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What Safeguards, Had They Been in Place, Might Have Identified Rita Crundwell Before She Was Able to Do Great Damage to the City of Dixon, Il?

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While assuming the responsibilities of the vacationing City Comptroller, City Clerk Ms. Kathe Swanson made what she thought to be a routine request for bank statements for all of the Dixon, Illinois municipal bank accounts. The City of Dixon had been banking with the Fifth Third Bank since 1967, and the request was met promptly

As she reviewed the statements, it became apparent that one of the accounts was one with which she was not familiar. She quickly alerted Mayor James G. Burke, who requested assistance from the Rockford, Illinois office of the FBI.

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Rita Crundwell was the type of person that everyone trusted. As the comptroller and treasurer of the small town of Dixon, Illinois, she was well-versed in company finances. Whenever anyone had a question, they were advised to “ask Rita.” In 2011, the city commissioner praised Rita as someone who “looks after every tax dollar as if it were her own.” What the commissioner and the rest of Dixon did not realize until the next year was that Rita Crundwell took this view quite literally. In addition to her trusted position with the city, Rita was also a champion quarter horse breeder. She had won 52 world thoroughbred championships and owned hundreds of horses. The competitions often took Rita away from her city job, but she would dock her pay for the extra time she took off

In 2011 during one of her trips, a city clerk took over Rita’s job while she was away and came across a bank account in the city’s name that made no sense to her. Money from the account as being used to purchase lavish items such as jewelry and boats. The suspicious account was reported to the mayor and then the FBI. After taking five months to build their case, the FBI arrested Rita Crundwell for municipal fraud on April 17, 2012. The extent of the fraud was staggering. Rita Crundwell had first opened the fictional account in 1990, meaning that she had successfully stolen from the city for 22 years before being arrested. In those two decades she stole over $53 million from a city of less than 16,000 people.

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The Fraud Diamond Framework was an improvement on the earlier ‘Fraud Triangle’ used by forensic accountants to detect accounting fraud. David Wolfe and Dana Hermanson proposed the change to the Fraud Triangle by adding a fourth element of ‘capability,’ rechristening it “The Fraud Diamond.” The first element in the framework is ‘Incentive’ which arises from the greed to commit fraud. The second element of ‘Opportunity’ could be a potential weakness in the system that the precise person could exploit

The third element of ‘rationalization’ happens when a perpetrator convinces his/her own self that such deceitful behaviour is worth with the risk taken.The fourth element is the ‘capability’ of a person with the necessary traits and abilities to be the ‘right’ person recognizes the prospect of fraud and executes it. (Wolfe and Hermanson, 39) The Crundwell case is a typical illustration. Rita’s incentive for performing this fraud was to finance her own quarter horse breeding operations, and to build an elite image of herself in the community. Her opportunity came in 1983 when she got the position appointed the comptroller, and she could retain her position as long as required since there was no election to the post. Rita convinced herself that the risk taken was well worth it, and probably believed that this was her due for the long years put at the City of Dixon (rationalization). Further, Rita’s senior position in the City Office, her ability to conceal the fraud for as long as she did in the absence of proper audits, her ability to understand and control systemic weaknesses combined with her confidence contributed to the fourth element of capability. Thus, the Rita Crudwell case perfectly fits the Fraud Diamond Framework. In order to prevent frauds, the City of Dixon should put certain controls in place.

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Given these points, most stunning of all was the identity of the person suspected of masterminding the scheme: Rita Crundwell, a woman whose parents were the kind of humble, hardworking community pillars upon which Dixon’s reputation was built, a woman who had been the town’s comptroller for more than three decades, as trusted and efficient as a church tithe collector

It was Burke who had taken the dubious bank statement to the FBI office in Rockford back in October 2011. Agents instructed him to hold his tongue while they investigated. As the months passed, he woke often in the night.

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Nashwa, George. “The Role of Audit Committees in the Public Sector.” CPA Journal Online. Aug 2005. Web. 23 Jun 2014

Smith, Bryan. “Rita Crundwell and the Dixon Embezzlement.” Chicago Magazine. Chicago Mag Online 24 Sep 2012. Web. 23 Jun 2014

Wolfe, David T., and Dana R. Hermanson. "The Fraud Diamond: Considering the Four Elements of Fraud." CPA Journal 74.12 (2004): 38-42. Print.

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