A GOP lawmaker plans to introduce legislation to expand the authority of the Arizona Auditor General in response to an ongoing civil lawsuit in which Santa Cruz County’s ex-treasurer stands accused of embezzling $39.4 million over a decade.
It comes after an Arizona Auditor General investigation into Santa Cruz County’s ex-treasurer accused of embezzling $39.4 million found she gave gifts to employees and their families and allegedly tried to have a personal relationship with a financial advisor associated with the investment bank used by the county.
The investigation, released Monday, comes three weeks after the county filed a civil lawsuit against former county treasurer Elizabeth Gutfahr, accused of embezzling over $39 million over ten years and falsifying bank statements to hide the alleged theft. Investigations by the FBI, Department of Justice and Santa Cruz County remain ongoing.
In response, state Rep. Matt Gress said he will run a bill next year giving the Arizona Auditor General’s Office independent access to financial institution records directly from the institutions.
In the auditor general’s report, the agency noted it lacked the authority to independently obtain the county treasurer’s financial information directly from a financial institution. The county is instead required to provide the required financial information, which resulted in the auditor general receiving fake investment statements.
“This will ensure that auditors have more tools necessary to uncover and address financial misconduct, even when internal controls fail,” Gress said. “Additionally, I am considering introducing legislation to require newly elected or appointed county treasurers and their deputies to meet specific training requirements, better equipping them to manage public funds responsibly.”
The auditor general’s investigation looked at certain Santa Cruz County Treasurer’s Office transactions from March 2014 to March 2024. Gutfahr allegedly took $39.4 million over 182 unauthorized wire transfers from two county Treasurer’s Office bank accounts to her personal business accounts.
The alleged theft was discovered after the bank’s laundering team flagged the county Treasurer’s Office money market account after $4.5 million had been transferred to her personal business accounts.
Investigators: Gutfahr sought to provide employees with loans and gifts
The state’s investigation revealed Gutfahr had offered some employees personal financial help or gifts.
The chief deputy treasurer said Gutfahr gave her a $6,000 loan for a new air conditioner, and a car for her sister, and has paid her cell phone bill since 2019 or 2020, the report said.
A senior secretary told investigators Gutfahr sometimes paid her bills and had given her $1,500 for her birthday. Gutfahr also allegedly gave the tax clerk’s son a “generous gift” when he was married, and she went on a trip with the tax clerk to San Carlos, Mexico. Gutfahr also offered the use of her ranch to the clerk’s daughter for her wedding, according to the report.
Court documents point to Gutfar’s extravagant lifestyle, including the purchase of several ranches. One of Gutfahr’s neighbors, Kathleen Vandervoet, went to Gutfahr’s horse ranch in April 2023 for a Tubac Historical Society fundraising event and said she was “shocked” at the opulence.
“I was shocked because the ranch itself would have been somewhat costly, and then she was talking about all the renovations she and her husband had made,” Vandervoet said, including putting in a new pool, a pool house, and remodeling rooms and an outdoor kitchen area.
“My first thought was where did she get all this money?” Vandervoet said. “I just thought, ‘Oh well I hope she had good luck. I hope she inherited it.’ But I never I never thought too much more about it.”
Former treasurer bypassed internal controls as officials, employees failed to review monthly reports
Investigators found Gutfahr allegedly asked the chief deputy treasurer for her password and access to her multifactor token authentication device to transfer funds to a Wells Fargo investment account with a more favorable interest rate.
This meant Gutfahr and the chief deputy treasurer shared their passwords and kept their authentication devices accessible to each other.
“By overriding this internal control, the Treasurer created a way to repeatedly make unauthorized wire transfers from County Treasurer’s Office accounts by herself without detection,” stated the report.
Gutfahr allegedly made transfers one to five times a month except for June and July during the annual Arizona Auditor General’s audit when she avoided making transfers.
County officials, who supervise the county treasurer, did not review the monthly Cash Reconciliation reports, according to the state’s findings.
“Had anyone from the County reviewed these monthly Cash Reconciliation reports, they may have noticed irregularities and discovered the Treasurer’s actions,” stated the report.
