There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Caleb Newquist: In 2012, Liz Gutfeld ran for Santa Cruz County, Arizona treasurer for the first time and won in a narrow three way primary where she got 43% of the vote. She went on to win in the general election and was reelected in 2016 and 2020. In April 2024, Liz was well on her way to winning reelection, again running unopposed. But then, seemingly out of nowhere, she resigned. That's [00:00:30] right. A county official. A comfortable incumbent. Just up and quit. And no one knew why. But it wouldn't be long before everyone would find out.

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Caleb Newquist: This Is My Fraud, a true crime podcast where cheaters always prosper, at least temporarily. I'm Caleb Nyquist. How's it going? Nice to see you. What is going on? There is a development in my life that is probably, uh, something that some of you can relate to, and it's it's it's a little [00:01:30] sensitive. It's a little personal. But I've also shared some personal stuff in the past. So if you don't care for it, then, you know, get to the episode. I'm sure I, you know, I know, I'm sure some of you, that's what you're here for. But I have to say that I have started using a CPAp machine, and I'm, you know, I'm kind of on the fence, but it's early days. It's early days. And, yes, I have severe obstructive sleep apnea, And my [00:02:00] doctor says it's probably because I'm just, you know, anatomically, you know, had some bad luck because I'm, you know, a lot of people say, oh, you know, overweight, uh, you know, other, other things that, uh, contribute to severe obstructive sleep apnea. And I do not have those things. And so, uh, just by, you know, luck of the draw. I have this, and now I am treating it, uh, and it's. I don't know how it's [00:02:30] going. It's still early. I'll keep you updated, but, uh, I don't feel as tired. But I also didn't feel tired before, and so maybe I was just tired all the time and didn't realize it, because that's a strange thing.

Caleb Newquist: My body just kind of acclimated to the fatigue. I'm like, oh, this is how I feel all the time. But I never felt bad. I had enough energy to exercise and chase my kids around and like, do a bunch of other stuff, but I [00:03:00] guess I've just been sleep deprived for like 30 years. God, that's a fucking weird thing to think about. Anyway, maybe the next 30 I'll be very well rested, I don't know. We'll see. Anyway, never too late, I guess. So that's what I got for you. I don't know if that's. You know, if you don't like that, I understand. I understand if you don't like it. Should we do some mail? We'll do some mail. All right. Hey there. Caleb. I'm a long term fan. Thanks for a great show in Monkey Business episode, episode [00:03:30] 79. Would it be fair to say that there's an additional lesson that standard financial audit does a terrible job of detecting fraud? Per the ACF, only 3% of frauds come to light throughout. Excuse me? To light through a financial audit. And if I understood correctly, the Columbus Zoo was getting regular financial audits, but not forensic ones. Why is this important? At least in the nonprofit world? There's a widespread myth, especially among boards of directors, that a quote unquote clean audit on a standard financial audit means that [00:04:00] there is no fraud.

Caleb Newquist: That there's nothing to worry about. In the case of many nonprofits, including, it would seem, the Columbus Zoo. This myth breeds complacency. What do you think? Thanks, Sean. Thank you. Sean. Uh, yeah, maybe I failed to mention it in that episode about the Columbus Zoo, but external audits, as you rightly point out, are only cited in 3% of cases in the Acf's report to the nations as how a fraud is detected. And yeah, that's not [00:04:30] very good. So it would seem that audits are not good at detecting fraud. And also, I think the point that you make about nonprofits is a good one. Nonprofit boards are filled with people who have a wide variety of backgrounds, and most of these people are not experts on accounting and auditing. Ergo, I can't imagine that they would have a good understanding of what external audits are and are not supposed to do. And [00:05:00] that could mean a clean audit could be easily misconstrued as meaning there's no fraud. So if you're listening and you serve on a nonprofit board, or if you're an advisor to nonprofits like it seems, Sean might be particularly small ones. Yeah. Part of I think your job is to educate them and be like, look, an audit is not this silver bullet for fraud. They don't know what they don't know. So tell them, you know. Anyway, thanks [00:05:30] for the email, Sean. Uh, here's another one from a former colleague of mine who I am just going to call Mark.

