>>> the central illinois town of dixon , authorities announced a 60-count indictment felony, felony indictment rather against a woman named rita crundwell. she also faces federal charges. she is accused of stealing taxpayer money on a breathtaking scale. as harry smith reports tonight, this story of a local hero gone wrong has shaken just about everyone in a small town that for decade had pretty much decided in rita we trust.
>> reporter: on summer nights, people still come to hear the dixon municipal band playing in the band shell behind the high school . dixon , illinois, the boyhood home of ronald reagan . people say this is the place young ronnie learned his values. a place where trust flows as gently as the waters in the rock river . [ applause ] dixon 's mayor is is jim burke .
>> at one time i was thinking about moving to florida. but i was on the way home, as i went down the street, i heard and it was one of my grandsons up on the porch playing with some kids. i thought that's why i am not leaving dixon .
>> reporter: dixon , a place where your word is your bond. a place where trust has been part of the glue that held the town together, especially in the last few years. and despite all that dixon had to seem going for it, the city budget had been cut to the bone. no one who works for the town has received a pay raise in more than three years. dealt debt is piling up town workers just buckled down and made do.
>> they all got on board with us each year and knew that in order for us to survive there weren't going to be any raises. and not new hires and those things. just so we could get by with what we had. it didn't get any better. actually this last year it was actually, seemed even, more drastic in regard to maybe layoffs.
>> reporter: how could things be so bad in a seemingly prosperous town. for decade dixon 's budget was in the capable and hard working hands of one person. who is rita crundwell?
>> well, rita crundwell, a very likable person. everybody around city hall liked her. she was very friendly. always had a big hi and hello.
>> reporter: danny landloss is the chief of police .
>> you had a question, go to rita . if you need something, go to rita . any tomb-ime you have an expenditure of significance check through rita . everybody looked at her, she would fix any problem or take care of anything that needed to be done.
>> reporter: sheep was the go-to gal.
>> she was. ri rita crundwell grew up in dixon . belonged to national on nor society and started working in city hall , part time as a 17-year-old student and ultimately became the city's treasurer comptroller. in her spare time , crundwell developed a more glamorous avocation, she built up a nationally famous quarterhorse farm right on the edge of town.
>> congratulations to our newly crowned, world champion .
>> reporter: rita owned 400 horses and be cam known coast to coast for her 54 world championships . a glimpse in a room reveals wall to wall trophies and award.
>> bred by rita crundwell. dixon , illinois.
>> reporter: it was as if rita crundwell was leading two lives.
>> will there would be stories floating around town that she sold a horse for $250,000. people in dixon assumed the horse business was making her ric rich. they were flatter that rita still worked so hard for her neighbors in dixon .
>> what i thought she cared about the city. wants to seep it through. she wants to be here to make sure everything goes well with the city. an that's what i believed.
>> reporter: let me get this straight.
>> reporter: you think her heart is so large and her -- faith and love and loyalty to dixon is so strong that even though she has this very successful horse business she is still working nose to the grindstone every day in city hall .
>> no doubt.
>> year after year, rita was the bearer of bad news. the town of dixon couldn't make end meet. sack rifices would have to be made. she would present the figures for the annual budget workshop and that showed it was going to be nip and tuck as far as how things would go.
>> reporter: one day when rita was away at a horse show , a city employee discovered something suspicious.
>> our city clerk brought a bank statement to me. and she said, i cannot connect this with anything. and i took a look at it. and i thought, this can't be.
>> reporter: there in the statement was a rogue account. in it, hundreds of thousand of dollars that had apparently been taken from city fund. could it be that rita crundwell, the one-time president of the high school business occupations club, was stealing from the city?
>> then i thought, well you know this small town , if we're wrong about this, she is going to get all sullied up, rumors will fly all over there is swroung with the money thing.
>> shaken and nervous, the mayor could not ignore the evidence before him. so he called the fbi .
>> i started to get sequestick to my stomach. i realized this was a big ripoff going on.
>> reporter: from what you could see right there, how big did you think it was?
>> i could see there was $775,000 had gone in and out of this account in one month of september.
>> in one month?
>> one month.
>> reporter: what did the fbi then say to you? what plan did they come up with?
>> first of all they wanted me to cokeep my mouth shut.
>> reporter: he did just that. for 5 1/2 months, the fbi secretly scoured dixon 's finances. all the while the mayor and clerk who tipped him off had to act business as usual . you are coming in here every day, you know what you know. you are looking at her, she must not have had any idea that you knew?
>> oh, i don't think she did. i don't think she did.
>> reporter: until the morning last april when the fbi came to city hall to pay rita a visit.
>> she come wheeling right in this door here. and i said, good morning, rilta. she said good morning. and i said three gentlemen would look to talk to you. one agent identified himself with the fbi we've got some questions to ask you. she said, sure. her face never changed emotion for anything.
>> reporter: boy, ice in her veins.
>> yeah. yeah.
>> reporter: no tears? no hysteria?
>> reporter: i didn't do this.
>> reporter: it was far worse than anyone dreamed or could even imagine. according to prosecutors, the trusted comptroller misappropriated an astonishing amount of money. $53 million in transactions, over the past 20 years. i have to believe there are people in this town who say, mayor, you have been mayor here for more than a decade. how could you not know this?
>> absolutely. absolutely. they'll ask that. you know this took place over, roughly almost a 22-year period. we had five city councils . three financial commissioners. three mayors. 21 annual audits. and no red flags surfaced, at least that any body detected.
>> reporter: perhaps the flags were hard to detect because they were so easy to see. prosecutors believe the money to run the horse business was coming from a modest office in dixon city hall .
>> unbelievable actually. it sure is.
>> reporter: missing was $53 million that should have gone to fixing things like the street under dixon 's famous arch and providing raises for all of those loyal city workers. disbelief has turned to disgust.
>> it makes me furious to think about what she has done. not only to the citizens at large, but the people very close to her, good, decent people. who trusted and who respected her. you know there is nothing worse than to have somebody that is close to you betray you like that.
>> reporter: if you had a chance to talk to rita , what would you say to her?
>> i would just look at her and shake my head at her and say, how could you, rita , how could you, how could you hurt so many people? how dcould you do this? put people's jobs and families at risk for your greed, for a horse? for a trophy? are you kidding me? i would tell her i hope you go to prison for the rest of your life.
>> reporter: perhaps the music from the band will help people get over what happened here in ronald reagan 's boyhood home. but they do well to remember something president reagan once famously said -- trust, but verified.
>> harry smith is here. couple things to point out. she pleaded not guilty. and ignored our pleas for an interview. how do they allege she got away with this?
>> the town has a mailbox at the post office and she volunteered to pick up the mail every single day. and somehow all of that mail that came back, except one tiny piece that had the -- proof of that one account.
>> as the mayor tries in his own dech defense to point out, many blame at many administrations here over 22 years.
>> right. the people in this town trusted her so much. the last person they would have suspected. they thought they weren trouble like everybody else . but the town is going to get some of its money back. a big sale of hundreds of those horses this weekend. a lot of her property. so, they're going to get some of it back. but it will be more like pennies on the dollar.
>> or oelats. harry smith . thank