? ?
(bright engaging music)
- [Bryan] 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 with 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 you from?"
I said, "Dixon".
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.
- [Kelly] If fraud at this magnitude is happening
in Dixon, it can happen anywhere.
- [Reporter] Federal agents and local police--
- [Broadcaster] Evaded police for half a decade--
- [Journalist] Guilty of wire fraud, $150 billion--
- [Kelly] 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.
- [Reporter] Allegedly embezzling thousands--
- Six dollars for over--
- Four million dollars over--
- [Kelly] Embezzlement is a 3.7 trillion dollar problem.
Government entities are the second-most
frequent victims of embezzlement.
(dramatic music)
- [Reporter] A nationally renowned horse-breeder,
a city employee since the 1980s, and a world-class thief.
(engaging dramatic music)
- 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?
(engaging dramatic music)
- Rita and I worked together from 1991
up until the time she was arrested in 2012.
(keyboard clacks)
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 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 US Attorney's office
and get a grand jury opened, and during that grand jury,
subpoenas issued for the 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.
(dramatic music)
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've 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."
(keyboard clacks)
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've had a lot of work to do.
"There's a lot going on at work.
I need to get a lot of things done."
- Over the next months, we'd look at surveillance
of the subject, 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 does this alone?
Was she hiding it for somebody else?
She had loved ones and family members that worked also
in the city of Dixon, that were in the area.
She helped support nephews.
She'd given loans out to family.
She had a boyfriend who was also involved in the business.
Are they involved?
(dramatic music)
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.
- [Todd] While we were doing the investigation, she was
able to take 1.5 million dollars from Dixon.
- I would sit and I'd watch her at lunchtime,
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."
(intercom rings)
- [Jim] 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, and she said, "Yes, sir?"
I said, "Rita, these gentleman
would like to ask you a few questions."
And she said, "Sure."
And I was looking right at her face.
Her countenance never changed at all.
So, with that, I exited the office,
I tell ya, just like that there's 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.
- [Kathe] 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 had taken around 10 million dollars.
If somebody gives a partial confession or something,
it locks their statement in, and that's what she did.
I think she was a little
overwhelmed, surprised.
Twenty years of her life and basically everything
she knew, that was all coming down,
and it hit her like a ton of bricks very quickly,
and people get emotional, and they probably later,
go, maybe I shouldn't have done that.
Maybe I shouldn't have talked, but they do.
- She was in here singing 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 a 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, 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 more egregious cases
the FBI has worked, considering
the size of the victim and the amount of money taken.
We're not talking $10,000, a ream of paper,
some pencils, which, you know...
53-plus million dollars is just unbelievable.
- [Kelly] So let's take a look
at how Rita pulled off this scheme.
(engaging music)
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.
Those phony invoices triggered Rita's
transferring money from the City's legitimate
capital development fund into her secret account.
And 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.
(horse whinnies)
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 never had 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.
- [Marissa] Any idea why she wouldn't talk to us today
and just apologize to the people of Dixon?
- I can't answer any questions.
- The public was pretty up in arms,
and people were picketing out in front of city hall,
and everyday was a news media deal.
- Rita, why did you steal $53 million
from the people of Dixon?
- Get our ass out of here.
- [Reporter] How were you able to get away with this--
- 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.
(dramatic music)
- In 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.
- [Kelly] Before Rita, the largest municipal fraud
in US history was a case in Washington, DC.
In this particular fraud, a network of friends and family
stole $48 million over a 20 year period.
When you compare DC 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.
- [Announcer] Now let's congratulate your
2011 world champion, Good I Will Be, owned and shown
by Rita Crundwell of Dixon, Illinois.
- She was leading 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 there
were stories that she had sold horses
for two- or three- hundred thousand dollars.
So, that was the image that she was conveying.
That was the image that I had.
- I must have went by Rita's horse farm
15 times, and I always asked my wife,
"Who has that many quarter horses?"
- It was really kind of mind-boggling
and see the spread that she had.
It's like, oh my gosh.
(engaging music)
- [Pat] 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 have owned many acres
of farmland, which is very high revenue.
Honestly didn't think too much about it, curious,
but like everyone else, you just kind of, hmm, interesting.
- I do know for a fact several people,
many people benefited from her money,
and I suspect 85% of it was cash.
- Coworkers at the city thought that she inherited
a lot of money and that she got involved
in it and was very successful.
The family knew that she didn't, so,
was it ever clear exactly what their belief was?
If they're benefiting, it's don't
look a gift horse in the mouth, right?
So...
- One of the things that really struck me about this story
with the horses were the names that she gave them.
- [Announcer] I Execute Class.
