Republican lawmakers plan to introduce legislation to expand the powers of the Arizona Auditor General in response to an ongoing civil lawsuit that accuses a former Santa Cruz County treasurer of embezzling $39.4 million over a decade.
This comes after an Arizona Auditor General's investigation into the former Santa Cruz County treasurer, who is accused of embezzling $39.4 million, found that she gave gifts to employees and their families and sought to cultivate a personal relationship with a financial adviser with ties to an investment bank used by the county.
investigationThe video, released on Monday, The county filed a civil lawsuit. To former County Treasurer Elizabeth GutferHe is accused of embezzling more than $39 million over a 10-year period and falsifying bank statements to cover up the thefts. The investigation is ongoing by the FBI, the Department of Justice and Santa Cruz County.
In response, state Rep. Matt Gress said he will introduce legislation next year that would give the Arizona Auditor General's Office independent access to financial institution records directly from financial institutions.
The auditor general's report noted that the department did not have the authority to independently obtain county treasurer financial information directly from financial institutions, but instead required counties to provide the necessary financial information, resulting in the auditor general receiving false investment reports.
“This will ensure that auditors have more of the tools they need to detect and address financial irregularities, even when internal controls are not working,” Gress said. “In addition, I am considering introducing legislation that would require newly elected or appointed county treasurers and their deputies to meet certain training requirements to better prepare them to responsibly manage public funds.”
The auditor general's investigation looked at certain Santa Cruz County Treasurer's Office transactions from March 2014 to March 2024. Gutphard allegedly received $39.4 million through 182 fraudulent wire transfers from two county treasurer's office bank accounts to his own personal business accounts.
The alleged theft came to light after the bank's money laundering team issued an alert on the county Treasury Department money market account after $4.5 million was transferred to her personal business account.
Investigators: Gutfahr offered loans and gifts to employees
The state investigation revealed that Gutfer provided personal financial assistance and gifts to some of his employees.
The chief deputy treasurer said Gutphard had given her $6,000 in loans for a new air conditioner and a car for her sister and had been paying her cell phone bills since 2019 or 2020, according to the report.
The senior assistant told investigators that Gutphul sometimes paid her bills and gave her $1,500 for her birthday. Gutphul also allegedly gave “generous gifts” when the taxman's son got married and even took a trip with the taxman to San Carlos, Mexico. Gutphul also offered to use his ranch for the taxman's daughter's wedding, according to the report.
Court documents detail Gutfer's lavish lifestyle, including the purchase of multiple ranches. One of Gutfer's neighbors, Kathleen Vandervoort, said she visited Gutfer's horse ranch in April 2023 for a fundraiser for the Tubac Historical Society and was “shocked” by the luxury.
“I was surprised because the ranch itself seemed pretty expensive, and she was talking about all the renovations she and her husband had done,” Vandervoort says, which included installing a new pool and pool house, as well as renovating rooms and an outdoor kitchen area.
“My first thought was, where did she get all that money,” Vandervoort said. “I just thought, 'Oh, I hope she gets lucky. I hope she inherits it,' but I never gave it any more thought.”
The former financial officer circumvented internal controls by not having executives or employees review monthly reports.
Investigators found that Gutphard allegedly asked the assistant treasurer for access to passwords and multi-factor token authentication devices in order to transfer funds to investment accounts with Wells Fargo that offered better interest rates.
This meant that Gutfahr and the Chief Deputy Treasurer shared passwords and kept their authentication devices accessible to each other.
“By ignoring this internal control, the treasurer developed a way for himself to repeatedly make fraudulent wire transfers from the county treasurer's office account without detection,” the report said.
Gutphal allegedly transferred funds one to five times each month, except during June and July when he was under an annual audit by the Arizona Auditor General, during which time he avoided transferring funds.
The state's findings showed that county officials who oversee county treasurers did not review monthly cash reconciliation reports.
“If someone at the county had reviewed these monthly cash reconciliation reports, they might have noticed the irregularities and discovered the treasurer's actions,” the report said.
The chair of the Santa Cruz County Board of Supervisors told investigators that while meeting minutes show the board approved the monthly reports, “approval does not mean the supervisors did anything to review the contents, and they did not know when or to whom the monthly reports were distributed,” the report said.
Some members of the Board of Supervisors told investigators they didn't know how county departments submitted monthly reports to the board.
The report cited two instances of people questioning Gutfer's activities.
One occurred in November 2021, when the deputy treasurer questioned Gutphul about a November 2021 transaction in which $225,000 was transferred from the county treasurer's office checking account.
Gutfer allegedly told her the money had been sent in error and would be returned. When that didn't happen, the employee again inquired about the missing funds. Gutfer allegedly said the investment firm was having trouble returning the money.
“The Chief Deputy Treasurer did not record the transactions in the County Treasurer's accounting system as required or communicate further to the Treasurer,” the report states. “The $225,000 was not returned to the County Treasurer's Office checking account.”
In another example, the county's financial consultant emailed Gutfer in December 2021 with questions about UBS investments, and Gutfer responded with “obvious lies,” the report said.
Investigators said Gutfahr wanted a personal relationship with the bank employee.
According to court documents, Gutphard is accused of opening an investment account with UBS Financial Services in 2021 and using that account to conceal the theft and provide falsified UBS investment account statements to a third-party consultant.
The state auditor general said Gutfer may have sought to cultivate a personal relationship with a UBS financial adviser who handled some of the county's investments. The auditor found a February 2023 email in which Gutfer offered the UBS financial adviser a place to stay in one of his family's homes.
Investigators found another email from a UBS financial adviser asking him to call her. It's unclear if she did, but an hour later she sent an email saying, “I'm not asking for anything. I'll handle it. Please don't cancel my account.”
Investigators didn't see his email response, but 26 minutes later they received another email from Gutfer that read, “Don't worry. You don't have to do anything. You don't even have to call. I called and handled it. Sorry.” The UBS financial adviser replied, “Thanks.”
UBS legal counsel barred investigators from speaking with UBS financial advisers to seek further clarification about those emails.
State recommends more training and procedural changes
Since the missing funds were discovered, the county has made significant changes to the treasurer's office. The county now requires the treasurer to provide independent oversight of the treasurer's office functions, rather than “cash handling operations” such as transferring funds, and it requires four employees, instead of one, to reconcile bank statements before the county treasurer reviews them.
The Arizona Auditor General has laid out additional changes that counties should implement.
Inspectors found the treasurer's accounting system was outdated and had control deficiencies, issues the auditor general has seen since 2009. In the report, the state recommended the county implement IT-related control recommendations included in previous audit reports from 2009 and limit access to accounting records and recording of transactions to a single employee who doesn't receive cash or disburse funds.
The state also recommended that the Board of Supervisors and county staff establish policies and procedures regarding accountability for the approval and receipt of financial reports and cash reconciliation reports.
Additional training on internal control procedures for employees in the Financial Director's Office and additional training for selected Financial Directors that would not require them to meet any specific education or experience requirements related to the duties of the Financial Director were also proposed.
Finally, the state recommended that counties conduct unscheduled compliance audits on a regular basis.
Locals saddened and shocked
Vandervoort said Gutfall's alleged theft resulted in the loss of public money that could have been used for many things, including road paving, community parks, education and fire protection.
“She doesn't understand, because she grew up in this community and she knows how hard it is for people to make a living,” Vandervoort said, noting that Santa Cruz County is rural, with a small tax base and payroll.
According to a report by 24/7 WallStreet, Santa Cruz County is the fourth-poorest county in Arizona, followed by Navajo, La Paz and Apache counties.
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