Faud Case Analysis: Rita Crundwell's 'Fraud'

Superior Essays
Fraud Case Analysis

Rita Crundwell started working for the City of Dixon’s finance department as a high school student, but she eventually became the city’s treasurer and comptroller in 1983. Seven years after her appointment, she began a twenty-two-year fraud scheme that enabled her to embezzle approximately $54 billion dollars from the taxpayers she was serving. To embezzle the municipality’s funds unnoticed, Crundwell discretely opened a bank account at the Fifth and Third Bank where city’s bank accounts were housed. She listed the bogus account as the Reserve Sewer Capital Development Account (RSCDA) Reserve Fund. Soon after, Crundwell began transferring funds from various accounts to increase the Capital Development Fund account.
…show more content…
Perceived pressures explain the motivation behind a fraud scheme and they are classified as either financial or non-financial situations that cannot be solved through legitimate means. Popular perceived pressures include excessive debt, meeting shareholder expectations, or desiring a more lavish lifestyle. Perceived opportunity explains the methods utilized to commit and conceal the fraud scheme. Therefore, the individual violates company trust by using his or her position and knowledge to commit fraud. In addition, he or she must be able to continue the fraud scheme unsuspected. Finally, rationalization is when individuals justify their fraudulent actions as being acceptable. Fraud perpetrators believe that the company is not going to notice the funds missing or that they consider the funds as a loan to be paid back later. Dr. Donald Cressey, the father of the Fraud Triangle, believed that the combination of these three components resulted in the committing of fraud. Therefore, someone who has the perceived opportunity to commit fraud with justified reasoning, the individual cannot commit fraud without a perceived pressure (The Fraud Triangle n.d.) (Albrecht, Albrecht, Albrecht, & Zimbelman …show more content…
Unfortunately, the equine hobby became expensive over the years as more funds were required to purchase horses, housing, and supplies as well as pay for other equestrian-related expenses. As an employee for the City of Dixon, Crundwell made around $80,000 a year, but only claimed $61,000. Therefore, funding for her passion became her perceived pressure to commit fraud. In addition, she enjoyed traveling to horse shows in a 45-foot Liberty Coach bus. Crundwell also had perceived opportunity to utilize her position to commit and conceal her fraud for over twenty-years. The City of Dixon had a small team that operated with weak internal controls and no segregation of duties, which gave Crundwell complete control over the city’s finances. Therefore, she was able to open her bogus account and create fictitious invoices to embezzle funds. In addition, she collected the city’s mail to conceal her fraud from others. Crundwell was a trustworthy employee who always made herself available when away. Crundwell’s actions were justified in two ways: (1) she might have believed that she deserved more than what she was earning and (2) nobody would suspect that she was embezzling funds as she was a valued city employee (Smith 2012) (Trust...but Verify

Related Documents

  • Improved Essays

    The team will also focus on the citing the failure by the management to record the liabilities that are warranty-related. The auditing team will look to cite any signs of undisclosed legal unforeseen events. The team will therefore seek to cite any indications of inadequate disclosures. Asset valuation is an important component. Fraudulent inflation of the valuation of assets is way of manipulating profits that is common and is the aspect that the audit team will be looking out for as part of the ways of detecting anomalies.…

    • 1728 Words
    • 7 Pages
    Improved Essays
  • Great Essays

    The question boils down to whether the transactions suspected of being fraudulent are valid or not. In order to have the best outcome, we want to search further than the suspected transaction and really look into the red flags of the situation and try to figure out the concealment strategy used. The procedure will look to authenticate, identify, and link to a fraud and/or concealment strategy. Specific audit procedures that may prove useful are analyzing the sales of the company and re-calculating the costs of goods sold in order to see if the calculation matches what is in the account. If the calculations do not line up with what is in the account, we may see that the entries were in fact fraudulent.…

