A Fraud Case Study: Rita Crundwell and the City of Dixon, Illinois

Gusto Editors

A big fraud in a small town has all kinds of lessons for accountants.

You might expect fraud to occur in businesses located in big cities, like New York, Chicago, or Los Angeles, but fraud can occur in any business at any time. As an accountant, it’s your job to ensure that fraud doesn’t occur in your clients’ business before it’s too late.

Unsure of how to detect fraudsters or what type of activity to look for? Gusto has you covered! 

Partnering with CPA Academy, we provided an excellent webinar on the characteristics of people who commit fraud, the data behind counterintuitive insights, and a case study that shows how fraud can have a devastating effect on a small community. 

Gusto’s Editor-at-Large, Caleb Newquist, took some time to chat with one of CPA Academy’s regular contributors, Greg Kyte, in the webinar. Greg has been included in Accounting Today’s list of the “Top 100 Most Influential People in the Accounting Profession,” and he has a wealth of knowledge when it comes to fraud. 

Their webinar “Fraud & Fraudsters: Meet the People Who Are Stealing Your Stuff” offers essential information to your business on how to define fraudsters and how to prevent fraud, specifically looking at the characteristics of fraud through the Rita Crundwell case study. You can check out the full webinar here

Discovering the characteristics of a fraudster

The “typical organization loses 5% of revenue to fraud.” This is about $3.5 trillion nationwide, involving nearly 1,400 businesses. 

“So, first off, the ACFE, they estimate that the typical organization loses 5% of its revenue to fraud. That’s the typical organization.”

– Greg Kyte

Greg Kyte explained how this figure is closer to $4.5 trillion as of 2020. He mentioned how the median loss for business hovers around $120,000 in the U.S. and Canada. But if you look at 2,500 cases in the United States, you’ll notice that the average loss was closer to $1.5 million. 

This isn’t a rare occasion for business or 1% of revenue. Greg mentions that the typical business loses 5%, which is a lot if a business is earning over 7 figures. 

To avoid this fraudulent activity from happening in your business and save hundreds of thousands of dollars, you have to know how to prepare for fraudsters. 

Young male business owner standing over desk and lap top review items on the screen with a white board behind him

One of the best ways to do this is to look at a specific case study and see how you can prevent fraudulent activity from happening in your business. For example, in this case study from the webinar, you’ll learn what a fraudster can do with bank details — the short answer is that they can embezzle millions. Thankfully, understanding fraudster characteristics can help you know what to look for. 

The fraud case study of Rita Crundwell

Rita Crundwell essentially stole $54 million through fraud. Originally, she was a city comptroller in the city of Dixon, Illinois. She committed fraud from 1991 to 2012 — a total of 22 years. Her fraud was the largest amount of money embezzled from a municipal government ever. Greg pointed out that Rita was a typical employee that didn’t have a history of crime:

“Interesting fact about her annual salary was $80,000. From what I understand, she was married. I think she had gotten divorced. So her $80,000 annual salary was just for her. Not a bad salary. She got caught in 2012, so that’s an $80,000 salary in 2012 and before.”

– Greg Kyte

Greg further explained how Rita was 38 years old when she initially committed the crime and was almost 60 years old when she was caught. This goes back to fraud data that is mentioned in Part One of the webinar — 19% of fraudsters are between the age of 36 and 40 years old; however, 65% of fraudsters are between the ages of 36 and 60. 

The data behind the case study & typical fraudsters

In addition to the case study, it’s also important to take a look at the data of fraudsters and where they are most likely to strike your business. An alarming statistic is private and small businesses rank higher in occupational fraud at 42% compared to major businesses. If you do suspect fraud in your business, you should contact the SBA and report it

Using Rita Crundwell as an example, Greg said that 35% of frauds are committed by management. 41% of frauds are committed by just employees and staff. 14% of frauds are committed by the accounting department, which is where Rita worked. If you are wondering how an accountant fits the profile of a fraudster, you’ll see how Rita fits it perfectly. 

