$40M Heist Sparks Legislative Action to Support State Auditor

Arizona lawmakers are pushing for enhanced powers for state auditors, a move sparked by the embezzlement scandal involving former Santa Cruz County Treasurer Elizabeth Gutfahr. The House Government Committee recently approved a set of bills aimed at improving access to financial documents from government agencies.

Gutfahr, who pleaded guilty in November to embezzling nearly $39 million over a decade, also faces charges of money laundering and tax evasion. Her actions have been labeled as one of the worst financial scandals in Arizona history, according to Rep. Matt Gress, R-Phoenix, who sponsors the proposed legislation.

“This treasurer fabricated financial records and used fictitious information,” Gress stated. The current auditing system heavily relies on treasurers to provide accurate financial documents, which allowed Gutfahr to manipulate records for years. Audit General Lindsey Perry noted that auditors could have detected fraudulent behavior sooner with direct access to financial data from banking institutions.

The primary legislation, known as HB2368, would allow auditors to request financial documents directly from banks, bypassing potential obstructions from county treasurers. This change has garnered support from several county treasurers, who testified in favor of increased transparency during the committee meeting.

“We feel ashamed that somebody did something so horrendous to taxpayers,” remarked Maricopa County Treasurer John Allen. He further disclosed that Chase Bank, the county’s banker, has encountered challenges in providing information to the Auditor General’s Office. The new bill also includes provisions to protect banks from liability when sharing information with state auditors.

In addition to HB2368, Gress introduced two more bills aimed at enhancing oversight. HB2369 and HB2433 would require more rigorous audits of county treasurer offices and mandate annual training for treasurers on their duties.

As the legal ramifications of Gutfahr’s embezzlement continue, Santa Cruz County is pursuing $40 million in damages from the Auditor General’s Office due to alleged negligence. The county has filed a lawsuit alleging that the auditors failed to uncover Gutfahr’s actions over a prolonged period, allowing her to exploit their auditing standards.

The county claims that Gutfahr strategically executed her scheme during periods when auditors reviewed bank statements, often avoiding detection. “Gutfahr routinely exploited the Auditor General’s lax auditing standards,” the county’s complaint reads. By providing falsified investment statements and manipulating the review process, Gutfahr managed to siphon off funds routinely up until 2023, when she allegedly stole over $11 million.

In response, the Auditor General’s Office is seeking to dismiss the lawsuit, arguing that the responsibility for financial statements lies with the county itself. Attorneys for the office contend that Santa Cruz County must provide evidence of reliance on false information from auditors, which they assert it cannot do.

A jury trial has been requested by Santa Cruz County, and a discovery motion in the case was approved in Maricopa County Superior Court on February 5.