then published a review of that same restaurant
based on that meal.
Seems like a huge conflict, right?
Well, it is.
- Exactly, but in this case, because of Clifton,
Larson's, Allen's own intentional
they themselves chose to formulate and create
the financial statements, which they themselves chose
to charge again to audit.
They were looking at their own work.
It's asking someone to prepare a document,
and then asking the same individual, and getting paid
to do so, and then asking the same individual
to say, is your document right?
- The city argued that the auditors knew,
or should have known, that the invoices were phony.
- Here's a proper invoice from the
Illinois Department of Transportation.
This is the way they're suppose to look.
And that's the invoice from Rita Crundwell.
And a nine year old could identify
the difference between those.
The field audit team looked at these false invoices
and failed to do anything at all
that they were taught in accounting school to follow up.
Whether it be, talk to the city engineer,
make a phone call to Springfield,
go out and look at these clearly fictitious projects,
any of which would have resulted in
a discovery of the theft.
I deposed a number of the individuals
that were responsible for the field audit work,
and the actual generation of the work papers for Clifton
when they did the work for the city of Dixon.
- If at any point in time
Clifton was doing the audit,
and they would've walked down the hallway
to ask a simple question of the city engineer,
excuse me, can you tell me about this project?
Do you agree the subsequent events
would have identified Rita's theft?
- Yes.
- Do you agree with me
had that been done, the fraud would have been identified
and Rita would've been arrested?
- Yes.
- There was 179, as we counted, of those false invoices
and they failed to react to any one of them.
They missed it, over and over
and over again, they missed it.
The issue is, you know, should someone
have known about that RSCDA account.
Do we have any proof that Clifton
had knowledge of the RSCDA account?
And according to them, in their own depositions,
the answer to that question is yes.
They were given bank confirmations on
disclosing the RSCDA account, and they did nothing.
I deposed both of the current, as well as the former
head of the Clifton office in Dixon.
Both of those individuals were also the key people involved
every year in performing the work for
Rita Crundwell's personal income tax returns.
- Is it unusual that somebody would have
over $300,000 cash flow out,
without being explained by their tax returns?
- Well, it would be unusual.
- In 2005, there's over $300,000 that Clifton,
in preparing Rita Crundwell's tax returns
identifies as money coming in to Rita Crundwell
for which there's no documentation.
All a city employee who makes
80 some thousand dollars a year.
- Other than just writing it down
and claiming it, that's the most that she had
in terms of documentation, correct?
- Correct.
- You never asked her
for anything further, true?
- True.
- How do you explain that at times
they were preparing a financial statement,
which within the financial statement that Clifton prepared,
demonstrated that the city was losing
millions and millions of dollars?
When the person, who is at the epicenter,
which they know because they're doing the annual audit,
the epicenter of the city of Dixon
is the treasurer/comptroller.
- Unexplained income on a tax return is always a problem.
And had the tax preparer asked a couple of more questions,
it would have led that preparer to know
that the unexplained income
was coming from the embezzled money.
- If the auditors are not to be held responsible for
identifying the theft of millions and millions
of dollars every year, why have 'em in the first place?
- I think most people are under the impression
that these audits are going to uncover
graft and corruption and embezzlement, apparently
not.
- Auditors are not responsible for finding fraud,
nor should they be.
They became reporting and disclosing police,
making sure that the corporations,
in particular, were following the appropriate regulations.
Am I defending these particular auditors, no.
- I just did not see, in light of the
overwhelming negligence of CliftonLarsonAllen's employees,
which came out in these depositions on
I just did not see how they could win the case
in front of a Lee County jury.
- Most frauds are discovered by a tip
from a whistle blower, and not from an audit.
So had Kathe Swanson not discovered this fraud,
and then reported it to Mayor Burke,
there's a chance that this would've never been discovered,
and Rita would've gotten away with it.
- Yes, um-hm.
- Being a whistle blower is, it's very stressful but,
you know, it's all in how you're brought up.
My parents taught me, you don't take something
that doesn't belong to you.
And if you see something wrong, say something, so.
- My only regret is, is that I didn't find out sooner.
- Fifth Third Bank was also named
in the civil complaint.
Remember, the city of Dixon held six legitimate
city accounts, along with her secret account,
which she used to funnel money out of the city.
- I think from the banking side,
I think it was shocking that they opened
the account the way that they did.
According to them it was a city of Dixon account,
and for them to see, on a regular basis,
so many personal transactions,
from jewelry to spas to equestrian activities.
Many of the checks that she was depositing
into this bogus account were made out to Treasurer.
That type of ambiguity is known within the banking industry
as something that you should not allow to occur.
Especially in the amounts of the money
that she was negotiating.
I took the deposition of one of the Fifth Third Bank
former employees, who happened also to be
the bank branch manager when a lot of the most
serious transactions that Rita had
with Fifth Third Bank, transpired.
- If you were a teller
at a bank branch here in Dixon
and somebody walked up to you and said,
I'm going to negotiate a check
for hundreds of thousands of dollars,
and it just says, payee treasurer,
do you feel comfortable that the check
can be negotiated as written?
- Based on my experience,
it would raise caution.
- And what's the basis of that opinion?
- The dollar amount, number one.
Typically higher dollar amounts are reviewed closer.
- I was able to obtain a lot of admissions
on behalf of Fifth Third Bank that I thought
would be very damaging for Fifth Third Bank
should we go to trial.
- The case never went to trial.
- No, I wasn't surprised by the settlement amount
because I in my heart truly believe
that the fault lied with Clifton,
the Fifth Third Bank, and one way or another
we were gonna get that money for the city,
whether it be by trial or settlement.
- And we have to become ACA compliant right now
if we go to that 2 1/2%, if we don't wait until January.
