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Quarter horse breeder Crundwell jailed for $US53m fraud

Rita Crundwell

Rita Crundwell

American quarter horse breeder Rita Crundwell, who defrauded a small Illinois city of more than $US53 million, has been jailed for 19 years and 7 months.

The 60-year-old’s sentence, handed down by US District Judge Philip Reinhard in Federal Court in Rockford, Illinois, is just five months short of the maximum jail term available for wire fraud, to which Crundwell pleaded guilty on November 14.

Crundwell, who was one of the top quarter horse breeders in the United States, stole $US53.7 million from the city of Dixon over two decades while serving as its financial controller, or comptroller.

Crundwell was taken into custody in handcuffs to immediately begin her sentence in federal prison.

She had used the proceeds to finance her quarter horse farming business and life of luxury.

It is believed to be the largest theft of public funds in state history.

Judge Reinhard said toward the end of the sentencing, which took more than two hours: “This has been a massive stealing of public money – monies entrusted to you as a public guardian of Dixon, Illinois.

Crundwell, he said, showed “greater passion for the welfare of her horses than the people of Dixon who she represented.”

Crundwell's home in Dixon county

Crundwell’s home in Dixon county

Assistant US Attorney Joseph Pedersen told the judge: “While the city was suffering, the defendant was living her dreams.”

Crundwell, he said, continued to take millions from Dixon to support her lavish lifestyle while she knew that Dixon, a city of about 16,000 people about 100 miles southwest of Chicago, was in dire financial straits.

Crundwell must serve at least 85 percent of the sentence as there is no parole in the federal prison system.

Judge Reinhard granted the government’s request for an upward variance in the federal sentencing guidelines.

In addition to the financial loss, he found that Crundwell caused a significant non-monetary loss, which involved a loss of public confidence in local government and a significant disruption of government function that struck “at the very heart of Dixon’s abilities to provide essentials for its citizenry”.

The judge ordered agreed restitution to the city of Dixon totaling $53,740,394, and he imposed an agreed forfeiture judgment in the same amount.

Following her arrest in April last year, Crundwell agreed to the sale of assets she had acquired with proceeds from her decades-long fraud scheme.

To date, the US Marshals Service has recovered more than $US12.38 million from sales, including online and live auctions, of about 400 quarter horses, vehicles, trailers, tack, a luxury motor home, jewelry and personal belongings, while sales of real estate in Illinois and Florida remain pending.

The net proceeds from the forfeited property – nearly $US9.5 million so far – are being held in escrow pending further proceedings on restitution to the City of Dixon.

Under federal law, the government may continue to seek additional assets of a defendant and obtain restitution for up to 20 years after a defendant is released from prison.

UStates Attorney for the Northern District of Illinois, Gary Shapiro, praised the FBI agents who conducted the investigation and the US Marshals Service for its efficient management of the seized assets.

“We have used criminal and civil forfeiture proceedings to ensure the recovery of as much money as possible for the City of Dixon and its taxpayers,” he said.

Crundwell's ranch in Dixon county.

Crundwell’s ranch in Dixon county.

“Unfortunately, this case serves as a painful lesson that trust, without verification, can lead to betrayal.”

The special agent in charge of the Chicago Office of the FBI, Cory Nelson, said: “The law is clear. Those who hold positions of trust must not abuse that trust. We remain committed to holding anyone using an official position for personal gain, as Rita Crundwell did for years, fully accountable for their corrupt actions.”

Crundwell began working for Dixon’s finance department in 1970 while still in high school, and she was appointed comptroller/treasurer in 1983.

She began the fraud scheme on December 18, 1990, when she opened a secret bank account, which she alone controlled, in the name of the City of Dixon.

It was known as the RSCDA account. The initials stood for “Reserve Sewer Capital Development Account” although no-such account actually existed for the city, and Crundwell did not disclose its existence.

At the sentencing, authorities also presented evidence that Crundwell stole at least $US25,000 from a separate Dixon bank account for its Sister City program between 1988 and 1990 before her fraud scheme began.