Caleb Newquist: Hi, Caleb. I blew through several episodes during a long drive the other day. Not sure now which episode it was, but the listener letter about the ten key made me chuckle. A few months ago, I was finally annoyed enough using the calculator app on my phone that I dug out my old ten key from the days at KPMG, and it has retaken a place on my desk. Wanted to send you a note following the episode on The Informant, in [00:06:00] case you are looking for more similar ideas. Maybe you'd be interested in doing one on the TV show Ozark. Thanks for making the show. It is an entertaining way to get CP's regards. Mark. Mark, thanks for that email. Um, I'll address the Ozark bit first. We probably will not do an Ozark episode, and there's a very good reason for that. And it's quite simple. And that is there's way too much to watch. Uh, I don't remember how many seasons it goes. It's a great show. I didn't end up finishing it, [00:06:30] but I definitely enjoyed it, especially the early seasons. The money laundering stuff was super interesting. Um, so, uh, on the surface it is a good idea, but from a practical perspective, there's just way too much to watch. So, um, I don't know, maybe somebody out there has an idea how we could boil that down into a single podcast episode.

Caleb Newquist: But, uh, it's not us. No. Sorry. No. Anyway, um. So the ten key. Yes. I'm still getting emails about ten [00:07:00] key calculators. And I knew this was not an imposter because Mark sent a picture of the ten key. And it is the model that I had when I was at KPMG. And so I was able to verify that. Anyway, thanks to everyone who writes in. I read all the emails. I, I try to respond to most of them. Maybe not the insane ones. There are some screeds. We do get some screeds. I can't read the screeds. It's [00:07:30] just a bit too much. Um, but I try to respond to lots of the emails, even if it takes me a little while. Also, thanks to everybody who writes the show on your podcast platform of choice, whether that's Apple, Spotify, earmark, wherever. Uh, if you go to the trouble of doing anything, writing anything, review or email, I just might read it out loud for a future recording. Okay. All right. Also, if your firm or company or conference or event [00:08:00] needs a live or virtual presentation on Frontier Ethics, that is something that I'd be happy to talk to you about. So email Omar Fraud at Earmark Comm to get more information on pricing and availability for something like that. All right, that's enough business time for some fraud. If you drive out of Tucson on Interstate 19, it won't be long before you hit Santa [00:08:30] Cruz County, the smallest county by area in Arizona.

Caleb Newquist: You know how when you look at Arizona on a map and its southern border is basically two straight lines, one that runs directly east west, and that other one that runs kind of northwest southeast, slightly northwest southeast. Where those two lines meet. That point of intersection. If you remember geometry that Santa Cruz County is sits right there. Okay. The county seat is [00:09:00] Nogales, population of approximately 20,000. And it is literally a border town. It combines with Nogales, Sonora, Mexico to make for the largest transborder agglomeration in Arizona. So there you go. Impress people at your next dinner party. More than $26 billion in imports and exports passed through the Mariposa Port of Entry in Nogales each year. That's a lot. Approximately [00:09:30] 60% of winter produce consumed in the US and Canada passes through there. The port of entry is critical for economic production, supporting more than 4000 jobs in the area. And that's where today's story takes place. Elizabeth Liz Gaffar was raised in Santa Cruz County, attending Nogales High School and graduating in 1979. Liz spent decades working in real [00:10:00] estate, but was also active in community and public service, serving a two year term on the governing board of a local school district and founding the Rio Rico Women's Association. She is also involved in her local church and rotary club.

Caleb Newquist: Liz began her political career running for county treasurer, first winning in 2012 and then reelected in 2016 and 2020. In 2024, she was running unopposed for her fourth term when she suddenly quit. On April [00:10:30] 11th, 2024, her letter of resignation to the county Board of Supervisors cited, quote, health and personal reasons, and it was effective April 12th. About a week went by before more details were revealed and those details were troubling. On April 19th, 2024, the Patagonia Regional Times reported that county officials had notified Gaffar that she was to be suspended while an investigation [00:11:00] into possible irregular bank transfers was conducted. This happened a week before Gaffar had submitted her resignation. So what had happened a week before? I'm going to tell you in that same story. It was also reported that JPMorgan Chase had alerted the county about evidence of suspicious transactions. The bank was ready to freeze all the accounts, but that was going to be a problem because the county needed to run payroll [00:11:30] like the next day or the in very in a very short time frame. They had to run payroll and pay some bills. So not good to freeze accounts. So the bank agreed to keep the accounts active if and only if the signers on the account, the current signers on the account were changed. So that meant Liz got fast. Access had to be revoked. The story also reported that just a few days prior, the FBI had executed [00:12:00] a search warrant on one of her properties.

