Devon C. Bruce, partner at Power Rogers & Smith, is featured in Crain's Chicago Business for his role as plaintiff's counsel in the embezzlement scandal involving the former Dixon, Illinois comptroller, Rita Crundwell.
As reported in Crain's Chicago Business, "How Dixon's auditors missed the biggest embezzler of all time," Steven R. Strahler, February 02, 2013:
CliftonLarsonAllen LLP is the dog that didn't bark.
The accounting firm was the auditor of the city of Dixon, while also performing other financial duties for the north-central Illinois community such as check processing. In addition, its personnel prepared tax returns for then-Dixon Comptroller Rita Crundwell.
Yet CliftonLarson never caught on to the fact that Ms. Crundwell was an embezzler who siphoned away $53.7 million over 20 years in what is said to be the biggest municipal fraud in U.S. history. Now Dixon is demanding that the firm compensate it for the entire loss, contending in a lawsuit that the bookkeepers failed to connect easily linkable dots.
The suit alleges, for instance, that CliftonLarson overlooked clearly bogus state invoices submitted to City Hall by Ms. Crundwell that resulted in six-figure checks that she steered into her own account at a local bank branch where Dixon kept its funds. In 2005, her city salary was $56,428.
Ms. Crundwell, a 60-year-old horse breeder who had worked for her hometown since high school, is scheduled to be sentenced next week by a federal judge in Rockford after pleading guilty in November to one count of wire fraud. She faces up to 20 years in prison and a $250,000 fine. Federal marshals have collected $8 million by auctioning off some of her ill-gotten goods, which included hundreds of horses and 14 cars.
Litigation against CliftonLarson is only beginning to unfold. Dixon--a farm-country city of 15,700 and one of Ronald Reagan's boyhood homes--hired a high-profile Chicago personal-injury law firm, Power Rogers & Smith P.C., to sue for damages in late December.
CONTINUED TO AUDIT
CliftonLarson, which was known as Clifton Gunderson LLP until a merger last year, was founded in Peoria in 1960. It now is based in Milwaukee and Minneapolis. The firm, which specializes in accounting for privately held business, small municipalities and nonprofits, has 1,550 CPAs and $570 million in annual revenue, about half the size of McGladrey LLP and Grant Thornton LLP, both based in Chicago.
Attorney Devon Bruce of Power Rogers & Smith P.C.
Photo by: Erik Unger
CliftonLarson in 2005 resigned as auditor for Dixon in order to keep other city assignments such as ledger-keeping after an influx of federal funds required the town to hire an independent auditor.
In its lawsuit, however, Dixon contends that CliftonLarson continued to do the annual audit and get paid for it, while hiring a sole-practitioner CPA from nearby Sterling to sign off on the work, thereby preventing competitors from grabbing the business. CliftonLarson says it prepared only a bare-bones "compilation" of financials after 2005 to aid the new auditor, Samuel Card, 56, who also is a defendant.
"The type of audits our firm performed through 2005 and the compilation services provided since 2006 did not require the sort of detailed testing needed to uncover the fraud or a forensic investigation to determine if the city's Comptroller Rita Crundwell was fabricating invoices," CliftonLarson says in a statement. Having lost Dixon as a client, the audit firm says it is working with the city "as it seeks to discover all of the facts that will describe what has happened in this case."
Reached in his Sterling office, Mr. Card says, "All my comments can come from my attorney." Chicago lawyer Thomas Falkenberg of Williams Montgomery & John Ltd., who says he was retained by Mr. Card's unnamed insurance carrier, responds, "We're just going to let this litigation play out."
'TWO-MINUTE PHONE CALL'
In depositions in late 2012, Power Rogers attorney Devon Bruce produced CliftonLarson emails after 2005 that referred to the firm's "audit" of Dixon. Also entered into the record were invoices submitted by Ms. Crundwell supposedly from the Illinois Department of Transportation that lacked an IDOT heading or logo and, in one instance, carried a nonexistent date--Nov. 31, 2004.
"Had a two-minute phone call been made by a Clifton employee to the Illinois Department of Transportation regarding any of these false invoices, Rita Crundwell's theft would have been identified at that time," the lawsuit argues.
Mr. Bruce says that despite CliftonLarson's assertion that it stopped doing audit work for Dixon in 2005, city payments to the firm dipped only slightly and by fiscal 2008 were $15,000 higher than they had been in fiscal 2005.
During a Nov. 8 deposition in Dixon, Mr. Bruce quizzed retired CliftonLarson partner and Dixon office head Ronald Blaine about tax returns he prepared for Ms. Crundwell. Her 2007 return showed gross receipts of nearly $700,000 for which Mr. Blaine could not recall demanding or receiving documentation. When she was arrested in April, he testified, "We had the same shock and awe as everybody else in the city did."
Mr. Blaine did not return a call to his Dixon home.
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