This week, the bizarre saga of former Santa Cruz County Treasurer Liz Gutfahr reached a stunning conclusion.
Gutfahr, who was convicted of embezzling tens of millions of dollars of public funds over a period of about 10 years, was sentenced to a decade in prison, followed by three years of probation.
Daisy Zavala Magaña, a reporter for Nogales International, has been following all the twists and turns of this case and joined The Show to discuss.
Full conversation
SAM DINGMAN: Daisy, good morning.
DAISY ZAVALA MAGAÑA: Good morning. How are you?
DINGMAN: Doing well, thank you for being here.
As you reported in your piece on this, Daisy, the judge in the case, U.S. District Judge Rosemary Màrquez, said she had reviewed all the evidence and found, quote “No reason for Gutfahr to have stolen all this money.” But Gutfahr’s attorney did try to persuade the court that Gutfahr had her own justifications for what she did, right.
ZAVALA MAGAÑA: Yes, he did.
DINGMAN: And what were those justifications?
ZAVALA MAGAÑA: So he tried to paint a picture that she was, so, aside from this embezzlement of $38 million of public funds, she was an otherwise honorable person and that she was misguided by, quote, unquote, “delusions of wanting to live a lavish life.” And some personal issues like depression and diminished capacity is what he was trying to paint for the court.
DINGMAN: I see, can you refresh our memories? What did Gutfahr say initially when this story broke? Was she always this introspective, at least by way of her attorney?
ZAVALA MAGAÑA: You know, not at all. It was radio silence on our end, but I can understand, right, not wanting to speak to media.
DINGMAN: Yeah.
ZAVALA MAGAÑA: But what prosecutors highlighted was that during that initial interview with the FBI, she actually denied having stolen as far back as 2013, when they clearly asked if it stretched back all the way to that year. She actually said that it was just three months, for an amount that essentially totaled about $1.5 million.
DINGMAN: When in reality, it was as you were just saying, 10 years. And what was the full total ultimately about $40 million.
ZAVALA MAGAÑA: Yeah, well, it was originally around $39 million. And then as they did revisions, it was reduced to about $38.7 million.
DINGMAN: Yeah.
ZAVALA MAGAÑA: Around there.
DINGMAN: So a bit of a big gap there between those two versions of the story. One of the other things I thought was interesting from your piece is that Gutfahr’s attorney, whose name is Joshua Hamilton, I believe.
ZAVALA MAGAÑA: Yes.
DINGMAN: He tried to pin some of the blame for what Gutfahr did on Santa Cruz County, right?
ZAVALA MAGAÑA: Yes, he did. In his sentencing memo, which was filed ahead of the sentencing date. But in court, he emphasized that the responsibility solely lied on Gutfahr. But in that memo, he did highlight that the county had no oversight. Little to no oversight and that it has a long history of embezzlement scandals and fraudulent scandals, which is true.
DINGMAN: Yeah. Yeah, but, one of the other things he said, if I'm not mistaken, is that she became Santa Cruz County treasurer, despite the fact that she had no background or training in finance or accounting. Which is interesting, definitely, but she did run for the office, right? Did she? She put her own name forward for the position.
ZAVALA MAGAÑA: She did. And she ran unopposed and ultimately got the position.
DINGMAN: So on the other side of this, you also had some comments in your piece from County Supervisor Rudy Molera. He said that he has known Gutfahr for 50 years. And I think it's fair to say that he didn't really buy these rationalizations for her behavior, right?
ZAVALA MAGAÑA: Yeah, he did, he did not. He actually called her out for trying to manipulate the situation again. He said he didn't believe that she had severe depression that influenced her behavior, or that she didn't know what was going on.
DINGMAN: So in terms of what was going on, she embezzled this money again over a period of a very long time. Remind us what the mechanics were of how she was able to do this. How was she able to secret away this much money?
ZAVALA MAGAÑA: Yeah. So she created a lot of LLCs. These are companies that she used to funnel the money out of, as an attempt to kind of hide that. And then she also falsified Treasury reports, reconciliation reports, and just a lot of other, I guess, mechanisms that would have served to help kind of catch this thing.
But the other issue with that is that, the county is being blamed for not doing their due diligence and having oversight and actually reading those reports or checking anything.
DINGMAN: Interesting. Interesting, I mean, I have to say, for somebody who notionally has no background or training in finance or accounting, it sounds like a fairly sophisticated operation. Is that something that the prosecution pointed out in all of this?
ZAVALA MAGAÑA: Yeah. The prosecution and ultimately the judge also pointed that as kind of a factor in why she decided to give out the sentence that she did.
DINGMAN: So, speaking of the judge, Daisy, this sentence that got far received was actually a little bit higher than what the prosecutors were seeking. Why did Judge Màrquez increase the severity of the sentence?
ZAVALA MAGAÑA: She, so there was a little bit of discussion on whether or not there was, what they called substantial financial harm, to the schools and tax districts affected by this. There was an objection to that.
But ultimately, the judge ruled that there was financial harm because, you know, these entities have not been made whole. And while the school didn't have money for renovations for the children, Gutfahr was living very lavishly. She had 17 properties. And a lot of luxury items.
DINGMAN: Yeah. All right, well, it seems like the end for now of a very strange chapter.