Caleb Newquist: But that's all that was known at the time. The local NBC affiliate spoke to Manny Ruiz, the county chairman, who said this of Gafah, quote, she's been a good member of our community, a trusted person. She's a businesswoman. At the end of the day, it was a big shock. And this is my favorite part. It would not be a local news report without an anonymous quote from someone who's [00:12:30] just, you know, tossing due process out the window. And here's the quote. I think she's liable. I think she took the money. And that was from a Santa Cruz resident who did not want to be identified. And this article goes on. People living in Santa Cruz County are mad that this happened under the reign of a woman who has held the job for more than a decade. Quote. Never think of people like that doing that, said the unidentified man. Now, regular listeners [00:13:00] to the show will take great umbrage with this last statement because, as we've learned, people like that are always the people who wind up accused of fraud. So anyway, more people need to listen to this show, and then they won't say things like that to local TV stations. Okay. But you know, also due process, that's still a thing too. So the county launched an investigation into what had happened. [00:13:30]

Caleb Newquist: Less than two months after the news broke, some details started coming to light. In early June, representatives from school districts and fire districts across Santa Cruz County attended a county Board of Supervisors meeting, where they learned some specifics about the irregular transactions that Chase Bank had flagged. There were 11 of them, 11 transactions, and each one was [00:14:00] $375,000. That made for a total of $4.1 million. The chief of the Sonoita Elgin Fire District and superintendent of Sonoita School District both issued statements as they were asked to review their records for any irregularities between the revenue they earned and the actual money they received. In [00:14:30] each case, county officials reiterated that the investigation was ongoing and everyone was cooperating with the federal investigators on the case. So that was the bad news. And that's it. There was only bad news. Later that summer, in late July, you know, officials got more bad news. An analysis by a local accounting firm found that more money was missing. A lot more. About $35 million [00:15:00] more. A total of $39.4 million had gone accounted for. The community was outraged, of course, with these new revelations and speculation about how it was pulled off continued. One resident told the Patagonia Regional Times, quote, now more than ever, I am convinced that in order to steal that kind of money, she had help. Either that help was the form of incompetence on the part of her supervisors, or directly in the form of accomplices. [00:15:30]

Caleb Newquist: Either way, I hope they are all held accountable. Just a couple days later, Santa Cruz County sued Liz Gutpa and her husband David and son Davian, Davion and several entities controlled by them for the alleged embezzlement. In the lawsuit, which you can see in the show notes, the county charged them with fraud, conversion, civil conspiracy, racketeering and breach of fiduciary duty. Santa [00:16:00] Cruz County's lawsuit spared no details in its allegations. It claimed that Gafar has made 181 illegal wire transfers from the county's bank accounts to the account of one of her businesses, Rio Rico Consulting. These transfers ranged in amount from $25,000 to $2,950,000. The lawsuit claimed that she made these transfers [00:16:30] over the course of ten years, beginning in March 2014 and ending in March 2024. March 2014 was less than two years after she was first elected treasurer of Santa Cruz County. Okay, so $39.4 million is allegedly missing. Is 39,412,100, to be exact. Uh oh. And the lawsuit noted that the vast majority of money came from the county's [00:17:00] savings account. So there's lost interest to consider, which amounted to $1,349,666. That made the total loss to the county to be 40,764,766. All in ten years. So disturbing, yes, but also very impressive. Now, if these circumstances sound familiar, then there's a good reason for that. Long time listeners of the show certainly remember episode three, where [00:17:30] Greg Kite and I discussed the case of Dixon, Illinois.

