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Comptroller sentenced to almost 20 years in city fraud case

Published: Friday, Feb. 15, 2013 10:04 a.m. CST

(MCT) — CHICAGO —To get across her point that Dixon’s budget woes necessitated cost-cutting, city comptroller Rita Crundwell each year sent department heads memos topped with cartoon characters — a scared cat, a pair of scissors cutting a dollar sign and even a man drowning.

According to a federal prosecutor, the apparent attempt at humor was really “a psychological tool to discourage the individuals in different departments from requesting money because the more money that was spent on legitimate city items the less money that would be available for taking.”

The day of judgment finally came Thursday for Crundwell after looting tens of millions of dollars from city coffers over more than two decades. A federal judge in Rockford sentenced her to just under the 20-year maximum in prison and then revoked her bond and ordered her immediately taken into custody, saying she posed a risk to flee

The stiff sentence meant that the judge gave her little credit for cooperating with authorities as soon as she was arrested last April. Authorities have called her massive theft perhaps the largest municipal fraud in U.S. history.

Crundwell, who built a championship quarter-horse breeding operation with the stolen money, has shown only a stoic side since she has become a scorned figure in this small northwestern Illinois town. But she displayed her first emotion as she briefly choked up while addressing the judge before he imposed sentence.

“I’m truly sorry to the city of Dixon and my family and my friends,” she said.

In sentencing her to 19 years and 7 months in prison, U.S. District Judge Philip Reinhard spoke of the “sheer magnitude” of the fraud scheme — almost $54 million was stolen over 22 years — and Crundwell’s callousness in financing her lavish lifestyle while the town’s budget was awash in red ink.

“You showed much greater passion for the welfare of your horses than the people of Dixon you represented,” he told Crundwell, who pleaded guilty in November to a federal wire fraud charge.

Under federal sentencing rules, Dixon, 60, must serve almost 17 years before she could be released from prison.

Several Dixon city officials—including the police chief and a city commissioner—were called to the witness stand Thursday to detail how Crundwell’s thefts crippled the city budget, delaying projects like repaving streets and replacing police radios, and led to fears of layoffs.

Crundwell blamed the weak economy and late state payments for the cash crunch, according to prosecutors. “If you knew where the money tree was, I’d be willing to get you a dump truck,” Mike Stichter, superintendent of the city’s Street Department, testified she once told him.

Reading from a prepared statement in court, Mayor James Burke quoted Shakespeare’s “Richard III” in explaining Crundwell’s motiviation. “My horse! My horse! My kingdom for a horse!”

“Rita Crundwell saw firsthand the penalty the city was paying for financing her high-flying, 20-plus years,” he said in reference to the budget woes caused by her thievery.

For the first time, authorities suggested that Crundwell’s thefts may have gone back as far as 1988, earlier than alleged in the charges. Crundwell, who started working for the city’s finance department in 1970 while still in high school, siphoned money from the city’s Sister City program’s bank account, taking at least $25,000 over two years, prosecutors said.

According to her guilty plea, the fraud began in December 1990 when Crundwell opened a secret city bank account. By the next month she started funneling money from various city accounts into the Capital Development Fund account, then into her secret account.

The thefts grew bolder over time, peaking at $5.8 million in 2008 alone.

She used the taxpayer money to amass a quarter-horse operation that was the envy of the industry. She owned about 400 horses by the time of her arrest. She also had purchased a sprawling ranch in Dixon, homes in Illinois and Florida, a luxury motor home, hundreds of thousands of dollars in jewelry and almost $250,000 in bank accounts.

Even the judge pondered aloud in court Thursday how the fraud went on undetected for so long, but Crundwell had complete control over the city’s purse strings and even collected the mail so her secret account wouldn’t be discovered. Another city official uncovered the account while Crundwell had taken extended time off to attend horse competitions around the country.

“You can trust but you have to verify,” said Assistant U.S. Attorney Joseph Pedersen, who prosecuted the case. “And I think that’s the lesson for other municipalities.”

Mayor Burke said he was pleased to see Crundwell immediately taken into custody but said the sentencing was also emotional, “knowing her all these years and (to) think what a tragedy this whole thing is not only for the city but for her also.”

The mayor, though, questioned the sincerity of Crundwell’s apology, saying, “I think her conscience didn’t bother her at all.”

Meanwhile, U.S. marshals who have been selling off many of Crundwell’s assets, said Thursday that they expect about $10 million to ultimately be returned to Dixon coffers.

But with 60 counts of felony theft still pending in Lee County court, Crundwell potentially still faces additional prison time. Anna Sacco-Miller, the county’s state’s attorney, said she would meet with town officials before deciding whether or not to continue the prosecution.

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