How did Philly lose track of $33 million?

City officials are trying to figure out if $33.3 million is missing from the city’s main bank account.

The discrepancy is the amount the city reports having in its records vs. what bank statements show and was first flagged in the city’s 2017 Comprehensive Annual Financial Report (CAFR), released in February. But the problem wasn’t widely known to the public until the current series of budget hearings — in which Councilman Allan Domb has peppered every city financial official about the unaccounted-for funds.

“I’m flabbergasted,” Domb said as he questioned the city’s treasurer earlier this month. “There could be a theft. I don’t really know what’s going on.”

Both current City Controller Rebecca Rhynhart and former Controller Alan Butkovitz say it shouldn’t have reached this point.

payroll records were not reconciled between late 2010 and last July, when, city Treasurer Rasheia Johnson said, she discovered the problem and asked her staff to start reconciling them and also the main cash account. Dubow said there don’t seem to be any discrepancies in payroll records.

Still, Domb said the city needs to operate like a business and not slip on essential accounting practices. He said if $33 million was not accounted for in his business, he would stay up all night trying to figure out what happened.

“It’s really important now because we are asking taxpayers to pay more in taxes when we aren’t managing effectively and efficiently the current money that they have been paying us,” Domb said

It is entirely possible that federal offenses committed may include, but not be limited to:

<><> Title 18 U.S.C. §1341, Mail Fraud, 18 U.S.C.§1001, Presenting a False Document to an Agent of the US Government for funding (may involve several felonies and could include forgery);

<><> 18 U.S.C.§1027 False statements and concealment of facts in relation to documents required by ERISA enacted 1974 and other possible offenses including civil and/or criminal RICO violations.

<><> 18 U.S.C. §§1961-68 (RICO Act)18 U.S.C. §1001 (making false Statements to Agents of the US Government,

<><> 18 U.S.C. §241(Conspiracies Against Civil Rights). Violation of Civil Rights under Color of law and conspiracy. Conspiring with others to violate 4th amendment rights.

<><> Possibly full investigations centering on RICO conspiracies under 18 U.S.C. §1962(c) could be warranted because (1) the persons (2) were employed by or associated with a public enterprise (3) that engaged in or affected interstate commerce and that (4) the persons operated or managed the enterprise (5) through a “pattern” (6) of racketeering activity, and (7) the taxpayers were injured by reason of the “pattern” of racketeering activity.

<><> Alleged Offenses could include Violation of Rights – which prohibits in relevant part, “two or more persons (from conspiring) to injure, oppress, threaten, or intimidate any person in any State, Territory, Commonwealth, Possession, or District

<><> Title 18 U.S.C. §2 41 – Conspiracy Against Constitutional mandates in the free exercise or enjoyment of any right or privilege secured by the Constitution or laws of the United States, or because of having so exercised the same . . .” See, 18 U.S.C. §241.

Taxpayers should demand the following agencies commence investigations at once:
<><> FBI — Wire Fraud Division
<><> IRS-Fraud Unit
<><> Department of Justice’s Office of the Inspector General,
<><> Department of Commerce’s Office of Inspector General.
<><> DOJ’s Criminal Division— Public Integrity Section
<><> DOJ Criminal Division—Organized Crime and Gang Section.

From Wikipedia, the free encyclopedia

Rita A. Crundwell (born January 10, 1953) was the appointed comptroller and treasurer of Dixon, Illinois, from 1983 to 2012, and the admitted operator of what is believed to be the largest municipal fraud in American history. She was fired in April 2012 after it was revealed that she had embezzled $53.7 million from the city over 22 years to support her championship American Quarter Horse breeding operation.[1][2][3] She pleaded guilty to her crimes and was sentenced to nearly 20 years in prison.[4]

Crundwell’s Quarter Horse breeding operation, RC Quarter Horses, was one of the best-known in the country; her horses won 52 world championships and she was named the leading owner by the American Quarter Horse Association for eight consecutive years prior to her arrest.[5][6]

In 1983 Crundwell was appointed the treasurer/comptroller for Dixon, and she worked in this capacity for almost three decades.[4][6][8] She acquired a sterling reputation; for instance in 2011 one of the city commissioners praised Crundwell for her stewardship of city finances, saying “she looks after every tax dollar as if it were her own.”[9]

