by Brian Mahany
The little Illinois town of Dixon has less than 16,000 residents. Located in rural Lee county, Dixon was best known for being the boyhood home of former President Ronald Reagan. Now it is known for being the city that lost $50,000,000.00. That’s quite a feat considering the per capita income of Dixon is just $16,630.
Prosecutors say that former town treasurer, Rita Crundwell, embezzled millions from the town coffers over several years. According to an article in the Chicago Sun Times, Crundwell has been charged with embezzlement. Ultimately a jury will decide whether Crundwell’s fate.
Unfortunately, society will always have thieves. The more interesting story is how a small town couldn’t figure out that so much money was missing. $50 million is a lot of money for any size city or state to lose.
According to published reports, Dixon hired an auditing firm to check its books and records every year. Apparently, a team of experienced CPAs never found the fraud either. A lawsuit filed by the town against the audit firm says the auditors reviewed the books for years yet never detected the fraud.
Elected officials in most small towns are usually part time and unpaid. That they didn’t discover a fraud of this magnitude is questionable but possible. That’s why most municipalities hire auditors. In our opinion there is no excuse for an audit firm to miss such a fraud.
Most businesses and governments have limited insurance against employee theft and fraud. Some employees may be bonded but the amounts of coverage are often limited. Auditors who fail to undercover fraud, however, may be responsible for the losses if they were negligent in their audit duties. From little Dixon, Illinois to huge Enron, the failure of auditors to uncover massive fraud and phony accounting entries never ceases to amaze us.
If you are the victim of a fraud or embezzlement and your auditors failed to uncover the problem in a timely manner, give us a call. You may be able to recover part or all your losses from the audit firm. Fortunately, most reputable audit firms carry malpractice or errors and omissions innsurance.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in many jurisdictions.