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City's ex-comptroller pleads guilty to stealing millions of dollars in public funds

Published: Thursday, Nov. 15, 2012 9:44 a.m. CDT

(Continued from Page 3)

(MCT) — CHICAGO — Rita Crundwell, once the trusted comptroller of Dixon, Ill., entered her name into the record book of Illinois embezzlers Wednesday when she pleaded guilty to stealing tens of millions of dollars in public funds — a plea she made, her lawyer said, because she wanted to spare taxpayers the expense of a trial.

Crundwell's case has unfolded with spectacular excess over the last seven months after authorities charged she had long diverted city money to a secret bank account in her name. In recent years the thefts had grown bolder as she stole $100,000, $200,000, even $350,000 at a time, according to authorities. Eventually, her thefts exceeded the annual budgets for the police and fire departments combined.

But she made a fateful mistake, spending long periods away from City Hall as she traveled the country to compete in horse shows. She had become one of the nation's top breeders of quarter horses with the money she stole from her small town, best known as the boyhood home of President Ronald Reagan. The city clerk, filling in for Crundwell, discovered the secret account and informed the mayor, who tipped off law enforcement.

Last April FBI agents unceremoniously arrested Crundwell and whisked her out of City Hall in handcuffs. On Wednesday, she displayed no emotion as she quietly pleaded guilty in federal court to the staggering embezzlements — $53.7 million in all since late 1990.

Referring to Crundwell's "incredible avarice," Acting U.S. Attorney Gary Shapiro said he believed her scheme represented the largest theft of public funds in Illinois history.

"Apologies to Ronald Reagan, but public officials who manage their citizens' money need to trust if they must, but they need to verify," Shapiro told reporters outside the federal courthouse in Rockford, Ill. "There was, as far as we could tell, no verification here."

The federal conviction, coupled with felony theft charges still pending in Lee County, could mean Crundwell, 59, spends much of the rest of her life in prison.

Crundwell has been free on bond since shortly after her April arrest, but federal prosecutors on Wednesday sought to have her taken into custody, arguing she was a risk to flee because of her age and likely stiff prison sentence. But after Crundwell's lawyer said she didn't have the money to run or a place to go, U.S. District Judge Philip Reinhard allowed her to remain free on her own recognizance. He set sentencing for Feb. 14.

It was revealed in court that she is living out of state, but the exact location was not disclosed. Her bond restrictions required her to stay in northern Illinois or southern Wisconsin.

The fall has been steep for Crundwell. Even before her plea of guilty, she had allowed authorities to sell off all her 400 horses, a luxury motor home and other equipment. More sales of hundreds of her personal possessions are still to come. Authorities are essentially emptying out her homes and then selling the residences — all with the goal to raise money that can go to Dixon to repair some of the damage she inflicted.

In court Wednesday, the woman who once counted three residences, seven fur coats and hundreds of thousands of dollars of jewelry among her possessions appeared to be wearing the same white turtleneck sweater, black pants and sparkling hair clip she had on during another court appearance two weeks ago.

Keeping her eyes trained on the judge during most of the hearing, Crundwell gave short, direct answers to his questions, often punctuated with a polite "your Honor."

As part of an agreement with federal authorities, Crundwell pleaded guilty to one count of wire fraud and admitted to money laundering.

Under federal sentencing guidelines, prosecutors believe Crundwell faces up to 19 1/2 years in prison. Crundwell's lawyers contend the guidelines call for no more than 12 1/2 years.

Crundwell did not speak to reporters as she left the courthouse, but her court-appointed attorney, Paul Gaziano, said her plea agreement is "saving the government the burden and the expense of a lengthy trial."

"Rita, since the day of her arrest, has worked with the government to accomplish the sale of her assets, including her beloved horses, all with the goal of hoping to recoup the losses for the city of Dixon," he said. "I think the people of the city of Dixon ought to know that."

So far, U.S. marshals have raised about $7.4 million through the auctions. Horses from the well-known breeder sold for as high as $226,000. At a press conference after the guilty plea, Darryl McPherson, the U.S. marshal for the Northern District of Illinois, said marshals plan to begin auctioning off her land, homes and personal property next month.

Shapiro said authorities intend to "find everything Rita Crundwell owns and to liquidate it at the best possible price and to return as much of the money as we can to the folks in Dixon."

Crundwell served as the city's comptroller since 1983, handling all of its finances. In the plea agreement, she admitted to transferring money from city funds into a bank account bearing her name that she opened in December 1990 without the city's knowledge. The embezzlements grew bolder over time. More than half of the money was stolen in the last six years.

Prosecutors have said Crundwell used the money to fund a lavish lifestyle and her champion horse-breeding operation.

To conceal her crimes, Crundwell told other city officials that budgetary shortfalls were due to late payments of tax revenue from the state.

Federal authorities indicated there was no evidence that anyone else was in on the scheme with Crundwell.

Experts have said numerous financial safeguards broke down or simply didn't exist in Dixon. As both comptroller and treasurer, Crundwell held almost complete control over the city's purse strings. She also picked up the city's mail deliveries to keep city officials from learning about the secret bank account she used to funnel herself the money. When she took a vacation, she had a relative handle the chore.

In an interview Wednesday afternoon, Dixon Mayor Jim Burke, who reported Crundwell to law enforcement authorities after learning of the secret bank account, agreed the theft should have been discovered sooner and said auditors and the city's main bank should have raised a red flag.

"Anybody that was involved in this thing tangentially could look back on it and say they wish they had done this and wish they had done that," he said. "Myself included."

Burke said he would like Crundwell to receive the maximum sentence of 20 years.

"If she ends up getting out of this deal like in 10 years or less that is going to go down like a piece of coal with everybody in Dixon," he said.

Crundwell still has to answer to 60 counts of felony theft filed by Lee County State's Attorney Henry Dixon in September. She has pleaded not guilty to those charges.

Peter Buh, chief of the office's felony division, said that case will continue despite the federal plea deal and a new state's attorney preparing to take office since last week's election.

"We're going to move forward," he said.

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