Cover Story

Dixon's quiet hero

The ACFE’s 2018 Sentinel Award recipient had no intention of changing her orderly life as the city clerk of Dixon, Illinois. And then she found a secret account in city ledgers that led to discovery of Comptroller Rita Crundwell’s astounding $53.7 million fraud. Kathe Swanson’s life will be forever marked by her simple heroic decision.

One phone call in October 2011 irreversibly changed the lives of Kathe Swanson, Rita Crundwell and the citizens of Dixon, Illinois.

Swanson was in a rush. Crundwell, the comptroller of the city of Dixon, Illinois, and a champion quarter-horse breeder, was out of the office at an equine competition. Swanson, the city clerk, had to fill in for Crundwell and prepare the fiscal report for an upcoming council meeting. The problem was that Crundwell had never enabled the online option for the city’s bank accounts, so Swanson couldn’t view and print the statements. And the city’s bank, Fifth Third Bank, hadn’t mailed the statements.

In the past, when the statements were late, Crundwell would advise Swanson to give only the last four digits of the pertinent accounts to email to the bank so it could fax the records to city hall. “I finally called the bank, and I said, ‘I want every statement of the City of Dixon’s faxed to me in the next five minutes,’ ” Swanson said during a recent interview with Fraud Magazine.

When she got the bank records, she saw three large deposits — of $200,000, $300,000 and $500,000 into an unknown account called “RSCDA — Reserve Fund” or Reserve Sewer Capital Development Account.

“My first thought was that Rita put a private account under the city’s name because she was buying and selling horses and shielding the money from the IRS,” Swanson says. “That’s when I really started looking at all the debits and credits, like gasoline and things like that. Well, the city has their own pumps, so I knew it wasn’t a city account.”

Swanson thought she’d discovered fraud, but she wasn’t sure. So, she folded the bank statement and hid it in the sunglass container in her SUV. “I didn’t know who to turn to,” she says. “I didn’t know if it was something I should go to our police department with. Honestly, I thought, ‘Who can I trust?’ ”

Three days later she told then Dixon mayor, Jim Burke, about the suspicious account that Crundwell controlled. Swanson retrieved the bank statement from her car and made a copy for Burke. He took it to the FBI office in Rockford, Illinois, because he didn’t know if he was looking at a city conspiracy. Agents believed they should investigate the anomaly.

For months, Swanson says she had to feign normalcy around Crundwell. “So, I’d ask questions like, ‘How did your horse show go? What did you get for yourself?’ ” The FBI asked Swanson to collect records for evidence and interviewed her so they could construct a profile of Crundwell.

Meanwhile, during the six-month investigation, Swanson’s health suffered because of the secrecy. She couldn’t say anything to her boyfriend, Tom, or her grown children. “I cried a lot,” she says. “I was very distant because I knew I couldn’t say anything to anybody. Tom would ask me, ‘Are you okay? Are the kids okay? Is there something going on that I should know about?’ I’d say, ‘No, I’m just so busy at work. There are a lot of changes.’ When you lie like that, it just makes things worse physically.”

Reckoning day

On April 17, 2012, Swanson came to work at about 8:30 a.m., walked into the mayor’s office and said, “Jim, I can’t do this anymore. I’m just crazed out of my mind.”

“He looked up at me and said, ‘Kathe, it’s today,’ ” Swanson says. FBI agents were coming for Crundwell. “I gingerly walked back to my office and just sat in my seat. A weight had been lifted off my shoulders. … Then probably in the next five minutes, I saw two men dressed in dark suits walking down the hallway to the mayor’s office. … They were in there for a half an hour or so with Jim.”

At about 9:30, Crundwell walked into the building. Burke called her on the phone and asked her to come into his office. “Good morning, Rita,” Swanson said as Crundwell walked past Swanson’s office. “Good morning, Swan,” Crundwell brightly said. Crundwell had nicknames for all the city employees, Swanson says.

Crundwell knocked on Burke’s door. He asked her to come in and said, “Rita, these two gentlemen want to talk to you.” Burke walked out and closed the door behind him.

U.S. marshals then closed down city hall, Swanson says, and began searching financial records. FBI agents began to examine Crundwell’s computers. At the same time, marshals were examining Crundwell’s houses in Dixon and Florida plus her boyfriend’s house.

Crundwell knew she was busted. They had the goods on her. She confessed that she’d stolen millions. A U.S. marshall came to Swanson in her office and asked if the building had a back exit to take Crundwell away.