    • 1732 Words
    • 7 Pages
    Great Essays
  • Improved Essays

    Fraud Prevention

    • 776 Words
    • 4 Pages

    Motivation or pressure is the second angle in examining what is driving the individual to commit the act. Just as with rationalization, the perception of a need or a pressure is the key factor, and it does not matter whether or not the motivation makes sense to others or is based in reality. Individuals may be facing financial or other personal problems such as gambling, drugs, alcohol addiction, or extreme medical bills. Pure greed also can factor into the equation but may be flavored with a sense of injustice. For example, the perpetrator may feel like “the company should have paid me what my car was…

    • 776 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Fraud Triangle Case Study

    • 918 Words
    • 4 Pages

    Content 3.1. Cressey’s Final Hypothesis He stated that trusted persons become trust violators when they considerthat they are having a financial problem that is non-shareable, are aware this problem can be clandestinely resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property. (Cressey, 1953) 3.2. Do most Employees steal under the right circumstances? The 10-10-80 rule of thumb has come a long way as far as fraud examination is concerned.…

    • 918 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    A justification for secret trusts based on fraud is considered as a reason why the secret trustee should not take the testator’s property as an absolute gift, but not by itself a reason why secret trusts ought to be enforced for the interest of the genuine beneficiates. A possible way round this problem is to give the term “fraud” a wider meaning. According to Allan’s analysis, case laws have shown that “the view that fraud must involve the secret trustee gaining personally was rejected outright”.…

    • 851 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Lying By Omission Essay

    • 1639 Words
    • 7 Pages

    In the coming sections, these three forms of lying will be further evaluated. The first to be examined is lying by omission. According to US Legal, “A lie of omission is an intentional failure to tell the truth in a situation requiring disclosure. An example could be a seller's failure to note a known defect on a real estate disclosure form.” Lying by omission is also known as “passive lying” or “lying without lying.” Lying by omission is commonly found in two places in the business environment. First, it is a favorite tool of advertisers.…

    • 1639 Words
    • 7 Pages
    Improved Essays
  • Improved Essays

    After figuring out who was part of the crime some were caught specifically Patricia Heart a few months after the crime. (Linder, Patty Hearst Trial 1976) John Greenya described how Patricia was captured after analyzing tapes of bank robbery to say it was her committing the crime in When Patty Hearst Met Revolution. Patricia Hearst and Wendy Yoshimura were captured September 18, 1975 in San Francisco, after a year of no communication from Hearst. (Greenya) These…

    • 519 Words
    • 3 Pages
    Improved Essays
  • Superior Essays

    Cressey's Fraud Triangle

    • 1132 Words
    • 5 Pages

    In order for a crime (fraud) to be committed, one must first recognize the opportunity and the means to defraud the company or organization. The opportunity to commit fraud involves having a clear and untraceable course of action or plan that is not likely to be detected or discovered. Trust by the public or organization often gives rise to opportunities. If people trust you, they are not likely to monitor or question what you do. The third and final stage in Cressey’s fraud triangle is rationalization, or the ability to rationalize crime.…

    • 1132 Words
    • 5 Pages
    Superior Essays
  • Improved Essays

    Fraudster’s Fraud Triangle Elements Pressure The desire to achieve self-gains is one of the factors that drive the actions of a fraudster who engages in corporate fraud. Financial strain is also a major motive concerning the presented unethical behavior in the workplace. Evidently, fraud can lead one to amass a large amount of finances…

    • 821 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Ergo, do corporate governance frameworks of organisations need to take action to cover the fraud risk of Ponzi schemes? On initial consideration one would think it unlikely, as organisations can be expected to have reasonable investment insight, business know-how and resources for active investigation. Nonetheless, even though one would assume that institutional investors would have greater business acumen than individuals, a Ponzi scheme often isn’t detected until it collapses and maximum damage has occurred. It is indeed possible that the shrewdest and most vigilant of organisations can be persuaded by the enticing notion of being involved in an innovative finance proposition, especially when proposed by reputable individual. Hence, an institutional investor could easily be pulled into a Ponzi scheme if the perpetrator plays his cards right.…

    • 1527 Words
    • 7 Pages
    Improved Essays