Expert: Crundwell case is ‘huge,’ ‘extraordinary’

DIXON – Life has been good for Rita Crundwell.

The 59-year-old Dixon woman has been the city’s sole financial officer for three decades; her annual salary now is more than $80,000. She is expected to be fired this morning, when the City Council holds a special meeting at 10 a.m.

Crundwell operates Rita’s Ranch, 1556 Red Brick Road, in Dixon, and another ranch in Beloit, Wis.; she breeds and sells champion show horses at both through her company, RC Quarter Horses LLC.

Well known in the equestrian world, Crundwell has won many awards from the national American Quarter Horse Association.

With an appreciation for the finer things in life, she often made big-ticket purchases, most notably a $2.1 million mobile home.

Many people in the community wondered how she could afford her toney lifestyle. Most assumed her money came from her horse business.

Tuesday, the community learned that might not be the case.

The longtime city comptroller, accused of misappropriating more than $30 million in taxpayer money, was led out of City Hall in handcuffs that morning and charged with a single count of federal wire fraud, which carries a maximum sentence of 20 years in prison and a fine of up to $250,000.

Assistant U.S. Attorney Joe Pedersen said more charges may be pending, although he declined to say what charges, when they might be filed or whether anyone else is under investigation.

It’s a crime that shocked the Sauk Valley, and quickly became national news.

A former federal prosecutor who helped put away disgraced former Gov. George Ryan called the case against Crundwell “extraordinary.”

“For an embezzlement or fraud of that amount to occur in a town like Dixon is huge,” said Chicago attorney Joel Levin, now a defense attorney who deals with white collar crimes, among others.

Levin is not involved with Crundwell’s prosecution.

Kristin Carpenter, one of Crudnwell’s federal defenders, declined to comment for this story.

The case against Crundwell

According to an affidavit accompanying the criminal complaint:

In October, Mayor Jim Burke met with FBI agents after City Clerk Kathe Swanson alerted him to a secret account that “did not appear to be related to any legitimate business of the city of Dixon.”

Swanson was performing some of Crundwell’s duties while the comptroller was away on an extended vacation.

The name on the account was “RSCDA, C/O of Rita Crundwell,” and its statements were addressed to a post office box in Dixon, where the mail was picked up by Crundwell or an unnamed relative – who is not a city employee – and distributed.

Federal agents reviewed September through March statements. The September statement showed three deposits totaling $785,000; 84 checks drawn totaling $360,493; and 40 withdrawals totaling $266,605.

They dug further and discovered misappropriations of city funds dating back to 2006, the complaint said. In legal terms, misappropriation is the intentional illegal use of property or funds by a public official for an unauthorized purpose.

Between September and February, more than $2.78 million in various tax funds were electronically deposited into one of the city’s accounts, which Crundwell moved around to other city bank accounts. Most of those funds eventually were transferred to the city’s Capital Development Fund account.

Between September and March, Crundwell wrote 19 checks made out to “Treasurer” totaling more than $3.55 million on the Capital Development Fund account, which she deposited into the RSCDA account that she jointly held.

Only $74,274 of that money was used for city operations. The rest – more than $3.2 million – was used to pay for her horse operations, to make online payments to her credit card accounts, and to buy a pickup truck, agents said.

When they discovered that Crundwell recently transferred more than $3.55 million in city funds to the RSCDA account, they took a look at bank records from July 2006 to March and learned that Crundwell deposited more than $30.2 million in city funds into the account over that time.

Among other things, the money was used to buy several vehicles, including a $2.1 million luxury motor home, to pay $2.5 million on her personal American Express card and to buy more than $339,000 in jewelry, the complaint said.

Why only one charge?

Hours after her arrest, federal prosecutors unsealed a complaint against Crundwell charging her with one count of wire fraud involving only $175,000.

Wire fraud is committed when a person uses “interstate wire communication facilities” to carry out a scheme to defraud, to use deceit or trickery to obtain the money or property of another.

According to the complaint, Crundwell wired the $175,000 from a city account at a bank in St. Paul. Minn., to a bank in Cincinnati in November.