Caleb Newquist: In that one, a municipal comptroller, Rita Crundwell, embezzled over $50 million from the city of Dixon. She conducted her fraud over the course of more than 20 years. Rita stole a lot of money in a relatively short period of time. You know, an average of 2.5 million a year. You don't have to be a numbers wizard to realize that. The lawsuit against Liz Gutt for alleged that she was stealing [00:18:00] at a faster clip than Rita, 39.4 million over ten years, 3.9 million a year. Now, I don't know about you, but if I think about what I was doing from March 2014 to March of 2024 is that there was a lot that happened. I moved a couple times, I got married, some kids showed up, I traveled quite a bit, I [00:18:30] changed jobs, I started this podcast and, you know, like all of you, we I lived through a global pandemic. I mean, a lot happens in ten years. But you know what I didn't do during that entire time? I didn't carry out a fraud. And we've alluded to this in many episodes, but I just want to expand on it a little more. And that is this. The practicalities of carrying on a fraud for [00:19:00] that long are, are kind of mind bending. I just covered the high points of what I remember doing for ten years. And you know what else happens over the course of ten years? Lots of stuff that's not even worth mentioning.

Caleb Newquist: Like, I worked a lot. I wrote a lot. I got sick many times. No hospital visits that I can recall. But, you know, I definitely was [00:19:30] sick a few times. Many times, especially after having kids. I definitely was getting sick. Um, I'm happy to say that during that period of time, the number of hangovers I had was steadily going down. So that's progress. That's that suggests progress of some kind, right? I also went to several weddings, several funerals, lots of therapy sessions. And I guess my point is we don't really think too much about how everyday life is so boring. Like, [00:20:00] life itself is miraculous and a complete wonder. But when you break it down day by day, in between these big moments that you can recall, there are plenty of days that are, you know, exceptionally dull. But if you're carrying on a fraud, does that mean that every day is kind of exciting or terrifying? You have to be like on every day, every day, like vigilant to the point of rampant [00:20:30] paranoia. And that sounds exhausting. I don't know if there's any amount of money that would make carrying on a fraud for ten years worth it. I know Kelly Richmond Pope tells us that, like, everybody's got their number and I'm sure I have my number, but it's a big number.

Caleb Newquist: If I had to carry on a fraud and sweat it out for a decade, it would be a big number, a very big number. And we've talked about this many times. You can't even take a vacation, right? Even if you're on vacation, and even if you manage to take [00:21:00] a vacation while you're doing a frog, you're not going to enjoy it, are you? I mean, can you even enjoy the money that much at all? I mean, people seem to try, but you're always thinking about how to hide it, how to launder it. You know, the practical things of carrying on a fraud every single day, 24 hours a day, seven days a week, 52 weeks a year. It's just so far beyond a full time job. Think [00:21:30] about how exhausting a full time job can be, and then think about it consuming everything in your life, you know? I don't know, maybe I'm describing the job you have right now. And if that's the case, I don't know. If you hit your breaking point, you can just quit, right? But if you quit a fraud, you get caught. And that's what happens next is not going to be good. And so you have this crushing amount of dread. I have to imagine I don't know personally, but I have to imagine there's a crushing amount of dread. And [00:22:00] I think the vast majority of people are not psychologically capable of dealing with that, like processing it on a day to day basis.

Caleb Newquist: Like the compartmentalization that would be required. It just doesn't really seem possible. I don't know. I've got some. Someday we will get a psychologist in here to talk about this. I'd like to anyway. Or if you're listening and you want to talk to me about this and you're a psychologist, that would be great. Okay. That's that's that's that's [00:22:30] an that's an open invitation, not an empty gesture. All right, so ten years. How does one keep a fraud hidden for that long? The lawsuit claimed that Gaffar did this in three ways. Okay. Way number one. She only wired funds from August through May. Okay, that's ten months out of the 12 months of a year, but whatever. Anyway, she avoided June and July, and the lawsuit explains that this was because [00:23:00] the county's fiscal year ended on June 30th. And during its annual audits, the auditor general only looked at the year end financial statements to verify those balances. Liz knew this, and so she just didn't wire herself money during that time. And so the auditor apparently not testing transactions out of that period, out of that, outside of that time frame, they would never see the transfers to Liz's businesses. Okay. Hiding. [00:23:30] Fraud. Tactic number two. Liz misrepresented the total. Outstanding quote unquote daily warrants in reconciliations. So we'll get we're going to we're going to talk about this.

