Arizona lawmakers want to empower state auditors to have better access to financial documents from government agencies that are under audit after a former county treasurer stole nearly $40 million from Santa Cruz County. 

The House Government Committee passed a trio of bills Feb. 5 that would give auditors more direct oversight over county treasurer offices. 

Former Santa Cruz County Treasurer Elizabeth Gutfahr pleaded guilty in November to embezzling $38.7 million over 10 years. She also pleaded guilty to charges of money laundering, and tax evasion for failing to pay income tax of more than $13 million.

“One of the worst scandals in Arizona history,” said the sponsor of the three bills, Rep. Matt Gress, R-Phoenix. “This treasurer fabricated financial records and put the bank’s letterhead and fictitious contact information on these documents.”

One of the reasons why Gutfahr was able to embezzle funds for so long was because the Auditor General’s Office must rely on county treasurers and other government officials to hand over financial documents and bank statements. 

“Auditors would have had an additional tool to help detect her actions if they were able to obtain detailed County Treasurer’s Office financial information directly from financial institutions,” Auditor General Lindsey Perry wrote in an August 2024 report after Gutfahr’s embezzlement was uncovered. 

The primary bill in the three Gress measures aims to solve the issue Perry described. 

HB2368 would give auditors the ability to access financial documents of the state agencies and  political subdivisions directly from banks. 

County treasurers are supportive of the measure. Three county treasurers testified at the House Government Committee on Feb. 5 and welcomed more transparency of their offices. 

“The treasurers are appalled at what’s happened here,” said Maricopa County Treasurer John Allen, a former state representative. “We feel ashamed that somebody did something so horrendous to taxpayers and we don’t ever want it again.”

Allen said Maricopa County’s banker, Chase Bank, has informed him that it has issues with handing over financial documents to the Auditor General’s Office. The bill would exempt financial institutions from liability to state entities or political subdivisions for providing information requested by state auditors.

The two other measures Gress introduced, HB2369 and HB2433, would instruct state auditors to conduct more thorough procedural reviews of county treasurer offices and require treasurers and county boards of supervisors to undergo at least 10 hours of education related to treasurer duties and powers every year. 

“This is where all the money is. You want to go where the money is,” Gress said.

Gutfahr is awaiting sentencing, but Santa Cruz County is seeking $40 million in damages from the Auditor General’s Office to recover the funds that were embezzled. 

The county filed a lawsuit against the Auditor General’s Office and the state in November, alleging negligence from auditors for failing to catch Gutfahr’s actions for more than a decade.

The county’s complaint states that Gutfahr was able to strategically steal funds because the auditor general only reviewed bank statements from June, so Gutfahr never stole funds in June or July.

“In stealing these funds from the County, Gutfahr routinely exploited the Auditor General’s lax auditing standards,” the county’s complaint states. “In fact, Gutfahr was only able to pursue her scheme because of the Auditor General’s failure to abide by reasonable standards.”

Gutfahr also provided the Auditor General’s Office with at least five fabricated investment statements, and county officials say she was emboldened by the auditor general’s alleged negligence. The first year she stole was 2014 when she took $386,000. In 2023, she stole more than $11 million.

“There was a sophisticated scheme occurring in Santa Cruz County by the treasurer to conceal illegal activity,” Gress said. 

The Auditor General’s Office filed a motion to dismiss the case in January. Attorneys for the Auditor General’s Office argued that Santa Cruz County hasn’t shown evidence that auditors issued specific false representations of fact needed to prove negligent misrepresentation claims.

They wrote in their motion that the Auditor General’s Office can’t be held liable for inaccurate financial statements because the county itself provided its office with the statements – something that would not have happened had Gress’s measures been law. 

“The funds Gutfahr took came from County accounts, which the County controlled, and over which the County has broad legal custodial responsibilities under both Arizona statute as well as government accounting standards and principles,” the defendant attorneys wrote in the motion to dismiss. “If the representations the County allegedly relied upon are found in the financial statements themselves, then the County cannot prove it relied, let alone justifiably relied on information provided by the Auditor General.” 

Santa Cruz County has requested a trial by jury in its civil complaint. A motion for discovery was granted Feb. 5 in Maricopa County Superior Court.