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Questions about Crundwell income raised early

Accountants’ depositions reveal concerns about her lifestyle

DIXON – About a decade before city Comptroller Rita Crundwell was arrested in April for stealing millions of dollars from the city, Mayor Jim Burke had asked the city’s auditor to look into her credit card expenses.

Ron Blaine, who was an equity partner for CliftonLarsonAllen, the city’s contracted auditor at the time, said in a deposition statement that Burke had asked him around 2002 to look at her credit card expenses, specifically an American Express account.

Click here to read all of the depositions.

Blaine was one of two accountants who were interviewed in November by the city’s attorney, Devon Bruce, in connection with the city’s lawsuit against the firms that audited the city’s finances.

The mayor, whose call to the FBI last April led to Crundwell’s arrest, was suspicious of the former comptroller’s lifestyle. According to Blaine’s statement, nothing was found – but it is unclear whether the account was even investigated.

The mayor’s inquiry was not the only time Crundwell’s source of revenue was questioned, said Blaine, who also did her personal tax returns and even asked her for a date.

When Crundwell was building a horse barn on her U.S. Route 52 property, Blaine asked where she got the money. He said she told him it came from a private investor.

Crundwell, 60, pleaded guilty in November to federal wire fraud and faces up to 20 years in prison at her Feb. 14 sentencing. She has admitted to stealing nearly $54 million in city funds to fund her quarter horse operations and lavish lifestyle.

The city’s lawsuit recently added Blaine and Clifton partner Todd Etheridge as defendants in the action against CliftonLarsonAllen, Janis Card Company, LLC, and Samuel S. Card, CPA, saying the auditors should have detected Crundwell’s theft. The lawsuit seeks damages in excess of $53 million.

After the mayor’s question about Crundwell’s credit card usage, Blaine said, he either passed it onto whomever was doing the auditing work at the time in the Dixon accountant’s office or had Burke talk to the person who would have been responsible for doing it.

“Whatever happened after that, I don’t know,” Blaine said in the deposition.

Burke said Friday that he could not comment on the incident, since it is involved in pending litigation.

Blaine also did Crundwell’s personal income tax returns in 2005. After the city’s attorney pointed out her net cash flow was negative $304,329, Bruce asked Blaine whether he ever questioned the source of her revenue.

“She told me she had – I don’t remember the exact terminology – it was an investor, a backer,” Blaine said. “I asked her about an additional tax filing if there was a business combination, and she said no. She said it was private, personal.”

Blaine told no one at the city about that, nor did he examine whether there was a documented loan.

Blaine said in his deposition that he first met Crundwell in the early 1970s, when he was doing Dixon’s audit and Crundwell was working at City Hall. He said he had been over to her house once for dinner.

“I kind of invited – talked her into inviting me out for – to cook a meal,” Blaine said. “She cooked. I still have the recipe; I do.

“It was beef and vegetables in foil. Yeah, I still have it.”

The city’s attorney asked whether Blaine ever dated or had sexual relations with Crundwell.

“No. I asked her out one time,” he said. “She turned me down, because she was involved with someone else.”

In personal email exchanges, Blaine called Crundwell “Reetz” or “Rita Alice.”

In a deposition given by Clifton partner Etheridge, the city’s attorney pointed out the auditor knew about Crundwell’s cash flow and knew she worked for the city, adding that the auditor also identified control problems within the city’s finances.

There was not enough segregation of duties, Etheridge said, agreeing it had been pointed out in communication with city officials for more than a decade.

“When a control deficiency is identified, it becomes a risk that is considered in planning and performing the audit,” Etheridge said. “If the risk of the engagement goes up which considers internal control, then you design your audit procedures around those risks.”

Etheridge agreed that Crundwell’s cash flow should have raised concern, and said he talked to Blaine about it and nobody else at their office.

“Ron said he talked to her and that she had a private backer,” Etheridge said.

“Beyond talking to Ron, did you do anything else about those concerns as to where she was getting the money?” Bruce asked.

Etheridge said, “No.”

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