Prosecutors say she used that money, and other wired funds, to pay for her “lavish lifestyle.”

It’s not uncommon for a defendant to be charged with only one count initially, Levin said.

“A complaint is just a way to get the person into court and into the system, to get the case started,” Levin said. “By no means is it everything that could be charged.”

A trial cannot proceed on a criminal complaint only, he said. Prosecutors have 30 days to either hold a preliminary hearing, which Crundwell waived, or take the case to the grand jury, which will return an indictment.

At a preliminary hearing, the prosecution must present enough evidence for the judge to find that there is probable cause to charge the defendant. Although defendants can cross-examine witnesses and introduce their own evidence, preliminary hearings are public, and defendants frequently waive their right to have one.

At a grand jury hearing, jurors hear the evidence and if they decide there is enough probable cause to sustain the charges, they return a bill of indictment. Grand jury hearings, however, are not public.

More charges likely will be included in Crundwell’s indictment, Levin said.

If Crundwell is convicted, however, it’s not the number of counts she faces that the judge will consider when imposing a sentence. The amount of the loss, whether there was an abuse of trust, the “sophistication” of the scheme – those factors will carry more weight.

“At the end of the day, pleading guilty to one count will result in a sufficient sentence,” Levin said.

Free on bond

During a brief hearing Wednesday, U.S. Magistrate Judge Michael Mahoney released Crundwell on a $4,500 recognizance bond, which means she put no money down, but will have to pay $4,500 and face detention if she violates the terms of her release.

It was a move that puzzled, and angered, many in the community.

It’s not uncommon for a federal defendant, especially one accused of a white-collar crime, to be released on bond, Levin said.

“Judges aren’t supposed to use bail as a way to keep people locked up,” Levin said. “The determination that the judge makes is whether the defendant presents a danger to the community or is a flight risk.”

Prosecutors did asked for Crundwell to be jailed, saying they believed she might be a flight risk.

Once investigators compiling a pretrial report found she was not a flight risk or a danger, though, they agreed to followed the recommendation that she remain free, Pedersen said.

Before a federal detention hearing is conducted, an officer of pretrial services interviews the defendant, asking questions about things such as family and educational background and criminal history.

The report does not include details about the crime the defendant is facing.

The magistrate judge use the information when deciding detention vs. bond.

Judge often impose strict bond conditions to ensure a defendant will appear in court.

Under the conditions of her release, Crundwell cannot travel outside northern Illinois and western Wisconsin, cannot obtain a passport, and must surrender her Firearm Owner’s Identification Card and two guns.

She also can’t touch two bank accounts or sell any of her horses or other property.

As in state court, federal defendants have the right to a speedy trial.

A case as such Crundwell’s, though, could take 4 to 6 months, maybe as long as a year to come to trial. It depends on the complexity of the case and the documents that need to be reviewed, Levin said.

“Allowing the defense to have more time to prepare would not surprise me in a case of this nature,” he said, adding that more than 90 percent of federal cases end in a plea deal.

How will the city recoup?

After Crundwell’s arrest, agents raided City Hall, her home, and her ranches, where they seized many vehicles, trailers, and the mobile home, which prosecutors say were bought with the proceeds of her crime.

They won’t say where the property is being held. The horses still were at the Dixon ranch on Friday.

A list of everything seized will be made public once agents complete their search, said Randall Samborn, an assistant U.S. attorney and the public information officer for the office.

He didn’t know when that would happen.

Pedersen told reporters that prosecutors would seek to “recover any and all assets we can and return those to the city of Dixon.”

Burke said in a news release Thursday that he had been in contact with the FBI about the assets the agency is holding, and how the city might get its money back if Crundwell is convicted.

Levin said he had no doubt that prosecutors would work to recoup some of the losses if Crundwell is convicted, but it won’t be easy.

“Generally, in these fraud cases where there are large losses, more often than not, the victim does not fully recover everything that was taken,” Levin said.

“Presuming that she’s not independently wealthy – I’m sure she doesn’t have $30 million sitting around – it’s very, very hard to recover the full amount.”

As part of a plea bargain, Crundwell may choose to forfeit the seized items, which could go paying restitution.