Tim Steller's column: Alleged $39 million embezzlement jolts Santa Cruz County voters

The scale of the alleged embezzlement takes your breath away: $39 million.

That’s the amount that little Santa Cruz County accuses its former county treasurer, Elizabeth Gutfahr, of stealing through various ruses over 10 years. They filed a lawsuit against her Aug. 1 in Pima County Superior Court and are beginning the process of selling off Gutfahr’s real-estate purchases.

“For more than a decade, the Gutfahrs used County funds as their own personal piggy bank to fund an opulent and extravagant lifestyle, purchasing several ranches, vehicles, and more,” the suit says.

While the county government has positioned itself as the victim, the county’s voters appear to be placing blame on elected officials, too, in a way that is remaking the county power structure.

In July, Democratic voters ousted two of the three sitting county supervisors, Bruce Backer and board chair Manuel Ruiz, in the party’s primary. Ruiz had served as a county supervisor for 24 years, and Bracker for eight.

The third incumbent Democrat, Rudy “Bugs” Molera, has been on the board for 16 years and won his primary, but only because his two challengers split 58 % of the vote. Molera won with 41 %.

Now he is being challenged by three other candidates, a Republican and two independents, in the general election. Democrats have the advantage in the county: They have 13,720 registered voters, the GOP has 5,124, and independents number 11,287.

The county government’s claimed loss of $40 million, including interest, has jolted the county’s relatively somnolent electorate into an apparent revolt. Two Republican challengers in the largely Democratic county are leaning into the mood.

“People are understandably upset that it lasted so long and (Gutfahr) took so much money,” said Republican candidate Jesus Jerez, who is running in District 3, where Bracker has held the seat. “The explanation we got is ‘We believed her. We trusted her.’ But that’s not the job of the supervisors.”

Not the first case

It would be easier to forgive the supervisors if the amount weren’t so large, the period so long, and if there weren’t a precursor.

Just two years ago, the longtime Santa Cruz County assessor, Felipe Fuentes, pleaded guilty to taking cash bribes and favors for reducing the assessed value of property belonging to Constantine “Dino” Panousopoulos. In April, 2023, Panousopoulos, a prominent Nogales-area landowner, was charged with bribery and wire fraud in U.S. District Court. He has pleaded not guilty.

A year after that, in April 2024, Chase Bank contacted deputy county manager Mauricio Chavez about suspicious transfers. At the outset, county officials learned the total involved was around $4 million, Bracker said in an interview Tuesday.

But the FBI began investigating, as did the county’s own hired auditors, and eventually it became clear the losses were much larger. In July, an executive session of the board of supervisors was livestreamed, and reporters from the Nogales International caught wind of what they discussed.

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The board learned in that executive session that closer to $40 million was missing and discussed it without realizing the public could hear. Then the International let the public know — as they should have. It was only a week or so before the primary election.

“People were already pissed about it,” Bracker said. “You could see it in my balloting. The early balloting swayed against me, and on election day I just got crushed. It became a one-issue election.”

Democratic challenger John Fanning won with 62% of the vote to Bracker’s 38%.

A transparency platform

In District 1, which includes downtown Nogales, a variety of factors drove challenger Luis Carlos Davis to the shocking victory over Ruiz in the Democratic primary, he said. It wasn’t just the embezzlement scheme, but also the deteriorated conditions of the area that have voters upset.

And his victory was extraordinarily narrow: Just a 10-vote margin.

Now, he is running on a transparency platform to try to defeat Republican Mike Melendez and independent Luis “Louie” Parra Jr.

“Transparency is a big thing — establishing the mechanisms so this thing doesn’t happen again,” he said.

The current board of supervisors has blamed the state auditor general for missing Gutfahr’s embezzlement, noting that Gutfahr never took money in June or July of a year, because those were the months for which auditors checked financial statements in their annual audits. The board has filed a legal claim against the agency, the legal step before filing a lawsuit.

After that, on Aug. 26, the auditor general published a report that blamed the supervisors’ lack of oversight. The supervisors viewed that as blame-shifting, Bracker said.

As their spat over responsibility plays out, a court-appointed receiver is beginning the process of selling 17 properties, along with 150 head of cattle, belonging to Gutfahr and the businesses she established with her husband and son.

She hasn’t been indicted yet, but that’s probably coming soon.

In the meantime, Republican Gerry Navarro is running against a big party-registration disadvantage, along with two independent challengers, to try to unseat Molera. Navarro, who retired from the state Department of Public Safety, said he’s going to use “honesty and experience” as a theme to win over voters.

“I know how to investigate things. They’re not going to pull the wool over my eyes,” he said.

That message may not be enough to win an election for a Republican in this Democratic county. But $39 million missing tends to shift the debate.