- [Bryan] Subconsciously, or ironically to send
a message to the town.
The irony there is obvious,
[horse whinnies]
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 I Execute, so.
- [Interviewer] 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 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.
- I met Rita in 2005 at the American Quarter House
World Finals in Oklahoma City, Oklahoma.
We always stalled at the same area every year.
She kept in a small, little circle.
You didn't see a lot of people walking up to her,
congratulating her, and I think,
you know, I was in awe of her.
Rita was a showman and she was very good at what she did.
When she won, she deserved it.
I mean, she really did.
- [Reporter] 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 would 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 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?
(peaceful music)
- 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?
- [Kelly] 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.
- [Pat] 'Cause she was a friend, after the council meeting,
they all came to her house and then she had cocktails.
- 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 subsidence 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 Steevers,
by Mr. Touchdown Kid; I leased Terry's
alt mares for two years, and I got all the colts out of 'em.
- [Kelly] Rita's wealth was not necessarily a red flag,
but what should have 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 many not have felt
the impacts of Rita's fraud
because they were borrowing
a lot of money during the time
that 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.
- [Reporter] 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 US District Court, to seize and care
for horses belonging to former City of Dixon
comptroller, Rita Crundwell.
(horse whinnies)
- 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.
(dramatic music)
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 gonna
ever bring anything close to that.
Our purpose today is to let the prospective buyers know
that what we have here is a very valuable herd.
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 has sometimes been referred to
as the Willie Nelson concert crowd.
(country music)
(auctioneer calls)
- It's amazing what millions of dollars can buy you
and how fast they can disappear in two days.
(auctioneer calls)
- [Bidder] We're here to bid on some horses and hopefully
we can bring back some of the money back to Dixon, Illinois.
- [Buyer] I've been in the horse business all my life
and I've never seen anything like this
no place in the United States.
- [Auctioneer] He is absolutely gorgeous and I've doing this
for 30 years, and I can tell ya, I've never started
a horse sale with one as good as this one.
(auctioneer calls and crowd bids)
Sold, $775,000.
(crowd cheers)
- I'm glad to see what that horse went for, Willy.
- [Reporter] Right.
- 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.
- [Todd] 97,000 plus dollars of horse semen
that she actually had stored and frozen
for breeding purposes, that was sold.
(auctioneer calls)
- [Jason] 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.
(engaging music)
(horse trots)
- 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,
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.
(engaging music)
- I want her to prosecuted to the full extent of the law.
- Well, I guess I don't know.
I would anticipate, if guilty.
Yeah, 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.
- [Kelly] 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.
(engaging music)
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.
(engaging music)
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
$6,000 on a custom-made saddle.
Miss Crundwell upgraded her motor coach.
She upgraded that thing five times
until she bought one that was $2.1 million.
(engaging music)
But particularly in year 2008,
is when she crossed the five million dollar threshold,
and again in 2009, more than five million,
and again in 2010, she stole more than five million dollars,
and I think she did that because the beginning
of 2008 was the start of the recession,
and she had the best excuse.
- Showing all of her assets made everybody realize
that she kept buying and the people of Dixon were suffering.
(dramatic music)
- 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 suffered because of this?
Everybody in this city suffered.
- And then, 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 the worst crime.
- [Jim] 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.
- [Kelly] 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 for 20 years I worked side by side with this woman,
and I never knew her, I never really knew her.
- [Kelly] 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.
(dramatic music)
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,
while 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.
- [Female] 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?
Where did they take her?
So it's like, first you're angry, you're upset,
your you're betrayed, then your emotions of
is she okay,
and to me it was so confusing for me,
and I just couldn't understand why I was feeling like that.
(birds chirp)
- [Patrick] Jim, big day yesterday
for you up in federal court.
After thinking about it now for almost 24 hours,
what do you think about how it went down?
- [Patrick] 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 worked with the US 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
one: investigating and then two: seizing
and documenting all the evidence.
At this point,
you 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.
(contemplative music)
- 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 nothing happened,
and we keep having to have cameras in our city
for stuff that's no good for our city.
So we're sick of it, so, thank you.
- You have not been doing your job.
You've been doing 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.
- Just what goes on in this town?
It's nothing but greed, abuse of power, and corruption.
- [Audience Member] That's right.
- And until we get rid of some of these people
it'll always be there.
(engaging music)
- When did I create the sign?
Just about a week before they was able
to have their 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-- [sighs]
what I thought of that man.
- The city council and the mayor
all should have known what was going on.
The should have known about the fraud.
They should have 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.
A lot of it's directed at probably people that govern,
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 governance
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-- - Mayor: So, I was vilified.
We would have the same people coming 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,
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 Ms. Crundwell told them,
they swallowed it hook, line, and sinker.