- Correct.
- Right.
- No, actually taking the job after she was here,
my first thought was, well,
really, how could I do any worse?
You know, I mean it was like, wow.
My plan was, in addition to this,
was to write up those raises for the non-union people.
And send something--
The idea of coming in and creating
a whole new system of accounting,
and restructuring it all, just seemed really interesting
and a challenge that I wanted to do.
I actually changed about everybody's job duty
and I physically relocated them
in a lot of times into different locations,
just so that we would all have a view that
things are gonna be done differently here.
- Our office dynamics have definitely changed.
My duties have lessened.
I'm just the city clerk now, I don't do the payroll.
I think it's more of a professional place.
I still harbor a lot of bad feelings towards Rita.
I can't help but feel that way.
I don't think I feel any more sorry for her.
I think she's where she belongs.
I look back at it sometimes and I think,
how did it all come about?
Why was she caught?
And that I can't wrap my mind around,
you know, why that day?
I'm sure, you know, to save the city.
- I don't believe that how Dixon's finances were structured
is probably very different from many,
maybe even a majority, of other small towns
all across the United States.
I would also guess that there's
a tremendous amount of theft out there.
What Rita did isn't particularly unique.
The only thing that makes her unique
is the dollar amount that she took.
What she did is very, very common, and could be done by
almost anybody in any size organization.
- Councilman Tucker. - Aye.
- Councilman Venier. - Yes.
- Councilman Bishop. - Aye.
- Councilman Barnes. - Yes.
- The citizens have voted in a new form of government.
We'll become a managerial form.
The role of the commissioners from being kind of
an everyday executive authority over different departments,
now the city manager will have the executive authority
over the different departments,
and the council will just be doing policy
as opposed to being involved on a more of day-to-day basis.
- Baskets are held on by brackets on the--
The city needed some fresh blood, some fresh ideas,
and we got five new councilmen
that were elected back in April.
- I recognize that when you guys come in,
you had a lot of extra work to do.
But, your ears have always been open to us,
Paul's door's always been open to us,
I appreciate the fair treatment, I thank all of you.
And the rest of the people--
- We now have put in
multiple forms of fraud protection.
Multiple people have to sign checks.
Multiple people have to approve
the payments in the first place.
- I think other small towns should consider,
not necessarily going out and hiring a lot more people,
but the people that you have involved,
your council members, your elected officials,
even other people who are employed there,
I think it would behoove them to really actually understand
accounting, understand financial statements,
so that they can look at them
and read the story that they tell.
Financial statements are really out there to tell a story.
And if you can learn to read that story,
you might be able to avoid anybody walking away from this.
- Hey, were you able to get anything
as far as any cost estimate or--
- Dixon Mayor Jim Burke makes
last minute phone calls on Monday.
- If it's possible to get a requisition
before I leave the office today.
- Okay.
- 5:30 I'll be all finished.
I really, I'm disappointed I'm not running again.
I think the foundation was there to get reelected.
- This marks his final day at city hall.
He's completing 16 years as mayor.
- I'm gonna miss it, I hate to go,
but I know it's time to do this.
- Here we have intermediate storage,
so for all of the paperwork that isn't necessarily
from my administration, but we still want close by.
Old filings and stuff, that's kept right here.
Since electronic records are relatively newer,
that's one of the things that was interesting
about the Crundwell situation, 'cause it took place
over 20 years and she was essentially
the master financial bookkeeper.
So you're trying to put together her work
during that whole situation, that's one of the challenges
our new finance director faced.
- She did keep some pretty good details,
which helped with a lot of things,
both in terms of figuring out what happened
from the FBI side, and in our case, putting together
the finances and figuring out which funds she took from.
So whatever those funds were originally supposed to be
spent on, they could get their money back.
I was interested in running for election
basically because of the Rita Crundwell situation.
Because I saw what was happening in my own back yard.
So, congratulations, Scott.
People needed to trust their government again.
'Cause that trust was shattered by this incident,
absolutely shattered.
- We have recovered a net of about $40 million
from the civil lawsuit and from Rita's assets.
- 10 million of it right away disappeared for lawyer fees.
A good roughly half of that
immediately went to debt payment.
As Rita was stealing more and more money,
we were borrowing more and more money.
And one of the things I looked at is by the end,
the numbers were eerily close.
You know, she stole close to somewhere like five million
in the final year, and the city borrowed
close to about five million.
And then the rest has been focused mostly
on infrastructure.
We redid River Street, which was a major eyesore
on a major state highway that was going
right along the river.
Seventh Street washed away, there was a big gaping hole.
So our focus is, whatever's been left,
we're trying to use on what got hurt by the theft.
And by and large that has been infrastructure.
Anyone who interacts with the city of Dixon,
under this council and my administration,
whether you're an auditor, whether you're contracting
with the city, whether you're an employee of the city,
we're gonna be watchin' the money really closely.
- The past three years I think the town is physically,
financially in better shape than it's been
in many, many years, since I've lived here.
And basically because they recouped all that money
from the bank and the accounting firm.
- The people of Dixon are really, really good people.
I don't want people to think we're a bunch of boobs.
I don't want people to think we aren't interested
in what happens in our town.
It's tough when that's the image we have out there.
So our job has to be now not only to change things,
but to show people how we changed,
and what a good community we are.
- I love this city.
My wife and I chose to retire here, 20 years ago.
Ask anybody that comes here from any,
from miles around, we're envied by all the
surrounding towns around here for what Dixon has.
- We're trying to put the fraud behind us.
You never dream it's gonna happen to you.
But obviously it can.
I think our hometown boy, our President Ronald Reagan
said it best, "We trust, but verify."