Feds: Ill. suspect spent stolen millions on horses

DIXON, Ill. (AP) — The small-town bookkeeper dazzled friends and co-workers with invitations to her immaculate horse ranch and home, where she displayed trophies hauled back from world championship exhibitions and visitors in cowboy hats arrived to buy some of the best-bred horses in the nation.

“She has a trophy case that you wouldn’t believe — actually a room,” said Stephanie Terranova, who worked with Rita Crundwell for 15 years at city hall and attended her parties and auctions. “You wouldn’t believe the different people that came. We don’t have a lot of that type of thing around here. ... Cowboy boots, cowboy hats and southern drawls.”

The gulf between Crundwell’s two worlds was breathtaking, and her colleagues and neighbors never guessed how the two entwined: Crundwell is accused of using her modestly paid town hall job to steal their tax dollars, support an extravagant lifestyle and win national fame as a breeder.

Federal prosecutors say Crundwell, 58, who handled all of the city’s finances, embezzled a staggering $30 million in public funds from Dixon, the boyhood home of the late President Ronald Reagan.

In a criminal complaint, they say they’ve obtained bank records that document each step she took in shifting taxes and other public funds through four city bank accounts before hiding them in a fifth account no one else knew about. Still, they are trying to figure out how she kept the scheme a secret, even from outside auditors, for at least six years. It unraveled only when a co-worker filling in for Crundwell while she was on an extended vacation stumbled upon the secret bank account.

Crundwell had an encyclopedic knowledge of city business down to which drawer contained a particular document, said Mayor James Burke, who recalled feeling uneasy about the city comptroller’s growing wealth.

“There wasn’t anything to hang my hat on,” said Burke, who has known Crundwell since she was a teenager. “Rita, she is a very, very smart person. I mean she is almost brilliant ... which I think probably was one of the reasons that a lot of people got bamboozled with her.”

On Monday, the city fired Crundwell, who was arrested by FBI agents April 17 on a charge of wire fraud and later freed on a $4,500 recognizance bond. She could enter a plea at a May 7 status hearing. Her lawyer, federal public defender Paul Gaziano, refused to comment on the case. Phone messages left at numbers listed for Crundwell’s Dixon home and ranch were not returned.

Her arrest stunned tiny Dixon, a small city along a picturesque vein of the Mississippi River about a two-hour drive west of Chicago in Illinois farm country. Its 16,000 people are largely lower-middle class, working at factories, grain farms, the local prison and a hospital, among other places. Many are grappling with the region’s high unemployment, but they are proud of the city’s modest prosperity and ties to Reagan.

“People just don’t understand it, just how $30 million could ...,” cafe-bookstore owner Larry Dunphy said, trailing off at the thought of it. “It’s hard to believe.”

Of the millions Crundwell is accused of funneling into the secret account, only six checks totaling less than $154,000 were ever spent on city business, made out to a sewage fund and a corporate fund, according to Assistant U.S. Attorney Joseph Pedersen.

The rest, prosecutors say, went to her personal and business expenses, including at her horse farms in Dixon and just across the Wisconsin state line in the city of Beloit. Agents searching her home, office and farms seized seven trucks and horse trailers, three pickup trucks, a $2.1 million motor home and a Ford Thunderbird convertible.

While Crundwell had other indulgences — she spent nearly $340,000 on jewelry, according to prosecutors — court documents indicate most of the stolen money was lavished on her beloved horses. She bought trucks and trailers to haul them around, including a Featherlite Horse Trailer for about $259,000, according to the criminal complaint.

Crundwell grew up in Dixon, playing baseball and surrounded by the outdoors and animals from an early age on her family’s farm. At 17, she started at City Hall in a work program for high school students.

She stayed, serving as treasurer and becoming comptroller in the early 1980s. She oversaw the finance and accounting department and its two clerks, including Terranova, in a modest building in Dixon’s quaint, historic downtown along the fast-flowing Rock River.

“She was wonderful to work with,” said Terranova, a deputy clerk who watched as Crundwell’s breeding business rapidly outgrew a small barn and pasture by her house and expanded to the Meri-J Ranch in Wisconsin and more recently to an immaculate 100-acre ranch on Red Brick Road, a few miles from her Dixon home.

Crundwell is deeply involved in the care of the horses, even braiding their manes and — when the farm was still small enough — running back and forth from City Hall to handle chores herself, Terranova said.

She has become one of the nation’s top breeders of quarter horses, a breed prized for being able to run short straightaways — a quarter mile in distance — faster than any other. The best can cover the 440 yards in 21 seconds or less and fetch up to $200,000 at sale.

Crundwell’s breeding program has produced 52 world champions in exhibitions run by the American Quarter Horse Association in Amarillo, Texas, the world’s largest equine breed registry and membership organization.

She mainly shows her horses in halter classes, competitions where the animals are led by hand and judged on their beauty. Wins bring only $2,500 to $5,000 in prizes, but the publicity for a breeder can be priceless. Yet Crundwell kept a relatively low profile.

“We’ve got 230,000 members, and so we have members that do like to draw attention to themselves and they want to be seen and want to be heard,” said Charlie Hemphill, director of shows and events at the Quarter Horse Association. “... In comparison, she is not one who draws attention to herself.”

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