After the February article entitled “How Dixon’s auditors missed the biggest embezzler of all time” was published in Crain’s Chicago Business, Devon C. Bruce, partner at the Chicago personal injury law firm Power Rogers, filed an amended complaint including new allegations against Fifth Third Bank for its role in the embezzlement of over $53 Million Dollars.
The facts of the case revolve around the criminal actions of the former Treasurer of the City of Dixon, Rita Crundwell, who stole $53 million dollars from the City of Dixon over a period of 15 years, from 1988 through 2006. In order to effectuate her theft, Ms. Crundwell redirected money from various legitimate City of Dixon bank accounts held at Fifth Third Bank in Dixon, IL into a separate, account at the Fifth Third Bank called RSCDA.
Ms. Crundwell would then use the RSCDA account funds to pay millions of dollars of expenditures for her own personal use. Over $45 million dollars of the transfers into the RSCDA account were from the City of Dixon Capital Development Fund account, another account held at Fifth Third Bank. Put simply, for over a decade Ms. Crundwell would transfer money from one valid City of Dixon account into her invalid RSCDA account held at the same bank branch of Fifth Third Bank in Dixon without any scrutiny or oversight from the bank.
Initially, the Plaintiff, the City of Dixon, filed its complaint against the various accountancy firms it employed for failing to detect the misplaced millions of dollars. More recently, however, new facts came to light that implicated Fifth Third Bank and its failure to investigate these fraudulent account-transfers. In particular, Plaintiff has included counts against Fifth Third Bank for negligence, violation of the Uniform Commercial Code, Breach of Contract, Negligent Misrepresentation, Violation of the Illinois Fiduciary Obligations Act, Aiding and Abetting and Fraud by Omission.
In support of these counts, Plaintiff discovered that Fifth Third Bank failed to identify the RSCDA account in its bank confirmations (documents that ascertain the exact amount of money is in each client account in order to verify a client’s books), despite the fact that the RSCDA account was in the bank’s name. Fifth Third Bank had a duty and obligation to disclose these bank confirmations to auditors every year, yet Fifth Third Bank failed to disclose the existence of the RSCDA account until 2010 and 2011. Had Fifth Third Bank disclosed the existence of the RSCDA every year, the auditors should have investigated its existence and discovered Ms. Crundwell’s massive theft.
Fifth Third Bank was further negligent, Plaintiff alleges, in permitting the creation of the RSCDA bank account in the first place. Fifth Third Bank’s predecessor permitted creation of the account without the necessary documentation. The Bank should have required that the owner of the account provide documentation of individuals authorized to act on that account.
The owner of a governmental account is the City itself and for that reason, the authorization usually comes in the form of a Resolution. No valid resolution authorizing Ms. Crundwell was ever provided to the Bank in relation to the RSCDA account. Finally, Fifth Third Bank was negligent, Plaintiff alleges, in failing to implement fraud detection software which should have identified the repeated, suspicious transactions made by Ms. Crundwell.
This case is currently pending in the Circuit Court of Lee County in front of the Honorable Judge Daniel A. Fish.