Caleb Newquist: So obviously the county's general ledger. It's accounting. It's books if you like. They did not include Guterres wire transactions to Rio Rico Consulting. She's not going to book a credit to cash in a debit to embezzlement expense. [00:24:00] Right. She's not going to do that. So the financial statements or the treasurer's report, they did not reflect the actual balance of the county's bank accounts. Okay. Anyone can look at the ledger and see one number. They can look at bank statements and see that they wouldn't agree. Right. So that's why accountants do reconciliations. They have to reconcile the bank to the book. It's this process of identifying the differences between the books and the bank. [00:24:30] I'm, you know, for the auditors and accountants listening. They are, you know, they are bored with this, but I'm just explaining it for everyone else. Anyway, those reconciliations, they document the details of that difference. Okay. But if that difference is being created by an embezzlement for hundreds of thousands of dollars, you're not going to document money that I'm taking for myself in that reconciliation, are you? No. [00:25:00] I mean, that's that would be hilarious. But also then you're. Then the jig is up. Okay. You have to figure out a way to make it look legitimate. So nobody asks any questions. So to cover this up, Liz would misreport the daily warrants. Again, not sure about this terminology, but that's what they had the daily warrants in this cash reconciliation.

Caleb Newquist: Those were the expenses that the county had paid but not yet recorded in their books. Okay. So this meant when reporting [00:25:30] those cash reconciliations, Liz showed that those warrants that had cleared the bank, they just hadn't been posted to the books, but she was making it much higher than they actually were. Right. So this allowed her to balance her report with the actual cash totals that were reflected in bank statements, and that helped fill in the gap of those declining account balances. She was hiding those wires herself in those [00:26:00] daily warrants. Okay. And a table in the lawsuit showed how much those daily warrants were, uh, each year over the ten years that they said she was stealing. So in year one, the amount outstanding was 1.2 million and year two was 925,000. On and on and on. Then in year five, it was 4.6 million. In year six it was 5.5 million 78. 7 million. Year 82. 9 million. Year 94. 3 [00:26:30] million. And finally in year ten, 1.5 million. Okay. This led to the third way that Liz was covering her tracks, and that is she had by by a certain point, she had taken so much money that the outstanding items couldn't plausibly explain the difference between the cash balance on the county's books with the balance shown by the bank. Right. You're just like, that's not. How could that be? How could we have so many outstanding daily warrants? Right.

Caleb Newquist: So Liz started [00:27:00] creating fake investment statements that would serve as proof of the difference between the bank balance and the book balance. The lawsuit claimed that there were at least five fake statements. Now, remember, these are all just. These are all just civil charges. In other words, they were part of a lawsuit. The county, Santa Cruz County, Arizona, was suing Liz. Nothing criminal. Nothing criminal yet. On [00:27:30] November 19th, 2024, the US attorney for the District of Arizona brought criminal charges against Les Govar, including one count of theft by a public official, one count of money laundering, and one count of tax evasion. Charges broke down the 187 wire transfers Liz made from 2014 through early 2024, when it started. The charges allege that she made six wires [00:28:00] for a total of $386,100. That made for an average transfer size of about $64,350. Okay, the number of transfers peaked in 2020 when she made 26 of them. That's every other week, and the total amount of embezzled funds that year was $4,525,000. But the largest dollar amount she stole in a in a single [00:28:30] year of the scheme was in 2023, when she made 21 transfers into account. She controlled for $11,350,000, so each transfer was more than $540,000. That is until Chase Bank notified the county about the suspicious transfers. Prosecutors allege that Liz had already made eight transfers in 2024 for more than $2.8 million.

Caleb Newquist: And in case you weren't following the trend, by that final year, [00:29:00] the number of transfers was accelerating quite a bit, and that might have been what the bank noticed if it hadn't already noticed the sheer size of those transfers in 2023. The indictment followed very closely the lawsuit in explaining how Liz was able to cover up her theft. So little recap. First, she falsified the reconciliations by showing outstanding items that the bank had accounted for, but the accounting system had not. [00:29:30] Of course, had these items been posted to the accounting system, they were just being used to cover up the cash shortfall caused by Liz's embezzlement. Okay. When those outstanding items got to be too large, she created false statements, investment statements from UBS, and that made up the difference. So from 2021 through 2023, those amounts were $14 million, $17.2 million and $26.5 million. Now, where did all this money go? Well, the lion's [00:30:00] share of it was used to buy and renovate four major ranching properties, but also $7 million in purchases were made on credit cards, various livestock related expenses, and automobiles. Oh, and for reasons not explained in the indictment, Liz did not file a personal tax return for the calendar years 2014 through 2023. And so the charges allege that she owed over $13 million in back taxes. Now, [00:30:30] in all fairness, the county they had a control in place for this.