On December 8, 1990; Crundwell opened a secret bank account named RSCDA (Reserve Sewer Capital Development Account), making it appear to be a city account. She was the only signatory. She would have money deposited into another account called the Capital Development Fund, create false state invoices, and then write checks from the fund payable to “Treasurer,” which she would deposit into the RSCDA account. According to federal investigators, this relatively uncomplicated scheme continued for 22 years.[4][10]

On average, Crundwell stole nearly $2.5 million per year from the city. In 1991 she stole $181,000, while in 2008 alone she managed to embezzle $5.8 million from a city with an annual budget of $8-9 million.[4][11] She not only used the money to finance her Quarter Horse operation, but also to support a lifestyle well beyond her $80,000 city salary. Among other things, she bought several cars, a second house and a million-dollar motorhome.[12]

Crundwell covered up her embezzlement by claiming the city’s frequent budget shortfalls were due to the state being late in paying the city its share of tax revenue.[13] She forced city departments to make drastic service cuts in order to keep the budget within reason. As a result, employees went two years or more without raises and the police department couldn’t get new radios.[14] The most visible effect, however, was on street maintenance. The city was forced to lay off three of its nine street repair workers and cut the rate of maintenance. In the decade prior to Crundwell’s arrest, only 65 blocks of road were repaired or replaced.[9]

For most of Crundwell’s tenure, residents trusted her despite the city’s perilous economic conditions. They assumed that either she inherited wealth and/or that her award-winning quarter horse breeding business was profitable in its own right. By the late 2000s, with the financial crisis and economic recession, as city maintenance and equipment suffered, there were some suspicions that she was stealing money, which went as high as Mayor James G. Burke. However, the city’s outside auditors, Clifton Gunderson (now CliftonLarsonAllen after merging with LarsonAllen in 2012) and local accountant Sam Card, dismissed his concerns, as they presumed that Crundwell was honest and signed off on Crundwell’s financial statements annually without concern. For small American cities similar to Dixon, lack of sufficient outside audits was a recurring problem, as third-party auditors at best could only give limited attention. For most of her tenure as comptroller, Crundwell had nearly complete control over the city’s accounts, while few if any city employees had access to the city financial statements.[4]

Caught and arrested
In the fall of 2011, while Crundwell was on an extended vacation, city clerk Kathe Swanson, who served as acting comptroller in Crundwell’s absence, discovered the account and many checks written on it.[6] Swanson suspected that this was not a legitimate city account, and brought the information to Burke, who contacted the Federal Bureau of Investigation (FBI). The fraud continued for six more months, as Burke and Swanson (whose payroll was controlled by Crundwell) had to remain silent while the FBI built up their case.[10]

Crundwell arrived for work on April 17, 2012 to find FBI agents waiting for her. She was arrested later that day and indicted by a federal grand jury for embezzling $30 million from the city during the previous six years.[5][10][15] She was charged with one count of wire fraud and released on $4,500 bail the next day.[16][17] On May 2, 2012, a superseding indictment charged her with embezzling $53 million over the prior 22 years.

On November 14, 2012, Crundwell pleaded guilty before Judge Philip Reinhard to a single count of wire fraud.[18] As part of the deal, she also admitted to money laundering by using the stolen money to finance her Quarter Horse operation. She was required to forfeit more than $53.7 million in cash, assets and possessions, equivalent to the amount she stole, which is being used to make full restitution to the city.[13] She reportedly told FBI agents that some of the money was spent on her horses and their upkeep. Prosecutors sought the forfeit of her horse farm and 300 horses, in addition to her three homes and a luxury motor vehicle.[5] Prosecutors later discovered that Crundwell’s crimes had begun as early as 1988, when she siphoned off $25,000 from the Dixon Sister City program over two years.[1] Had she not pleaded guilty, she would have faced additional charges of bank fraud, wire fraud and money laundering that could have sent her to prison for the rest of her life.

The following month, Dixon’s new finance director said that the city had seen an almost $3 million rebound since Crundwell’s arrest, but that the operating budget was still off by $16.6 million.[19] It was also reported that Dixon lost $30 million in operating funds over the prior decade.[19] The city sued its outside auditors, as well as the city’s banker, Fifth Third Bank, for ignoring numerous red flags in Crundwell’s actions. In September 2013, the auditors and Fifth Third agreed to pay the city $40 million in a settlement, while the auction of Crundwell’s assets brought in over $9 million.[20]

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