Lessons From the Largest Municipal Fraud in American History

In 2012, the small town of Dixon, Illinois found its claim to fame; it was the site and victim of a $53 million embezzlement scheme perpetrated by a former town official. The official, Rita Crundwell, had led an exorbitant lifestyle and created a horse-breeding empire at the expense of her struggling town.

The story of Crundwell’s theft captured media attention for its large scale, small-town intrigue, and Crundwell’s own peculiar charisma. Since the FBI arrested the woman at the center of the massive theft, the case has been examined in a 2017 documentary and used as an example in forensic accounting courses.

Misplaced Trust

While the contrast between Crundwell’s lavish life and her struggling town captivated media coverage, Kelly Richmond Pope, Ph.D., CPA (and director of the 2017 documentary) identified something else at the center of the scam. “I think it happened because everyone trusted Rita,” said Pope in an interview with WBEZ Chicago. “We all have a Rita in our organization — someone who we unconditionally trust — and when they tell us something, we don’t check up on it because we know them well.”

This assessment of the case rings true to the years of experience SDC CPAs and its founder Dee Studler have handling employee theft and employee dishonesty cases. The story of Crundwell and the town of Dixon exemplifies a fairly common occurrence in forensic accounting; some of the most expensive and longest-running schemes are perpetrated by trusted employees who are practically above suspicion.

This pattern, in which a supposed pillar of an organization is actually draining it, can occur when oversight is limited or internal controls are set by the fraudster themselves. In situations like these, the truth may be further obscured by the fraudster’s façade. Similar to Crundwell’s case, the public may laud a dedicated civil servant who helps the town navigate a budget crisis—created by that very person.

While it can be disheartening to see people manipulate the trust they’ve earned, it can be equally vindicating to see forensic accounting expose their wrongdoing.

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