The city of Dixon, Illinois announced on September 25, 2013 it would receive a $40 million settlement from CliftonLarsonAllen, Fifth Third Bank, and Janis Card and Associates for the fraud Rita Crundwell committed and was not detected by the CPA firms or the bank.
The city sued the CPA firms and bank after its Comptroller, Rita Crundwell, stole $53 million over 20 years. Bruce Devon of the Chicago firm Powers, Rogers & Smith developed a case that clearly showed the shortcomings in the audit process that allowed the fraud to go undetected until Ms. Crundwell took extended leave. At that time, another city employee discovered the bank account Ms. Crundwell used to steal from the city.
Of the $40 million settlement, $35.15 million was paid by Clifton, $3.85 million by Fifth Third Bank, and $1 million by Janis Card and Associates. In addition, federal marshals and the US Attorney’s Office recovered about $10 million from the sale of assets owned by Ms. Crundwell who is serving 19 years, seven months in prison.
CliftonLarsonAllen LLP is one of the nation’s top 10 certified public accounting firms. Its CEO Gordon Viere said:
First – they are not allegations. They are real. $53 million was stolen and Ms. Crundwell went to prison. Second, trying to say there was a shared responsibility that resulted in the fraud going undetected tries to minimize the CPA firm’s responsibility to detect the fraud that occurred. The auditing profession has got to get its act together and begin to find the significant frauds that have brought down major corporations and caused huge losses to government entities.
This was a simple fraud and could have been detected early on if the auditors had simply examined the endorsements on cancelled checks or tried to visit the non-existent capital construction projects that were part of the fraud.
These are basic audit steps and the audit manager admitted they were not done.
This is another black eye for the auditing profession. A profession that is important to the public. It’s time for all auditors to start studying the past frauds that occurred and find the future frauds that will happen.