Chicago Tribune Staff - Draining Dixon. How Rita Crundwell Embezzled More Than $50 Million from Her Illinois Town

The arch welcoming visitors to Dixon, Illinois.

FBI agents wait to load boxes of evidence into their cars at the Dixon City Hall garage.

For years Rita Crundwell has kept an eye over virtually every dollar that passed through the small town of Dixons coffers as city comptroller, while also running one of the most successful horse farms in America. On Tuesday, FBI agents led Crundwell from City Hall in handcuffs on charges she misappropriated more than $30 million in city funds in just the last six years. Much of the money went to operate the champion horse breeders ranch.

The size of the losses represents a staggering hit for the small northwest Illinois town with a budget of only about $8 million to $9 million a year, leaving residents bewildered.

Nobody was watching the store, said Ron Pritchard, who attended high school with one of Crundwells brothers. We dont have the checks and balances.

Despite a city salary of just $80,000 a year, Crundwell lived extravagantly, spending huge sums on her horse farm in Dixon, that raised champion quarter horses, as well as $340,000 on jewelry since mid-2006 and $2.1 million to buy a luxury motor home fit for a rock star, authorities said.

James Burke, mayor of the town of 15,000 about an hour southwest of Rockford best-known as the boyhood home of President Ronald Reagan told the Tribune that townspeople figured her wealth came from her successful horse business.

I guess people assumed she was making a ton of money in the horse business, he said.

In reality, she used a secret bank account to conceal her lavish spending on personal expenses, according to the mayor.

Crundwells apparent downfall came because she took off four months a year all but a month unpaid to operate the horse business and travel to shows. During one of her stints off last October, an employee filling in for Crundwell asked the citys bank for all its statements and discovered a suspicious account that was the source of multiple six-figure transactions, authorities said. Burke, Dixons mayor since 1999, said he went to the FBI.

I was sick to my stomach, and I kept hoping that there really wasnt anything going on, the mayor said just hours after FBI agents arrested Crundwell and began to carry out search warrants at farms in Dixon and Wisconsin.

Burke said the city had endured budget cuts the last few years and indicated that Crundwell had blamed the shortfalls on the state owing the city $1 million in unpaid tax revenues.

One Dixon resident said the public pool had been closed the last few summers.

Its incredible really. In the last two years weve been really in a financial crunch with the whole thing, the mayor said. The annual audit didnt show anything. Auditors even commented that we were doing fine with our cash controls.

During three decades as comptroller, Crundwell had accumulated a deep wellspring of trust as one of a handful of full-time employees at City Hall, Burke said.

Prosecutors said Crundwell handled all of the finances for the city. According to the citys website, she held down positions as both comptroller and treasurer. She even had a relative collect the towns mail from the post office each day, according to the charges.

Crundwell, 59, appeared Tuesday in federal court in Rockford, charged with a single count of wire fraud. A detention hearing is set for Wednesday afternoon. Her court-appointed attorney declined to comment, and calls to her home and businesses were not returned.

The City Council held a closed-door emergency session that lasted more than an hour Tuesday night. Council members declined to comment as they left the meeting.

Crundwell has worked for the city since she was a teenager, starting in a part-time job before being appointed comptroller in the early 1980s, the mayor said. In Dixon, she was well known and trusted as a longtime city employee, Burke said.

She was also one of the best horse breeders in the world.

She was particularly well known, said spokesman Jim Bret Campbell. Shes won more world championships at this point than any other competitor.

Among the items prosecutors claim she bought with stolen city funds were two semitrailer trucks and a horse trailer worth nearly $1 million combined.