Dixon Sues Auditors in $53 Million Embezzlement Case
June 12, 2012 (Chicago Tribune) The City of Dixon, [Illionois,] stunned earlier this year when its longtime treasurer was charged with stealing more than $53 million over the last two decades, has filed a lawsuit against its auditors for missing the massive, decades-long embezzlement from the small town's coffers.
The suit accused Janis Card Associates, an accounting firm based in Sterling, and its owner, Samuel S. Card, of professional negligence and negligent misrepresentation for overlooking the huge thefts since 2006.
The auditors "failed to report and identify irregularities in the financial statements, accounting and controls in the City of Dixon," said the suit, filed Friday in Lee County, which includes Dixon, best known as the boyhood home of President Ronald Reagan.
Rita Crundwell, Dixon's treasurer and comptroller since 1983, was led away from City Hall in handcuffs in April on charges she misappropriated more than $30 million since mid-2006. When she was formally indicted in May, authorities alleged the thefts went back nearly 22 years and totalled in excess of $53 million.
Prosecutors charged that Crundwell funneled money from a handful of accounts into the city's Capital Development Fund account, then into another account that bore the city's name and "R.S.C.D.A. c/o Rita Crundwell." The alleged fraud was discovered last fall by the city clerk while filling in for Crundwell during her vacation. The clerk noticed the account with Crundwell's name and brought it to the attention of Mayor James Burke, who has said he did not know it existed.
Crundwell used the stolen tens of millions of dollars to finance a championship horse breeding operation and lavish lifestyle, prosecutors charged.
Crundwell, who was fired by the city following her April arrest, has pleaded not guilty to a charge of wire fraud. The U.S. Marshals Service is now overseeing the care of more than 300 horses that she boarded around the country. The government has said it plans to eventually sell the horses and other seized property in order to return some of the funds Dixon lost.
Experts have said they believe numerous safeguards broke down in Dixon -- annual audits and local banks didn't send up red flags, city officials didn't notice tax dollars disappearing and the city's lack of checks and balances gave Crundwell almost complete control over the city's purse strings.
According to the suit, the auditors "knew or should have known" of the massive embezzlements.
A woman who answered the phone at Janis Card Associates said Samuel Card had no comment on the lawsuit. His attorney could not be reached for comment.
The lawsuit also said that Dixon believes the accounting firm of CliftonLarsonAllen and two of its employees as well as Fifth Third Bank and US Bank "have information essential to the determination of who should properly be named as defendants in this action." Clifton Gunderson provided auditing, accounting and financial services to Dixon since 1988, according to the lawsuit.