“My first inclination,” Swanson says, “was to tell them, ‘No, I want her paraded through the office in handcuffs.’ ” But instead she directed them to a staircase that led to the city hall garage. Crundwell was gone, and Swanson hasn’t spoken to her since.

City employees then gathered so officials could let them know what was happening and offer a counselor’s services. “Everybody was in shock,” Swanson says. “I remember one employee saying to me, ‘Well, I guess you’re not going to get a Christmas card from Rita this year, are you?’ ”

City hall was reopened after all the marshals and agents had left. Swanson still had to work the rest of the day, but at 4:30 p.m. she walked to the office of the city’s lead attorney. He and the other city attorneys, which included her boyfriend, Tom, were waiting for her. “I went in, hugged Tom and said, ‘This is the reason I’ve been so crazy for the past six months. I’m sorry; I couldn’t tell you anything,’ ” Swanson says. “He said he understood.”

At the end of a news conference that evening, she was leaving when a reporter shoved a microphone in her face and asked, “Are you the person who discovered it?” She deflected the question, but soon the media had correctly surmised that she’d found the anomaly in the city’s bank records. And, so, her public presence as a whistleblower began.

That night she says she worried about Crundwell. “Where did they take her? Was she cold? Did she have a blanket?”

Methodically pilfering over decades

Crundwell began working in city hall in 1970 when she was a high school student. She became Dixon’s comptroller and treasurer in 1983 and opened the curious RSCDA account in December 1990.

Swanson says Dixon funds would first go into the Illinois Treasurer’s Investment Pool [ITIP] state account in Springfield, the capital, because of better interest rates. “We would get a fax from the state saying the money was in the account, whether it was from state sales tax, income tax, whatever,” she says. “Once the money was in the ITIP account, Rita would call it up before 11 o’clock, and it would go into our capital development account — an honest account. Then before she left for lunch, she’d go over to the capital development account book, write a check for ‘treasurer,’ payable to treasurer. She’d take that check and bring it over to Fifth Third Bank in Dixon and deposit it into the RSCDA account, ‘care of Rita Crundwell, Treasurer, City of Dixon.’ ” Crundwell did this 169 times until she’d stolen $53.7 million.

Kathe Swanson, the former city clerk of Dixon, Illinois, stands Sept. 17 at the riverfront that the city constructed with recouped funds from the Rita Crundwell fraud.

Swanson says city employees never suspected Crundwell because they implicitly trusted her and “because the checks were made out to ‘treasurer’ and she’d put in parentheses or a dash in the register book, ‘State of Illinois.’ We just assumed she was making payments on projects that were being done. … We’d have to pay the state of Illinois for our portion of a project.

“I really feel she thought the money was an entitlement — that it was her money,” Swanson says. “Rita did not have a conscience. I really feel she did not because she hurt so, so many people in her life.”

Swanson says it was excruciating to see Crundwell steal money after Swanson had discovered the fraud and before the FBI finished its six-month investigation. “It was terrible because I could walk through it blindfolded,” Swanson says. “I knew exactly what she was doing. Stephanie [Dixon’s assistant treasurer] goes to lunch. Here comes Rita at 12:15, sits down at Stephanie’s desk, pulls the ledger book out.

“It got to the point where Rita would go to lunch, and I’d go to the book, and I’d say a few choice words. I’d tell the mayor, ‘This is the money we got in.’ I would take a photocopy of the fax that we get from Springfield showing we were getting money. Then I would show it to the mayor, and I’d say, ‘She took it all.’ ”

Crundwell used the stolen city money to buy hundreds of quarter horses and build a first-class, horse-farming business with an arena, an office and horse stalls. Her horses won 52 world championships. She owned two residences in Dixon; a home in Englewood, Florida; 80 acres of vacant land in Lee County, Illinois; a 2009 luxury motor home; more than four dozen trucks, trailers and other motorized farm vehicles; a 2005 Ford Thunderbird convertible; a 1967 Chevrolet Corvette roadster; a pontoon boat; and jewelry and $224,898 in cash from two bank accounts, according to the U.S. Department of Justice (DOJ). As she became one of the nation’s top breeders of quarter horses, she used her company, RC Quarter Horses LLC, to initiate and authorize her business transactions.

