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Dixon sues auditors

Published: Friday, June 8, 2012 11:14 a.m. CDT • Updated: Friday, June 8, 2012 11:09 p.m. CDT

(Continued from Page 1)

DIXON – The city of Dixon is suing the auditors it says were unable to detect the misappropriation of millions in city funds.

An attorney for the city of Dixon filed a civil complaint Friday morning in Lee County court against the accounting firms that conducted the audits for the past 5 years, Samuel S. Card, CPA, P.C., and Janis Card Company, LLC, both located at 501 E. Fourth St. in Sterling.

The complaint argues that they were guilty of professional negligence and negligent misrepresentation when, despite having "full and unfettered access" to the city's financial documents and bank records, their reports said the city's books were free of irregularities and did not disclose problems with the city's internal controls.

Because of that, the complaint says the firms should have to pay the city more than $50 million – the amount prosecutors say the city's longtime comptroller, Rita A. Crundwell, misappropriated over the past two decades.

A hearing is set in the civil case for 1 p.m. Oct. 9.

The city's attorney, Devon Bruce of Chicago-based Power Rogers and Smith, said that length of time between filing and a hearing is "typical."

The Dixon City Council hired the firm to pursue litigation against any entities that might have been involved or negligent in the allegations surrounding Crundwell's April 17 arrest. The firm would receive 25 percent of any funds the city receives through this lawsuit plus reimbursement for expenses.

She pleaded not guilty on May 7 to a count of federal wire fraud and has a hearing set for June 15.

Prosecutors say Crundwell opened a secret account at First Bank South, now Fifth Third Bank, in 1990 that she used to funnel money out of the city.

At the time, Clifton Gunderson, now CliftonLarsonAllen, was performing the audits. It still does the city's payroll and some other accounting work. That agreement is set to expire at the end of this fiscal year.

The Card firms took over the auditing in 2006, during which time prosecutors say Crundwell misappropriated $30 million.

The complaint cites letters in which, the city says, the auditors told officials that everything was fine when it came to the city's finances and internal controls. The cityt argues the auditors knew or should have know that those statements were false.

"At all relevant times, Samuel S. Card knew that the audit and the advice it gave to the city of Dixon from 2006-2011 caused the city of Dixon to believe that there were no irregularities, material misrepresentations, fraud or other improprieties in the financial dealings of the city of Dixon," the complaint said.

The complaint names CliftonLarsonAllen, as well as two banks where the city had accounts – Fifth Third Bank and US Bank – as respondents in discovery. That means the city wants to be able to request documents and other information so that it can determine if anyone else should be named in the suit.

US Bank manages the Illinois Funds, a statewide investment pool for local governments. Prosecutors say Crundwell withdrew money from the pool and transferred some of it to her secret account.

Bruce has been in contact with attorneys for some of the entities, he said, but would not say which ones.

Both Samuel S. Card, CPA, P.C., and Janis Card Company, LLC, declined to comment.

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