The fraud in Dixon, Illinois, involved Rita Crundwell, who was a city employee. Crundwell was the treasurer and the comptroller of the small town. Everyone trusted her, and whenever a person had a question, they were directed to inquire from Rita since she was well versed with the city’s finances. Additionally, Rita also engaged in breeding champion quarter horses, an art she had inherited from her parents. She won fifty-two thoroughbred championships in her breeding career and owned hundreds of horses (Ferrell et al., 2019). This paper attempts to identify the red flags that should have indicated the presence of fraud, how Rita used to commit the crime without getting caught, and measures implemented to prevent future frauds. The paper also looks into the moral philosophies that influenced her actions and how applying ethical perspectives prevented her from engaging in fraudulent activities.
Identify all the red flags that fraud was occurring.
During Rita’s career as the city’s treasurer and comptroller, various indicators of fraudulent activities emerged. The first sign was the conflict of interests between Rita Crundwell and Clifton Gunderson, an accountant firm for Dixon. Throughout the 1980s, Crundwell used to play Gunderson softball team and had made some friends within the firm, and at times they would get together for beers and lunch after work (Ferrell et al., 2019). The conflict of interest resulted from Gunderson firm being the city’s accountant and, at the same time Rita’s.
The second sign is the fact that Clifton Gunderson attempted to circumnavigate the newly implemented regulations. A law dictating that auditors had no power to provide both auditing and non-attest services was passed in 2005. Clifton firm thus resigned from the auditing role to concentrate on providing accounting services for Dixon (Ferrell et al., 2019). Dixon filed a lawsuit against Gunderson since it continued to audit the city through their subsidiary firm (Janis Card Accounting). They chose Janis to appear as if another company was providing the accounting services while, in the real sense, it was Clifton Gunderson.
The third indication is that Jim Burke, who was the town’s mayor at the time, grew suspicious of Rita’s rising wealth. The mayor failed to understand how the town’s worker’s salary could help Rita live such a lavish life. Burke approached the accounting firm (Clifton Gunderson), but he was silenced when asked about Crundwell (Ferrell et al., 2019). Other individuals in the city also had questions about how Rita could afford such an expensive life. All these hints given above could have prompted the city to thoroughly audit Rita, but it did not.
Describe all the ways that Rita Crundwell was able to get away with the fraud for so long.
Rita used various strategies to hide her fraudulent activities for more than two decades. She ensured that she collected all the city mails by herself when she was in office and assigned one of her relatives the task. Crundwell also directed her clerk Kathe on which town bank accounts to transact with to hide her unethical activities (Ferrell et al., 2019). She also succeeded because she was the only one responsible for handling the city’s financial transactions. The Third Bank failing to adhere to its internal control measures gave Rita a loophole to open a bank account to deposit the city’s money and later use it for her personal needs. Third Bank internal measures required that more than one person open an organization’s bank account for transparency, but in this case, Rita was allowed to open alone. In addition, the city had so much trust in her, preventing them from establishing what was going on.
List all the internal controls Dixon, Illinois, has implemented to prevent fraud in the future.
After the fraud was uncovered, Dixon, Illinois, implemented various measures to ensure that such an event does not reoccur. The city hired another finance director who aided in restructuring the department and reorganizing the town’s finances. The new director applied further internal control measures that ensured no individual within the organization could complete a whole process her included (Ferrell et al., 2019). Today the city has more clerks who concentrate on specific areas such as billing and payroll. The city has ensured that its emails are not picked by one individual but delivered directly to the city hall. These measures have helped the city ensure that all areas that can create room for duplicitous events have been covered.
Using Chapter 6 material, determine the individual factors and moral philosophies that influenced Rita Crundwell. Explain and support your answer using Chapter 6 material. Use in-text citations to clearly indicate where you have incorporated chapter material to support your answer.
Various moral philosophies influence Rita Crundwell in making her decision to defraud the town. One of the moral philosophies is teleology, which dictates that an act is deemed acceptable or morally right if it leads to producing the desired result, such as pleasure, growth, and wealth. Teleological philosophies evaluate the moral impact of action by examining its consequences (Ferrell et al., 2019). In this case, Rita decided to swindle the city because she stood by becoming wealthy. The idea of becoming richer prevented her from evaluating the consequence of her actions, for instance, delayed development projects within the city and the risk of being imprisoned if she got caught.
Another moral philosophy that she failed to observe and significantly impacted her decision is deontology. The ideology focuses on individuals’ rights and intentions related to specific actions instead of their consequences. The idea is based on the fact that equal respect should be accorded to every person (Ferrell et al., 2019). Rita failed to respect the people of Dixon town and her role in ensuring that their resources were safe. The city had the right for its tax money to be used for development projects, but she decided to ignore it and use it for her gains.
Using textbook material, determine how the application of an ethical perspective(s) (moral philosophy) could have helped Rita Crundwell avoid engaging in fraudulent activities and fulfill her responsibilities to society.
There are different ethical perspectives that Rita Crundwell would have applied to help fulfill her social responsibility. For instance, the enactment of instrumental and intrinsic goodness would have allowed Rita to conduct her duties. This moral philosophy draws a clear and steadfast line defining good and bad (Ferrell et al., 2019). The dogma dictates the connection between the ends and the means in creating a bad or a good outcome. Application of this principle would have aided Rita in determining what is good for the city and what is not.
The application of virtue ethics would have also enabled Crundwell to deliver her services to the people of Dixon in an honest way. The merits indicate that ethical behavior involves complying with convectional moral standards and the ability to consider what a mature individual with appropriate moral character would deem good in certain situations (Ferrell et al., 2019). As people advance socially, they tend to behave in various ways that they consider morally correct. An individual with the virtue of honesty will always be compelled to tell the truth since it is regarded as the right thing based on human communication. The execution of these acts would have enabled the right to act in the most truthful ways to fulfill her social responsibility.
Ethical virtues are vital in the operation and development of any organization. The City of Dixon, Illinois, suffered due to the unethical conduct of one of its employees, Rita Crundwell leading to more than fifty million dollars. Rita was a person that was trusted and respected by the city and thus was given the role of handling the town’s finances. Crundwell decided to use her position and the trust that people had in her to defraud the city. Ethical morals are crucial, and their application would have enabled Rita Crundwell to fulfill her social responsibility in the most effective way.
Reference
Ferrell, O., Fraedrich, J., & Ferrell, L. (2019). Business ethics: Ethical decision making and cases (12th ed.). Cengage Learning.