Crundwell began transferring money from city accounts to the RSCDA account in January 1991.

Subsequently, she used her position as comptroller to transfer funds from Dixon’s Money Market account and various other city accounts to its Capital Development Fund account.

She then repeatedly transferred city funds from the Capital Development Account into the RSCDA account and used the money to pay for her personal and private business expenses, including horse-farming operations, personal credit card payments, real estate and vehicles.

In 1991, she transferred more than $US181,000 to the RSCDA account. As the fraud scheme continued, the amounts she stole increased to a high of $US5.8 million in 2008, and she took an average of more than $US2.5 million a year over the 20-year course of the scheme.

While she was stealing the money, Crundwell participated in budget meetings with city council members and various city department heads. She repeatedly stated that the city’s lack of funds was due to a downturn in the economy and because the State of Illinois was behind in its payments.

At the time she made those statements, Crundwell was stealing millions of dollars, causing Dixon to cut its budget, which had a significant impact on city operations.

As part of the fraud scheme, Crundwell created 159 fictitious invoices purported to be from the State of Illinois to show the city’s auditors that the funds she was fraudulently depositing into the RSCDA account were being used for a legitimate purpose. In one instance, on September 8, 2009, Crundwell wrote checks for $US150,000 and $US200,000 drawn on two of the city’s multiple bank accounts.

She deposited both checks into Dixon’s Capital Development Fund account and, later the same day, wrote a check for $US350,000 payable to “Treasurer” and deposited that check into the secret RSCDA account.

Crundwell created a fictitious invoice to support the payment of $US350,000 to the State of Illinois that falsely indicated the payment was for a sewer project in Dixon that the state completed. Later, on September 8, 2009, Crundwell wrote a check drawn on the RSCDA account for $US225,000, which she deposited into her personal RC Quarter Horses account.

Five time World Champion Halter Mare Pizzazzy Lady is among the horses being sold.

Five time World Champion Halter Mare Pizzazzy Lady.

She used that money to cover a $US225,000 check, dated September 1, 2009, drawn on the RC Quarter Horses account to purchase a quarter horse named Pizzazzy Lady. The purchase check would not have cleared if Crundwell had not deposited $US225,000, using city funds, into her horse account.

To conceal the scheme, Crundwell picked up the city’s mail, including bank statements for the RSCDA account, to prevent other employees from learning about the secret account.

When she was away, she asked a relative or other city employees to pick up the mail and separate any of her mail, including the statements for the RSCDA account, from the rest of the city’s mail.

Dixon’s mayor reported Crundwell to law enforcement authorities in the fall of 2011 after another city employee assumed her duties during an extended unpaid vacation.

Crundwell, whose annual salary was $US80,000, received four weeks of paid vacation and she took an additional 12 weeks of unpaid vacation in 2011.

While Crundwell was absent, her replacement requested all of the city’s bank statements. After reviewing them, the employee brought the records of the RSCDA account to the attention of the mayor, who was unaware of the account’s existence.

While serving as Dixon’s comptroller, Crundwell also owned RC Quarter Horses, LLC, and kept her horses at her ranch on Red Brick Road in Dixon and the Meri-J Ranch in Beloit, Wisconsin, as well as with various trainers across the country.

In addition to the horses and all of their equipment, among the assets seized or restrained were Crundwell’s two residences and horse farm in Dixon, a home in Englewood, Florida, 80 acres of vacant land in Lee County, a 2009 luxury motor home, more than four dozen trucks, trailers and other motorized farm vehicles, a 2005 Ford Thunderbird convertible, a 1967 Chevrolet Corvette roadster, a pontoon boat, jewelry, and about $US224,898 in cash from two bank accounts.

Crundwell was well known on the national quarter horse circuit. She had collected eight straight titles as top owner at the American Quarter Horse Association’s annual World Show in Oklahoma City.

Many thought her wealth had stemmed from her success in the quarter horse industry.

 

» Pictures from the Crundwell auctions

 

 

 

 

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