Monday, December 3, 2012

No Questions About the $53 Million Fraud

By Gary Snyder

Much has been written about one of the biggest employee embezzlements in American history. The Controller of the city of Dixon, Illinois took $53 million. When she started stealing in earnest, she took an average of $5 million per year… without anyone noticing.

There were, principally, two reasons for it to take so long for her to get caught. First seems to be the obvious. There were no internal controls. She was simply given the keys to the city’s vault. The controller made herself indispensable. She controlled everything having to do with the city’s money. She balanced the checkbook. She wrote the checks. She made deposits. She requested funds. If anyone in the city needed money they had to go to her. Financial statements were sent to her mailbox. When the mailbox got full in her absence, she had a relative empty it. The financial statements included the secret accounts she created decades ago. She fattened one account to buttress another in her attempts to cover up her misdeeds.  

The second reason for her protracted success is that everyone trusted her. Since her job was secure, no one questioned her. When her standard of living increased substantially, no one questioned it. When she bought a parcel of land worth $540,000 on a salary of $83,000 no one questioned. When she bought a $260,00 trailer for her horses no one questioned it.  When she bought a series of pickup trucks no one questioned it. When she started wearing $1800 blouses no one seemed to care. When she took off of work for 12 weeks (almost 25% of the year) to tend to her horses, they trusted that her work was being done. When she started selling horses for between $250-300,000, no one took notice. Even having won hundreds of thousands of dollars in in prize money from her quarter horse championship horses, she also collected stud money and sold semen.

The auditors, the bankers, the mayor and the commission that ran the city failed in their responsibilities. They could not understand the books. The only person that could was the controller.

It took its toll on the city. Fire truck, police cars and just keeping up on needed technology were set aside because of the controller’s adventures. She controlled all purchasing decisions.

This is not the first horse owner that stole from a vulnerable institution. Several years ago, the Capital Area (MI) United Way finance chief, with an addiction to quarter horses, embezzled $2.1 million. An outside auditing firm recommendations regarding accounting procedures were not followed.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics,, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)
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