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Friday, November 15, 2013

Ind. Decisions - 7th Circuit decides an interesting non-Indiana case today

The opinion, out of Illinois, is UNITED STATES OF AMERICA v. RITA A. CRUNDWELL and much of it reads like a news story (or the start of a Gresham novel). The 7-page opinion by Judge Easterbrook begins:

In 2011 a Commissioner of Dixon, Illinois, the childhood home of President Reagan, lauded Rita Crundwell, the City’s Comptroller since 1983, because “she looks after every tax dollar as if it were her own.” How right he was. The next year Crundwell pleaded guilty to embezzling approximately $53 million from the City between 1990 and 2012. She used the money to support more than 400 quarter horses and a lavish lifestyle, which she explained to co-workers as the fruit of the horses’ success. During the final six years of her scheme, the embezzlement averaged 28% of the City’s budget. In exchange for her guilty plea, the prosecutor limited the charge to a single count of wire fraud. See 18 U.S.C. §1343.

Crundwell told other public officials that the City had to tighten its belt. She blamed a downturn in the economy and a reduction in remittances from the state, when her own theft was the real cause. Police went without valuable equipment. The City reduced the staff of its Street Depart ment from nine to six and cut the rate of maintenance. In the decade before Crundwell’s arrest, the City resurfaced only 65 blocks of its more than 100 miles of paved roads. The list of ways in which Crundwell’s crime injured the population of Dixon is long and played a major role in the district court’s decision to sentence her to 235 months’ imprison ment, substantially above the Guideline range of 151 to 188 months.

The scheme was not particularly sophisticated. Crundwell opened an account at a local branch of Fifth Third Bank. The account was called “RSCDA Reserve Fund” and nominally was owned by the City, but Crundwell held sole control over disbursements. She used her authority as Comptroller to move money from the City’s legitimate ac counts to the RSCDA account. Once the money was there she wrote checks for her own benefit. She created bogus in voices to justify the transfers from the legitimate accounts.

For more than 20 years, the bank failed to notice that the funds in the RSCDA account were being put to private ra ther than public use. And the City’s auditors — CliftonLarsonAllen and Samuel Card, a local accountant — failed to detect the scam, even though the spot checks of invoices and disbursements required by auditing standards ought to have turned it up long before 2012. The embezzlement was caught when a bank statement of the RSCDA account reached the Mayor by accident, and he phoned the FBI because the transactions it revealed startled him. The City sued the bank and the two auditors, which recently settled for approximately $40 million. Sales of Crundwell’s assets realized another $10 million, so the City has recovered much of what Crundwell took (if we disregard interest, which over this lengthy period would have been substantial) but lost the benefits, such as well-paved roads and efficient police, that the money could have achieved had it been available be tween 1990 and 2012.

Posted by Marcia Oddi on November 15, 2013 03:57 PM
Posted to Ind. (7th Cir.) Decisions