Corrections and clarifications: A previous version of this article incorrectly identified the agency investigating Santa Cruz County’s former treasures.ris accused of embezzlement.
Santa Cruz County slams Arizona and its auditor general’s inaction and “substandard” audits after former state treasurer is accused of embezzling nearly $40 million in public funds The state is suing the state for causing a negative impact.
The complaint was filed Nov. 14 in Maricopa County Superior Court against the state and Arizona Auditor General Lindsey Perry. In the process, the county said the auditor general became aware of former Treasurer Elizabeth Gutfahr’s daily inflating of warrant items and falsifying bank statements in an effort to cover up allegations of fund theft from 2014 to 2024. He claimed that there was not.
“Mr. Gutfahr’s scheme would have been discovered years ago had the Comptroller’s Office conducted a proper audit,” the county said in its lawsuit, seeking at least $40 million in damages. There is.
of suit The lawsuit was filed three months after the county filed a civil suit against Gutfahr in Pima Superior Court. The criminal investigation is still ongoing. The Arizona Attorney General’s Office declined to comment on the lawsuit. The Board of Audit did not respond to requests for comment.
Gutfal is accused of stealing $39.4 million in public funds. The county said it is willing to settle the claim for $45 million, including $1.3 million in lost interest, other fees and costs to locate the missing funds.
The county said in its complaint that the comptroller’s “gross negligence” emboldened Gutfahr. The complaint alleges that after stealing small amounts early in the scheme, she escalated the scheme to embezzle as much as $11.3 million in one year.
The county called the state auditor’s methods “substandard,” noting that it did not review a random sample of bank reports or financial statements. The agency only examined year-end bank statements for June and July.
The county said Gutfahr is suspected of stealing millions of dollars undetected through this practice.
“If the Comptroller General had simply looked at almost every savings account statement for any other month… Mr. Gutfahr’s fraudulent wire transfers to Rio Rico Consulting would have stood out like a sore thumb. Deaf,” the county said.
How did Mr. Gutfahr hide the embezzlement charges?
The county also said it accused Arizona of failing to analyze daily warrant items in annual audit reconciliation reports submitted to the state.
Gutfahr was responsible for preparing a report on the county’s cash reconciliation process, which compares the general ledger to other accounts such as bank and investment statements to ensure balances match.
During this process, she misreported payments to vendors or third parties that were line items on the daily warrant in order to close the gap between the amounts reported in the general ledger and the actual amounts in the county’s accounts. It is said that
Because the fiscal year ends on June 30, the county will have a minor difference at the end of the year because payments that were settled on June 30 were not posted to the general ledger until July 1. He said there are cases. The county said this made Gutfahr’s claim possible. The large discrepancy between the actual cash balance and the cash balance reported in her financial report was due to the timing of the posting of the warrant to the general ledger.
“Had the Comptroller General taken this step to actually confirm what Mr. Gutfahr said about the daily warrants, the Comptroller and Auditor General would not have been able to confirm the various “warrants” that Mr. Gutfahr claimed were outstanding. ‘ has actually already been posted to the general ledger. in June, not July,” the county said.
According to the county, treasurers from several counties warned the state that if it continues to only check year-end bank statements, it risks fraud.
One such agency is the Coconino County Treasurer’s Office, which asked the state to randomly select three months’ worth of bank statements to audit.
“Had this simple step been implemented as standard practice in all Arizona counties, the auditor general likely would have discovered Mr. Gutfahr’s theft,” the county said.
County accuses state of failing to recognize evidence
The county also accused Gutfahr of falsifying bank statements to hide increased amounts transferred to personal accounts.
Evidence of falsification includes using her company’s address in Tumacacori and UBS Financial Services Inc.’s Rio Rico address instead of the bank’s actual Phoenix address. The statement also changed the name of the financial advisor and the phone number assigned to the account.
“The auditor’s office failed to exercise reasonable care and failed to recognize clear indicators that the charges were fabricated,” the county said.
In an Aug. 26 report, the Comptroller’s Office said it did not have the authority to independently obtain detailed financial information for county treasury offices directly from financial institutions, and would assist the treasurer and county staff in obtaining that information. Said it was necessary.
The county countered by saying in its complaint that the auditing agency could contact the bank’s representatives to verify the information the county provided in its financial reports and ask the county to allow the bank to provide the information. .
In 2023, Gutfahr allegedly authorized JPMorgan Chase to provide financial statements to the state for ongoing audits. However, the state did not request savings account statements for months other than June, according to the county.
County discovered loss of funds after bank reported fraud
The county discovered the missing funds in April and blamed the state’s failure to follow “common generally accepted auditing standards and practices” for failing to catch the theft sooner.
The missing funds were discovered after JPMorgan Chase reported 11 fraudulent transactions totaling $375,000 to the county. The discovery prompted an investigation by the Federal Bureau of Investigation, Department of Justice, Arizona State Comptroller’s Office, and Santa Cruz County.
After an investigation, the county filed a civil lawsuit against Gutfahr and his family on Aug. 1.
county suspect Ms. Gutfahr has several other companies that assist her in embezzling public funds and own properties purchased with county funds.
The lawsuit also names Gutfahr’s husband, son, and daughter-in-law and their numerous business owners as defendants.
The investigation also included consultation with Coconino County Treasurer Sarah Benatar, who has visited Santa Cruz County several times. In some instances, the county treasurer’s office did not produce accurate reports, failed to match bank statements, and relied on screenshots of bank statements rather than original documents. discovered.
Gutfahr, a Democrat, was elected county treasurer in 2012 and was re-elected in 2016 and 2020. Before the embezzlement allegations came to light, he was running unopposed in the 2024 election.
Previously, he worked in real estate in Santa Cruz County.
Here’s where to contact the reporter: sarah.lapidus@gannett.com. The Republic’s southern Arizona coverage is funded in part by a grant from Report for America. Support Arizona news coverage with a tax-deductible donation. supportjournalism.azcentral.com.