Young male employee wearing glasses and a baseball hat standing in Wearhouse looking at paper on wire shelf

There are additional correlations between Rita and other fraudsters. Fraud is likely to occur with people who have more than 10 years of tenure and have a median loss of $200,000. Rita was at the end of her 42-year tenure and the median loss for an accountant was $200,000, which was her job at the time. She was the perfect candidate to become a fraudster. 

“Rita didn’t have any formal training in accounting or finance, but she was the comptroller. As I said, it was a small city, and she just worked her way up the ladder until she got there. 22% of fraudsters, almost a quarter of the fraudsters, do have a high school diploma or less.”

– Greg Kyte

While she was  stealing $54 million, Rita tried to build a Quarter Horse empire, accumulating over 750 trophies. When Rita was caught, the FBI seized and sold her assets, including a horse that sold for around $750,000. Not only that but the equestrian equipment was also extremely expensive: 

“Rita had a custom made saddle that sold for $1,200.”

– Greg Kyte

Although Rita made millions as a fraudster, her own life was incredibly boring and mundane. She lived in a small town and had an uneventful job. She then opened up a bank account at Reservoir Sewer Capital and made fake invoices and cut checks for fake invoices. This secret account would pay for her jewelry and high-end expenses. Greg revealed the shocking amount of checks she wrote over her 22 years of fraudulent activity: 

“169 checks that she [Rita] wrote over the 22 years, so they were pretty dang big checks that were being moved over from one to the other.”

– Greg Kyte

As Greg explained in the webinar, Rita was a master of fraudulent activity. Rita’s ability to accomplish all of this fraud was based on the trust she had built over the years. She worked at her job and lived in the same city for so long that the bank, the people in the city, and her employers trusted her completely. 

Greg explained that Rita’s eventual downfall was when she left town to show off her horses. Her co-worker asked the bank for the city’s bank statements, which led to the exposure of her secret fraud account. Then the mayor found out and told the FBI, which led to Rita’s arrest.  

Rita Crundwell’s fate as a fraudster

FBI waited to prosecute Rita, building a case against her for six months. During that time, they witnessed Rita take $3.2 million. At the time, the city auditor was Clifton Gunderson, who was later sued for $40 million by the city for not protecting it against the fraudulent actions of Rita Crundwell. 

The FBI initially thought that someone else must have been involved in the fraud, but they found out that she committed these acts herself. 

“There was only one perpetrator, and the crazy thing was the FBI did not believe that she did this massive fraud and that no one knew about it and no one helped her with it, but at the end of the day, they didn’t have any evidence that anyone was involved except her. Which is weird, but true.”

– Greg Kyte

Rita Crundwell fits the common characteristics of a fraudster found in ACFE’s characteristics of perpetrators: which included:

  • Being an employee
  • Being at the same job for more than 10 years
  • Worked in the accounting department 
  • Committed the fraud within the 36-40 age range 
  • Worked alone in committing the fraud 
  • Had no criminal background 

Learn more about fraudsters and how to prevent fraud

If you want to learn more about fraud and the characteristics of a fraudster, you can check out the full webinar here. Furthermore, make sure to check out Part One of the webinar, which goes into more detail about fraudster profiles and what accountants need to know about fraud. 

In addition, by joining Gusto’s Partner Program you are eligible for free Gusto payroll and HR tools and a dedicated Gusto partner advisor. You also receive revenue share or discounts in perpetuity for your clients. Some other benefits you’ll receive our free payroll transfers to move your clients to Gusto and a new revenue stream for your practice, along with other resources. You’ll also gain access to Gusto’s People Advisory program, where you can gain access to key resources for helping your clients and growing your firm. Additionally, you’ll immediately be able to use Gusto Pro and all of its workflow and software benefits. If you’re interested in learning even more about Gusto’s People Advisory program and how it benefits our accounting partners, click here

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