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CPA firm knew about secret bank account

DIXON – CliftonLarsonAllen knew about the secret bank account former comptroller Rita Crundwell used to steal nearly $54 million at least as early as 2010 – and did not investigate it, according to court documents.

The city is suing the accounting firm, one of the largest in the United States, claiming it should have detected Crundwell’s theft and asking for damages in excess of $53 million.

Documents filed in Lee County Court to add Ron Blaine and Todd Etheridge of Clifton to the suit, filed by the city’s attorney, Devon Bruce of Power, Rogers and Smith in Chicago, show Clifton knew of the account, which it confirmed had a balance of $142,000.

Blaine was a partner in charge of the Dixon account from 1995 until 2005; Etheridge was in charge from 2008 to 2011.

Crundwell opened this secret account in the city’s name on Dec. 18, 1990, at First Bank South, which subsequently became Fifth Third Bank. The account holder was an unknown entity called R.S.C.D.A. Checks written on the account list the account holder as R.S.C.D.A. c/o Rita Crundwell. She moved millions in and out of the account.

In a deposition, Megan Shank, a certified public accountant for Clifton in its Dixon office, confirmed she worked on the city’s account, and she received a response from Fifth Third Bank identifying the account Crundwell used to steal money as one that was not on a list of city accounts.

When Bruce asked what was done with that information, Shank admitted nothing was done.

“If a jury and a judge rule that Clifton was doing an audit in 2010, do you agree with me that Clifton deviated from the standard of care in not investigating the existence of the 9530 (RSCDA) account?” Bruce asked her in the deposition.

“Yes,” Shank said. “There’s no documentation of further looking into that account.”

In an audit, the account should have been investigated, and if it was, the theft probably would have been caught, she admitted.

Clifton, however, maintains it was conducting a compilation of services, which is formatting financial statements and involves little to no study, and was not doing an audit.

The city’s suit also accuses Clifton of failure to evaluate 179 phony invoices Crundwell fabricated to steal city funds. The invoices lacked key information, such as the agency’s emblem or logo and a contact name and number of an employee who could be reached for questions.

Both Etheridge and Blaine also signed, completed and/or approved Crundwell’s personal tax returns, including one in which Crundwell spent $304,329 more than she earned, according to a tax returned prepared by Blaine.

Jennifer Dirks, a spokeswoman for CliftonLarsonAllen in Milwaukee, Wis., said the company “is confident in the integrity and professionalism of our partners and employees.”

She also confirmed no employees have been fired as a result of the lawsuit.

Crundwell, 60, pleaded guilty in November to federal wire fraud and faces up to 20 years in prison at her Feb. 14 sentencing.

What's next?

A case management hearing on the city's lawsuit will be held March 15 in Lee County Circuit Court.

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