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"All The Queen's Horses"

Inside the biggest municipal fraud scheme in U.S. history

David Brancaccio and Erika Soderstrom May 11, 2023
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The scandal, which unfolded in the sleepy town of Dixon, Illinois, saw the city's comptroller steal $53 million over her 20-year career. Getty Images
"All The Queen's Horses"

Inside the biggest municipal fraud scheme in U.S. history

David Brancaccio and Erika Soderstrom May 11, 2023
Heard on:
The scandal, which unfolded in the sleepy town of Dixon, Illinois, saw the city's comptroller steal $53 million over her 20-year career. Getty Images
HTML EMBED:
COPY

Every time a massive financial fraud scheme takes over the headlines, there are nearly always questions of, “how could this happen,” or “how could we have stopped this before it was too late?” It’s a topic Marketplace recently discussed with Kelly Richmond Pope, an accounting professor at DePaul University, who authored the book “Fool Me Once: Scams, Stories, and Secrets from the Trillion Dollar Fraud Industry.”

For May’s installment of our Econ Extra Credit series, we’re watching Richmond-Pope’s 2017 documentary, “All the Queens Horses,” which delves into the biggest municipal fraud scheme in U.S. history. Rita Crundwell, former comptroller and treasurer of Dixon, Illinois, stole $53 million over her 20-year career.

Marketplace’s David Brancaccio recently spoke with Bob Brown, founding partner of The CPA Solution, a Maine-based operation that focuses on fraud protection and prevention, among other things. They discussed how this type of fraud happens and how can cities guard against it.

Below is an edited transcript of their conversation.

David Brancaccio: I was looking at this data wasn’t from Maine, it happened to be from Nebraska. Over a 10-year period, six of 14 clerks charged with theft, had served their small town for 10 or more years. Two had been named outstanding clerk of the year. I don’t know, we know these people, we hang out with these people. We don’t suspect that they could be up to this kind of stuff. And that’s what makes this so hard.

Bob Brown: Well, that is exactly right. When you take the element of being outstanding citizen, you combine longevity, and you combine a natural ability for people to assume that they’re doing everything right. It’s just a combination that just creates an absolute nightmare scenario.

Brancaccio: You know, towns will say we have a financial oversight committee. We also pay an auditor. What do you think, not enough?

Brown: Well, I think it’s an expectation gap. The auditor is hired to put together a set of financial statements, and that they are free from material mistakes. And understanding that the real role of an auditor is coming in taking information that is given to them. And then putting that into a binder or a package for the quote unquote, financial statement audit.

Brancaccio: It’s about compliance with procedures and making sure the forms are filled. But it isn’t really like an investigatory body.

Brown: You’re exactly right. From a numbers standpoint, outside auditors do not find fraud. Specifically, if you look at the actual engagement letter, and at the end of the audit, there’s something called a management representation letter. Specifically, in there, it indicates that, you know, the design and implementation of those internal controls to prevent and detect that fraud is the management’s responsibility.

Brancaccio: And let’s talk about that skill set. Bob, you’re a man who can read a financial statement. But it’s possible that people in power in smaller towns, smaller companies, nonprofits, might not have that training, and it’s too bad.

Brown: The ability or the confidence to understand what you’re looking at. And then to ask questions, that’s another thing I think we see lacking. We have this assumption that we’re being given something, so it’s obviously 100% correct. I mean, we know this person. So why would we question what they’re giving us instead of taking the approach: well, does this make sense?

Brancaccio: So, I mean, I’m hearing from you that a key lesson and I certainly got from our film this month, is that hoping that you can trust your colleagues and people in authority is very different from having systems in place that account for human nature?

Brown: That is so true, looking at how things happen, and when things go wrong, we need to trust the system and test that. But if you think if you’re in an organization or you’re in a town, and you walk through the door and you look at somebody go, you know what, I guarantee this person will never steal from me. You’re already a victim. We’re just talking a timing difference.

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