Looted City Recoups Most of Stolen Cash

The City of Dixon has a new problem, and it's probably the last one residents thought they'd have 21 months ago.

That's when the city's longtime comptroller, Rita Crundwell, was arrested for embezzling what amounts to a stunning $53 million over 22 years. Crundwell pleaded guilty to wire fraud and was sentenced to nearly 20 years in federal prison.

When the news broke, Dixon went from being a sleepy north-central Illinois hamlet best known as Ronald Reagan's boyhood home, to being the victim of what's believed to be the biggest municipal embezzlement in U.S. history.

But this scandal has a twist. Through a lawsuit settlement, and a sale of Crundwell's property, Dixon is getting the bulk of the stolen money back. Suddenly, they were confronted with a new problem: how to spend the nearly $40 million flowing into town.

"We've got lucky," said mayor James Burke. "It's almost like the whole thing worked out to be a giant savings account for us. But we sure as hell don't want this happening again!"

Indeed, even veteran scandal-watchers, say they are amazed at what Dixon accomplished.

"They're getting almost all of the money back, not quite all of it, but almost all of it," said Patrick McCraney of the Better Government Association. "That's just crazy!"

Dixon has already received most of the money from a lawsuit that was settled in September. The city sued its auditors, Milwaukee-based Clifton Larson Allen, Fifth Third Bank, and Samuel Card. (All separately told the Better Government Association the lawsuit was settled without admission of wrongdoing.)

In addition, the city collected about $9.2 million in December from a sale of Crundwell's former property, including around 400 show horses, a lavish motor home, jewelry, boats, cars, and real estate. Crundwell had used the money she stole, over $5 million in a single year, to fuel a massive championship-winning horse breeding and show operation.

So now, rather than scraping by as they were doing when Crundwell was looting the city, Dixon has to decide what to do with an influx of cash. Already, they've paid off $12.6 million in general obligation bonds, and $8.7 million in internal debt. Paula Meyer, the city's new finance director who effectively has Crundwell's old job (she sits at her old desk), says she wants another $5 million to be put in reserve.

"I was really surprised at the amount of money we were able to recoup," Meyer said, quickly adding that she wants to make sure that the influx of cash is not spent all at once.

"No, and if we do, I want to it be spent on very boring projects!" she said.

One of Meyer's first tasks was to put new controls in place, to make certain nothing like the Crundwell scandal could ever be repeated. The disgraced comptroller had virtual free rein over the city's finances. Now, two different signatures are required on every disbursement of city funds.

"For the taxpayers of Dixon, it's a good news story, because they've been paying taxes for 22 years and not getting anything out of it," said the BGA's Mcraney. "They're finally going to see something for all those taxes they paid in."

The bad news, of course, is that the money should never have gone missing in the first place. It's easy to ask how a community could have been so blind to so much theft for so long. But Meyer cautioned against those who might judge Dixon too quickly.

"I'm not terribly surprised," she said. "Unfortunately, accounting and financial statements are confusing to most people. They're boring."

In other words, Crundwell's victims were almost eager participants in the scheme, because she assured them she was taking good care of the city's complicated finances. And ironically, she was also the one who repeatedly turned city officials down when they brought her important capital needs.

"Every year it was, 'we don't have the money to do this, we don't have the money to do that.' Nobody realizing that she was sliding a couple million, three or four million, into her pocket," Meyer said.

Burke said once all of the controls are in place, he'd like to have an outside firm take a look at what Dixon's done.

"We're probably gonna have a model for how to operate a city when we take a few more steps," he said. "Kind of a rough way to go about it, but that's what we're going to end up with!"

Perhaps the biggest lesson, though, comes from Dixon's most famous son.

"It's that old Ronald Reagan thing," the mayor said. "Trust, but verify!"

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