The Santa Cruz County Board of Supervisors chairman told investigators the meeting minutes state the board approves the monthly reports, “but the approval does not connote that the supervisors have done anything to verify the contents, and he did not know when or to whom the monthly reports might be distributed,” stated the report.
Some board of supervisor members also told investigators they did not know how county departments submitted monthly reports to the board.
The report listed two instances of people questioning Gutfahr’s activities.
One occurred in November 2021, when the chief deputy treasurer questioned Gutfahr about a November 2021 transaction wiring $225,000 from the county treasurer’s office checking account.
Gutfahr allegedly told her the money was mistakenly wired, and the money would be returned. After the money still had not been returned the employee inquired about the missing funds again. Gutfahr allegedly said the investment company had trouble returning the money.
“The chief deputy treasurer failed to record the transaction in the County Treasurer’s accounting system, as required, or further follow up with the Treasurer,” stated the report. “The $225,000 was never returned to the County Treasurer’s Office checking account.”
In another instance, the county’s financial consultant emailed Gutfahr in December 2021, with questions about a UBS investment, and Gutfahr responded “with apparent lies,” said the report.
Gutfahr wanted personal relationship with bank employee, investigators say
Gutfahr opened an investment account with UBS Financial Services in 2021 and allegedly used that account to help hide her theft, providing fabricated UBS investment account statements to a third-party consultant, according to court documents.
The state auditor general said Gutfahr may have attempted to have a personal relationship with a UBS financial advisor who handled some of the county’s investments. The auditor found emails from February 2023 in which she offered a UBS financial advisor one of her family’s homes to stay in.
Investigators found another email in which the UBS financial advisor asked her to call him. Although it is unknown if she called him, an hour later she emailed him saying: “I’m not asking for anything. I’ll take care of it. Please don’t resign from my account.”
Investigators did not see an email response from him. But they found another email from Gutfahr 26 minutes later that read: “Don’t worry, you don’t have to do anything. You don’t even have to call. I called them and took care of it … I apologize.” The UBS financial advisor emailed back: “Thank you.”
UBS legal counsel restricted investigators from speaking with the UBS financial advisor for further explanation of these emails.
State recommends more training, procedure changes
Since the missing funds were discovered, the county has made sweeping changes to the treasurer’s office. The county now requires the treasurer to provide independent oversight of the treasurer’s office functions instead of performing “cash-handling duties” like transferring funds. It also requires four employees instead of one to reconcile bank statements before they are reviewed by the county treasurer.
The Arizona Auditor General provided additional changes for the county to implement.
Investigators found the treasurer’s accounting system was outdated and had control deficiencies — issues the auditor general has seen since 2009. In its report, the state recommended the county implement IT-related controls recommendations included in prior audit reports since 2009 and ensure access to accounting records and recording of transactions are restricted to one employee who does not receive cash or disburse funds.
The state also recommended the board of supervisors and county staff establish policies and procedures about their responsibilities for approving and receiving treasurer’s reports and Cash Reconciliation reports.
Additional training was also suggested for treasurer’s office employees on internal control procedures, and for the treasurer who is elected and not required to meet any specific educational or experience requirements related to treasurer duties.
Last, the state recommended the county periodically conduct unscheduled compliance audits.
Local resident saddened, shocked
Vandervoet said Gutfahr’s alleged theft removed public money that could have been used for so many things including street paving and community parks, education and fire protection.
“I can’t understand it because she grew up in this community, and she knows how hard it is for people to make a living,” Vandervoet said, noting Santa Cruz County is rural with a smaller tax base and smaller salaries.
According to a report by 24/7 WallStreet, Santa Cruz County is the fourth poorest county in Arizona, preceded by Navajo, La Paz and Apache counties.
The Republic’s coverage of southern Arizona is funded, in part, with a grant from Report for America. Support Arizona news coverage with a tax-deductible donation at supportjournalism.azcentral.com.
This article originally appeared on Arizona Republic: Santa Cruz County accused of stealing $39M; new controls proposed
