[ATG] State, LaPorte County sue ex-employee to recover embezzled funds
Office of the Indiana Attorney General
3/3/2014 - 12:00 AM
LAPORTE, Ind. – Today the State of Indiana and LaPorte County filed a lawsuit against a former county government employee to recover more than $153,000 in public funds the ex-employee is accused of embezzling.
Indiana Attorney General Greg Zoeller filed the lawsuit today in LaPorte County Circuit Court. Named as defendant is Mary Ray, a former deputy auditor in the LaPorte County Auditor’s Office.
In an audit issued February 21, the State Board of Accounts found 150 instances where county funds had been embezzled from the county Auditor’s Office between September 2011 and December 2012, totaling $153,002.46, and the audit concluded Ray was the employee responsible for the loss of those funds.
The lawsuit in which the county has joined the state as plaintiff seeks repayment of $153,002.46 from Ray, plus an additional $45,815.25 in accounting costs incurred by state examiners who investigated and calculated the loss, for a total demand of $198,817.71.
“When the very individual in charge of receiving and preparing deposits of taxpayers’ money is accused of embezzling that money, it is a profound violation of public trust, and we will use the legal tools at our disposal to compel repayment from this defendant in order to reimburse the public treasury for the amount lost in this brazen scheme,” Zoeller said.
Today’s lawsuit, called a complaint to recover public funds, is a follow-up to a temporary restraining order and prejudgment attachment the Attorney General’s Office filed for and obtained against Ray last September. At that time, a preliminary audit by State Board of Accounts examiners had uncovered a potential misappropriation of funds in the auditor’s office by Ray. The prejudgment attachment the state obtained in September froze Ray’s financial assets for the time being while the SBoA conducted a full comprehensive audit. The prejudgment attachment prevented Ray from selling, concealing or transferring her house or vehicles, so that there would be assets available to reimburse the county if the court later were to enter a judgment.
Until her retirement, Ray as deputy auditor had collected payments from other county departments, received various payments to the Auditor’s Office such as permit fees, both cash and checks, and prepared deposits for delivery to the County Treasurer. But in its final audit now completed, the State Board of Accounts found that the county had been shorted $153,002.46 through schemes such as check-kiting. Certain checks paid to the county were not recorded or deposited, but instead were held for a period of time and then substituted for unrelated cash payments to the county. Swapping the unrecorded checks for cash allowed the deposits to still balance with the amount of funds listed as receipted, the audit found. The State Board of Accounts determined Ray is responsible for the misappropriation, and asked that she be required to repay the full amount plus investigation costs. The SBoA audit then was referred to the Attorney General’s Office which serves as the state’s collection agent in such cases.
If the court enters a civil judgment against Ray, then the Attorney General’s Office will pursue collections methods against Ray that can include seizure of assets and accounts, liens on property and garnishment of wages. Because there was not a surety bond specifically on Ray to cover employee theft, the entire amount, $198,817.71, is her legal responsibility, Zoeller noted. Funds recovered in the lawsuit will be returned to the LaPorte County treasury as reimbursement for the amount embezzled, with the auditing costs returned to the State Board of Accounts. The county also is seeking to obtain proceeds from its county insurance policy to cover the loss.
The state Attorney General’s jurisdiction in such cases is civil only; the U.S. Attorney’s Office and county prosecutors have sole jurisdiction whether to pursue criminal charges.
The authority to freeze a defendant’s assets based on a preliminary audit to keep funds from being squandered, hidden or transferred while SBoA completes a final audit is based on a public accountability law the Legislature passed in 2009 at Attorney General Zoeller’s recommendation.
“Most government employees are trustworthy and good stewards of taxpayers’ money. But having sued to recover public funds from embezzlers in many similar cases, the Attorney General’s Office now is working on developing a coalition of groups that will provide training to local government agencies on internal accounting controls and best practices that might help deter misappropriation of public funds in the first place,” Zoeller said, noting details will be announced in the spring.
NOTE: The State Board of Accounts audit of the LaPorte County Auditor’s Office issued Feb. 21 is at this link: http://www.in.gov/sboa/WebReports/B43260.pdf.
The complaint to recover public funds, filed in LaPorte County Circuit Court by the State of Indiana and LaPorte County against Mary Ray, is attached.
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