Crundwell off to prison

On April 23, 2012, the Dixon City Council voted unanimously to fire Crundwell so she wouldn’t receive any pension benefits. Crundwell was indicted on May 2. On Nov. 14 of that year Crundwell pleaded guilty to a single count of wire fraud. She was first sentenced to 19 years and seven months in prison on Feb. 14, 2013, at the Wauseca Federal Prison in Wauseca, Minnesota, and then moved to the Federal Medical Center, Carswell in Fort Worth, Texas. [In April, Crundwell was transferred to the medium-security Pekin (Illinois) Federal Correctional Institution.]

During the sentencing hearing, a tearful Crundwell said, “I’m truly sorry to the city of Dixon and my family and my friends.” (See Ex-Dixon comptroller gets 19½ years for $54 million fraud, by Melissa Jenco, Chicago Tribune, Feb. 14, 2013.)

The Dixon chief and a city commissioner detailed from the witness stand how Crundwell’s fraud crippled the city budget, according to the Chicago Tribune article. Burke questioned the sincerity of Crundwell’s apology. “I think her conscience didn’t bother her at all,” he said.

“The two marshals stood up from behind where she was sitting,” Swanson says, “and they said, ‘Put your hands behind your back.’ I closed my eyes, I could hear the click of the handcuffs, and they took her out, and she was gone. Gone.”

“This has been a massive stealing of public money — monies entrusted to you as a public guardian of Dixon, Ill.,” Judge Reinhard said in imposing sentence. Crundwell showed “greater passion for the welfare of her horses than the people of Dixon who she represented,” he said, according to the DOJ.

“While the city was suffering, the defendant was living her dreams,” said Assistant U.S. Attorney Joseph Pedersen during the sentencing hearing. Crundwell’s “conduct in continuing to take millions of dollars from the city of Dixon to support her lavish lifestyle while she knew that Dixon was in dire financial straits was especially egregious,” the government argued.

Crundwell is scheduled for release on March 5, 2030. She’ll be 82. The city of Dixon, population 15,000 — the hometown of President Ronald Reagan — has recovered about $40 million, after lawyers’ fees, from a civil lawsuit against its two accounting firms and Fifth Third Bank plus the sale of Crundwell’s assets. Dixon also has a new mayor, has changed to a city manager system and has a full accounting system of checks and balances. The city has used much of the recovered funds to rebuild its infrastructure. (See Minneapolis accounting firm CliftonLarsonAllen will pay Illinois city $35m, by David Phelps, StarTribune, Oct. 4, 2013, and Crundwell recovery: 5 years later, by Rachel Rodgers,, April 14, 2017.)

Reclaiming a life

The experience, of course, has changed Swanson — and not necessarily for the better. A counselor told her after the story broke that she had post-traumatic stress disorder. And after the trial and sentencing, one day before work she was rushed to the hospital with a possible heart attack after she discovered another city employee probably had committed an unrelated fraud. The doctors eventually determined that Swanson’s chest pains were because of accumulated stress. But she realized she had to step away.

Swanson retired from the city of Dixon in 2016. Since then, filmmaker and accounting professor Kelly Richmond Pope has featured her as the hero in the 2017 documentary, “All the Queen’s Horses.” And two awards sit on Swanson’s mantle: the Ethical Courage Award presented by Pope on behalf of the National Association of State Boards of Accountants at a screening in Dixon of “All the Queen’s Horses,” and the ACFE’s Cliff Robertson Sentinel Award, presented at the 29th Annual ACFE Global Fraud Conference in June.

In a Fraud Magazine interview with Pope, she said that Swanson represents “the typical employee within any organization who sees something and debates whether she should report it or not. Kathe represents us all. It takes a tremendous amount of courage to report a superior.” (See Small town, huge fraud, insightful documentary, Fraud Magazine, January/February 2018.)

Swanson says that she doesn’t feel courageous. “But it’s just not in my nature to turn and look the other way,” she says. “If I see something wrong, I’m going to right it.”

She’s enjoying her retirement. Her daughter and son-in-law recently gave her a third grandchild. Swanson and Tom are enjoying vacations. And at the Global Fraud Conference, she said that she’d finally found some closure after receiving attendees’ support. She feels she’s well on the mend.

Yet one piece remains in the closure puzzle, and Swanson might never find it: speaking with Crundwell. Swanson is convinced that Crundwell doesn’t want to talk with her. “After all, I ruined her life.” But Swanson knows that she didn’t ruin Crundwell’s life; like all fraudsters, Crundwell ruined her own life. But still Swanson wants to see if Crundwell has some remorse for her crimes. And to simply ask her, “Why did you do it?” Crundwell has years to think of an answer.

Dick Carozza, CFE, is the editor-in-chief of Fraud Magazine. Contact him at