The Sonoita Elgin Fire District (SEFD) and the three local school districts have been advised by officials they can expect to eventually recover approximately 20% of the funds stolen from their accounts by former Santa Cruz County Treasurer Liz Gutfahr from 2012-2024.
At its Dec. 16, 2024 meeting, the SEFD Board of Directors heard reports from the County’s forensic accountants, as well as attorneys representing the District and the County, outlining the losses incurred by the district, recovery efforts and possible next steps.
CPA Chris Linscott, whose firm has been conducting the forensic accounting of Gutfahr’s embezzlement, told the board that SEFD can expect to recover approximately $7,000 from the $34,000 that Gutfahr stole from the district over 12 years, for a net loss of around $27,000. For perspective, SEFD’s budget for its current fiscal year is $1.66 million.
The three local school districts are looking at much larger losses.
Gutfahr stole a total of $516,833 from the Sonoita School district during her time as treasurer. The district can expect to recover around $106,000, giving it a net loss of over $410,000. The district’s annual budget is $3.22 million.
Gutfahr stole a total of $528,989 from the Patagonia Elementary district over 12 years. The district can expect to recover $109,000, giving it a net loss of around $419,000. The district’s current annual budget is $1.68 million.
She stole a total of $815,697 from Patagonia Union High district over 12 years. The district can expect to recover approximately $167,000, giving it a net loss of around $649,000. The district’s annual budget is $1.96 million.
The amount of money that the County calculated each district lost is based on the amount of money that had been held in a savings account during Gutfahr’s tenure, Linscott explained. According to Courtney Henson, an attorney from Snell and Wilmer, the law firm representing the County, SEFD’s losses were lower than the school districts’ because, of the 199 fraudulent transfers Gutfahr made, 198 came out of a savings account held at Chase Bank that did not hold much of the Fire district’s funds.
“The fire district had far less [funds] being held in the account that she was stealing from,” Henson said.
In total, Gutfahr stole over $38 million from the Santa Cruz County bank accounts that held funds belonging to the local districts across the County.
In an Oct. 21, 2024 report, Keith Bierman, the court appointed receiver, estimated that between $11 and $13 million of those funds will be recovered through the sale of Gutfahr’s 17 real estate properties, vehicles and other personal property. Through the end of 2024, receivership costs were $478,000, leaving a net recovery, before legal and CPA fees, of between $10 and $12 million.
Linscott estimated another $2 million would be paid to the attorneys and accountants, dropping the estimated net recovery to $8 million, which would then be divided equitably between the various entities that had been embezzled.
Linscott added that there was no allocation estimated for financial compensation associated with the County’s pending lawsuit against the State Auditor General for that office’s failure to discover Gutfahr’s embezzlements in its annual audits of the County’s finances.
Each district has until Feb. 28 to decide whether to file a “notice of claim” which would preserve their right to sue the County for losses suffered due to Gutfahr’s embezzlement.
At its Dec. 16, 2024 meeting, the SEFD board deliberated whether it made sense to incur more expenses by filing the notice of claim. The district has already spent $3,000 in legal fees as of November, according to Fire Chief Marc Meredith.
“$3,000 and we’re only getting $7,000?” Board member Ruth Ann LeFebvre said. “Do we want to continue with this?”
“To me the overriding issue is that the Sonoita Elgin Fire District doesn’t have that much skin in the game,” the SEFD’s attorney Thomas Benevidez advised the board. “I know that you’re talking about public money and that is all-important, but having lost approximately $35,000 over a ten-year period, it’s hard to justify paying more attorneys’ fees to go after that… You’d have to hire a law firm to do litigation, plus you’d have to hire your own expert witnesses. You’re talking about a lot of costs to try to pursue a litigation option at this point.”
In an interview with the PRT, Patagonia Schools Supt. Kenny Hayes said that the schools would not be filing a notice of claim on the advice of their attorneys.
Sonoita School District Supt. Dan Erickson told the PRT in a Dec. 29, 2024 email that a decision had not been finalized about whether the school district would file a notice of claim. “Our board is represented by counsel that is working on next steps,” he wrote.
Courtney Henson, from Snell and Wilmer, the attorneys representing the County, made the case for a Common Interest Agreement between the County and the affected districts, instead of each district pursuing legal action against the County, saying, “The purpose of a common interest agreement is so that we can effectively communicate openly and work to pursue our common interest together in a way that tries to maximize the recovery on behalf of all victims rather than having us try to go each his own way.”
At its January board meeting, the SEFD board will make a decision whether to go ahead with filing the notice of claim, and will discuss the cooperative agreement that the County’s attorneys have drawn up.
Gutfahr, meanwhile, is scheduled to be sentenced in federal court on Feb. 6. She faces a maximum penalty of ten years in prison for embezzlement, 20 years for money laundering and five years for tax evasion, as well as restitution to identified victims for all losses.
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