Caleb Newquist: Liz was not unilaterally able to make these transfers. They had a two step process for wire transfers that required first, the chief Deputy treasurer to initiate a wire transfer. They had they did that with a computer token that was assigned to the [00:31:00] deputy for that exact purpose. Okay. Only after the chief deputy initiated a wire transfer could a treasurer approve it using a separate token assigned to the treasurer for that exact purpose for approving the wire. Okay. So there's two people there, right? But Liz was able to work around this two step process by good old fashioned lying, just lying to her subordinates. She told [00:31:30] her chief deputy that the transfers were going to a savings account where the counting was earning interest, and so that was enough, apparently, to convince that deputy to give her her computer token to allow for the initiation of the transfers and basically rendering the entire process useless. So essentially, no controls easily circumvented, I should say. Liz also manipulated her subordinates in a number of ways, including [00:32:00] with gifts. She loaned her chief deputy $6,000 to buy a new air conditioner. The chief deputy told investigators that she had planned to repay that money after she retired. And I don't know, maybe I'm wrong, but I feel like in a place like southern Arizona where temperatures, you know, don't go below 100 degrees for weeks on end, I feel like giving someone an air conditioner with no feasible plan for repayment.

Caleb Newquist: That sounds like a bribe to me. [00:32:30] I don't know. Just feels like a bribe. Air conditioning? Yeah. Uh. She also paid for her deputy's cell phone. She. She allowed the chief deputy sister to use one of their one of her cars, which was apparently worth $3,000. I don't know about the car or the use. They didn't say. Anyway, the point is, she loaned her the sister of her subordinate, a car. She paid the bills. She paid [00:33:00] bills for one of the secretaries, gave this person $1,500 for their birthday. And then there was a tax clerk who said that Gaffar had given her son a generous gift when he got married. And then her daughter got married on one of her ranches. And then they went on a long weekend to San Marcos in Mexico. I don't know, with all that generosity and, you know, combined with no oversight of his position. I [00:33:30] mean, basically no controls. Speaking of the oversight, county officials did not review the monthly cash reconciliation reports, according to the state's findings. And there was even a cash balance report that did not change by a single penny for 14 months. And that's kind of weird. It's not unheard of. Some money just sits. But maybe something that you would [00:34:00] ask about, right? On November 21st, 2024, Liz Ghafa pleaded guilty to embezzlement, money laundering and tax evasion. Prior to sentencing, her attorney attempted to explain her actions in court.

Caleb Newquist: Her lawyer said, quote, Miss Stouffer committed one of the dumbest, ill conceived, short sighted and most audacious crimes in Arizona State history. Her scheme was not well planned. She made no real effort to [00:34:30] conceal her actions. Even a cursory review of financial records or publicly available information would have quickly uncovered her crimes. Okay. Harsh and not entirely true. Dumb? I don't know. I'd say by fraud standards, it feels pretty average. I mean, there's way we have talked about way dumber frauds than this one way dumber. So I don't know. Dumbest. Hmm. Anyway. Short sighted. I don't know about that either. As we discussed, [00:35:00] she carried this on for ten years. That's not ten years. Isn't shortsighted. Could it be longer sighted? Sure, but short sighted. I don't know. I don't think so. Audacious. A cursory review that would have uncovered it. All right, counselor, I'll give you those two. Okay. He went on to say Miss Gutpa had no business ever becoming the treasurer in the first place. Okay. Another quibble here. In the year [00:35:30] 2025, I think we are all aware now that this is not really how politics works. Okay. If people who had no business serving in government couldn't serve in government, then I think we'd have a very different government right now. Not to mention this is a local government, right? We're not even talking about the, you know, federal government, local government, you know, just finding someone willing to do the job that's that's hard enough.