(engaging music)
- 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 the residents?
(engaging music)
- [Jim] 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 had 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.
(engaging music)
- 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 one 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 not only did they not separate individual functions
among multiple people, they didn't separate
any functions among any people.
(engaging music)
- [Kelly] 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
within the city.
Rita literally did it all.
(engaging music)
- When 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.
(engaging music)
- It was clear to me 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 identity 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.
(engaging music)
- 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.
- [Kelly] 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.
(engaging music)
- [Kelly] 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 critic's 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.
It seems like a huge conflict, right?
Well it is.
- Exactly, but in this case because
of CliftonLarsonAllen's own intentional decision-making
process, 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 asking the same individual
to say, is your document right?
(engaging music)
- [Kelly] 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 supposed 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 the discovery of the theft.
I deposed a number of the individuals that were responsible
for the field audit work, and they actual generation
of the work papers for Clifton
when they did the work for the city of Dixon.
- [Bruce] If at any point in time if 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?
- [Field Auditor] Yes.
- [Bruce] Do you agree with me, had that been done
the fraud would have been identified
and Rita would have been arrested?
- [Field Auditor] 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.
(engaging music)
The issue is, should someone have know 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 multiple occasions
disclosing the RSCDA account and they did nothing.
(engaging music)
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.
(engaging music)
- [Bruce] Is it unusual that somebody
would have over $300,000 cash flow out
without being explained by their tax returns?
- [Partner] 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 to a city employee who makes 80-some thousand dollars a year.
- [Bruce] Other than just writing it down
and claiming it, that's the most that
she had in terms of documentation, correct?
- [Partner] Correct.
- [Bruce] You never asked her for anything further, true?
- [Partner] 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?
(engaging music)
- 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 probably under the impression
that these audits are going to uncover graft,
and corruption and embezzlement, and apparently not.
- Auditors are not responsible for finding fraud,
nor should they be.
They became reporting and disclosing police, making sure
that corporations, public 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 cross-examination, I just did
not see how they could win the case in friendly country.
(engaging music)
- [Kelly] Most frauds are discovered by a tip
from a whistleblower 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 have never been discovered,
and Rita would've gotten away with it.
- [Kathe] Yes, mm-hmm.
- Being a whistleblower 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.
- My only regret is, is that I didn't find out sooner.
(engaging music)
- [Kelly] 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, through 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.
- [Bruce] 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 in just says payee treasurer,
do you feel comfortable that the check
could be negotiated as written?
- [Manager] Based on my experience, it would raise caution.
- [Bruce] And what's the basis of that opinion?
- [Manager] 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 trail.
- [Kelly] 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 to get
that money for the city,
whether it be by trial or settlement.
- We have to become ACA compliant right now
if we go to that two and half percent
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?
[laughing]
You know, I mean it's like wow.
My plan was, in addition to this, was to write up
those raises for the non-union people, and send some.
The idea of coming in and creating a whole new system
of accounting and restructuring, 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 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, 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.
(engaging music)
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 every day 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 more of a day-to-day basis.
- The city needed some fresh blood, some fresh ideas,
and we've got five new councilmen
that were elected back in April.
- And I recognize that when you guys come in,
you got a lot of extra work to do,
but your ears have always been open to us,
closed doors have always been open to us.
I appreciate the fair treatment and I thank all of you.
- [Steve] 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.
- Pete, were you able to get anything
as any cost estimate or anything--
- [Reporter] 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.
- [Pete] Okay. - At 5:30 I'll be all finished.
I really am disappointed I'm not running again.
I think the foundation was there to get reelected.
- [Reporter] This marks his final day at city hall.
He's completing 16 years as mayor.
- [Jim] I'm gonna miss it, I hate to go,
but I know it's time to do this.
(engaging music)
- 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 backyard.
So, congratulations, Guy.
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.
(horses whinny)
(engaging music)
- $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 that I looked
at was by the end, the numbers were eerily close.
She stole close to somewhere like five million
in the final year and 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.
It 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 watching the money really closely.
(engaging music)
- The past three years I think the town
is physically, financially in better shape than it's been
in many, many years, and that's since I've lived here.
And basically because they recouped all of 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've changed,
and what a good community we are.
(people scream)
- I love this city.
My wife and I chose to retire here 20 years ago.
(water splashes)
Ask anybody that comes here from anywhere,
from miles around, we're envied
by all the surrounding towns around for what Dixon has.
(engaging music)
- 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."
(engaging music)
(captivating music)
(bright music)
- Announcer: All the Queen's Horses is available on demand
go to AlltheQueensHorsesfilm.com
to find out where you can stream this film.