CliftonLarsonAllen has agreed to pay $35.15 million to settle a lawsuit with the city of Dixon, Ill., for failing to catch a long-running embezzlement scheme by the city’s former comptroller.

The Minneapolis-based firm’s predecessor Clifton Gunderson began providing services for the city, including auditing, accounting and payroll, in 1988. City comptroller Rita Crundwell reportedly began stealing funds from the city only a few years afterward, according to the St. Paul Pioneer Press, embezzling approximately $54 million over 22 years and spending the money to finance her horse farm and lifestyle while earning an annual salary of $80,000 from the city. Crundwell was sentenced to nearly 20 years in prison after pleading guilty to a wire fraud count.

The city of Dixon filed suit against CliftonLarsonAllen, as well as a local accountant, Sam Card, whose firm Janis Card and Associates took over auditing the books from Clifton Gunderson on an annual basis starting in 2005, as well as Fifth Third Bancorp, where the city’s checking accounts were held. They agreed to settle last month for a total of $40 million. Fifth Third Bank will contribute $3.85 million, but agreed to settle without admission of liability, according to The Wall Street Journal.

In addition to the $40 million from CliftonLarsonAllen, Fifth Third Bank and Sam Card Accounting, Dixon Mayor Jim Burke anticipates the city will recover $10 million through the U.S. Marshall and the U.S. Attorney’s Office, which is still seeking to claim other assets. The city will thus recover a total of at least $50 million, less expenses of roughly $10 million, out of the $53 million to $54 million estimated to have been embezzled by Crundwell, according to various accounts.

The settlement came after a grueling negotiation session in downtown Chicago on September 20 and was announced last week. Devon Bruce of the Chicago law firm Power, Rogers & Smith accompanied Burke to the marathon meeting. “The meetings started at 8:00 a.m. and concluded about 1:30 a.m. Saturday morning, over 17 hours without anyone leaving the premises,” Burke said in a statement. “A total of 37 participants attended, including the defendants, plaintiff, insurance companies, including Lloyds of London and their respective attorneys. At 1:00 a.m. Saturday a settlement agreement was reached by all parties. As part of the agreement, the city will file no further lawsuits against the defendants or their representatives.”

CliftonLarsonAllen accepted the settlement and indicated its recently merged firm will be better equipped to handle municipal audits in the future. “The allegations of fraud committed by City of Dixon Comptroller Rita Crundwell, some of which she pled guilty to, are extremely serious and present an opportunity for all affected parties to evaluate how they occurred,” said CliftonLarsonAllen CEO Gordon Viere in a statement. “We believe there was a shared responsibility that resulted in Ms. Crundwell’s fraud continuing undetected, and the right thing to do is reduce the harm experienced by the taxpayers of Dixon and put this matter behind us. Reaching a fair settlement for taxpayers is important to CliftonLarsonAllen.”

Clifton Gunderson merged with LarsonAllen in January 2012 to create CliftonLarsonAllen, the firm noted, and as a result, services to city governments are now led by personnel with specialized knowledge and experience in serving public bodies, increasing the likelihood that such fraud will be detected promptly in the future.

“CliftonLarsonAllen is one of the most respected firms in the country,” Viere added. “Our promise to our clients and employees is to continue to deliver services at the highest standards of the industry within our integrated industry-driven approach. We are satisfied with the resolution of this situation and will continue to work to meet our promise to clients.”

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access