Caleb Newquist: Now you're going to want somebody who's qualified, [00:36:00] who has the chops to do the job. I mean, honestly, they're just looking for a body. Most of the time. Okay. Anyway, as for an actual explanation, he said, quote, she was a person suffering from severe depression and diminished capacity who was elected to run the county treasury without any real business experience or training in finance, it went on. Gut SaaS attorney says she thought she was basically borrowing money to build an ideal [00:36:30] life for her family. Quote miss gut far deluded herself into a pipe dream whereby she thought she could borrow surplus funds to establish a successful real estate and cattle businesses and then repay the money with everyone, her family included, being none the wiser. It was obviously an illegal and ill conceived idea, but Miss Gut Far was not thinking clearly. Okay, so that's the supposed explanation. And I will just say that people who are committing fraud delude [00:37:00] themselves in all kinds of ways. Okay, so you're not going to get a debate out of me there, but the idea that an elected official would believe that they had the right and ability to borrow surplus funds, whatever that means, to build up their side hustle, Sore, but still keep it a secret from their own family and taxpayers that they were elected to serve.

Caleb Newquist: That is kind of, uh, laughably unbelievable. But, you know, he had a tough job. This lawyer. [00:37:30] Anyway, the judge also must have thought that this was ridiculous because she sentenced, got far to ten years in prison and ordered her to pay over $51 million in restitution. So what did we learn? Did we learn anything? I mean, plenty of old lessons revisited, right? Having controls is not enough. They have to be implemented. They have to operate effectively. [00:38:00] Um, you know, Liz easily circumvented the the two tokens or the two keys or whatever. Whatever it was, it was it was very easy for her. And it had it had been effective, they would have had the two steps like they designed it. Right. But they would have also documented every instance of not following the process, including an explanation for why it wasn't being followed. Like oh so and so is in a body cast [00:38:30] and has been rendered mute, or has decided to wear duct tape over their mouth from now to the end of time. Whatever it is that would, you would know there would be an explanation for why it wasn't being followed. Okay, not to mention if you had someone else not the treasurer, not the deputy, another person just regularly review these instances of noncompliance with this two [00:39:00] step transfer process. You know, monitoring. If that was in place, they would have seen this and they'd be like, oh, this is happening all the time.

Caleb Newquist: Why is this happening all the time, right? Maybe not a perfect control, but that's kind of like that's kind of the framework of something that would have been maybe a little better. All right, so controls weren't happening. And, you know, the employees were maybe a little too friendly with each other. You know, travel gifts, loans [00:39:30] to subordinates with no, you know, foreseeable repayment plan. I mean, loans to a subordinate is probably bad enough right there. Forget about if forget about if whether this was a perfectly structured debt instrument, as they said in business law class. But we've we've talked about all this before. If you're going to have a team of people doing treasury and or accounting type things, you're going to eliminate a lot of risk by having [00:40:00] these people not like each other. How how, how how you achieve that? I don't know, you know, but, you know, maybe you use higher, generally disagreeable people and who would think on each other in a at the drop of a hat. That's who you want your accounting team to be. One other observation I'll just make and I kind of talked about this, but Liz was well on her way to stealing more than Rita Crundwell, another local government employee, not elected, but nevertheless. [00:40:30] But Liz was caught only after ten years, and she had taken $39 million.

Caleb Newquist: She was like three quarters of the way to Rita's Hall. But, you know, she got greedy. I mean, obviously she was greedy, but maybe she got too greedy too soon, you know, because she was already plenty greedy already. But, you know, so greedy that a bank noticed. And banks have lots of money. So if you get a bank's attention, then, yeah, maybe it's [00:41:00] too much. So I guess what I'm saying is, just when you think frauds can't get worse, don't worry, they can get worse. They can definitely get worse. That's it for this episode. And remember, if you live in Arizona and your boss wants to treat you to a state of the art Lenox or Reem air conditioner. Maybe take a beat to think about what they're really doing. If you have questions, comments, or suggestions for stories, drop me a line at OMG fraud. Com or hit me up on LinkedIn on [00:41:30] my fraud is created, written, produced and hosted by me Caleb Newquist. Zack Frank is my co producer, audio engineer and music supervisor. Laura Hobbs designed our logo. Rate review and subscribe to the show wherever you listen to podcasts. If you listen on your mark, that's where you get CPE. The only place to get CPE. I think for podcasts, I don't know. I think that's right. Anyway, earmark CPE. Do it. Join us next time for more advice, swindles [00:42:00] and scams from stories that will make you say oh my fraud.