Attorney General files suit against ex-trustee, aide, to recover public funds

INDIANAPOLIS – Today Indiana Attorney General Greg Zoeller filed a lawsuit against a former Knight Township trustee in Evansville to recover nearly $78,000 in public funds intended for poor relief and fire protection that the ex-trustee and an aide allegedly squandered on personal expenses and luxuries, such as New Kids on the Block concert tickets.

“For the ex-trustee to pilfer taxpayers’ money intended to help Hoosiers in economic crisis and divert it for her own entertainment and comfort is unconscionable and a betrayal of the public trust. The Attorney General’s Office will do everything within its legal authority to hold this individual and her accomplice accountable,” Zoeller said.

Zoeller’s office filed a complaint for recovery of public funds against former Knight Township Trustee Linda K. Durham and Durham’s former chief deputy trustee, Tonda Pauley, seeking an order to require the defendants to reimburse taxpayers for the amounts taken by fraud or misappropriation. The lawsuit was filed today in Vanderburgh County Superior Court, along with a motion for a temporary restraining order to prevent the defendants from hiding or transferring any personal accounts the State may seek to claim later.

A State Board of Accounts certified audit of Knight Township government’s finances for the time frame of January 1, 2008, to March 31, 2010, found that Durham misappropriated $74,544.76 in public funds and Pauley misappropriated $3,336.23. A certified audit triggers a legal process where the Attorney General serves as the State’s collection agent to recover public funds that were stolen, mishandled or diverted.

According to the SBoA audit, Durham made a long list of purchases using the township government’s credit card without supporting receipts or invoices. Durham’s improper personal purchases at public expense included: Autozone, Bath & Body Works, DIS Disney Movie Club, iTunes, LA Nails, Mineral Makeup, Spencer Gifts, Wet Seal, McDonald’s, KFC, Domino’s Pizza, Taco Bell, Dairy Queen, Little Caesar’s, Papa John’s, Pizza Hut and Donut Bank and numerous other eateries. Durham also purchased flowers, hair care items, movie tickets, gasoline, groceries and six New Kids on the Block concert tickets using taxpayer funds, the audit found.

Beyond Durham’s $47,025.71 in undocumented improper purchases, the suit alleges Durham is responsible for another $9,691.06 in undocumented disbursements; $1,115 for unnecessary overdraft and service fees; $4,868.64 in audit costs; and $11,844.35 for overpaying payroll to herself, Pauley and two other employees.

Specifically, the audit found that Durham paid herself her salary in advance — drawing a full year’s salary by August 6, 2009 – and then overpaid herself $8,452.74 in payroll by March 11, 2010, the date she resigned.

Pauley, who left office March 29, 2010, is alleged in the lawsuit to owe the township $3,336.23, mostly for undocumented improper purchases. Zoeller seeks triple damages against both defendants.

Zoeller today also filed motions for temporary restraining orders asking the Vanderburgh County Superior Court to freeze any bank accounts or retirement plans Durham or Pauley may have to prevent them from transferring or concealing funds. A magistrate granted the orders today. If the court later enters a civil judgment against the defendants for the amounts owed, then the Attorney General could seek collection of the assets to reimburse Knight Township’s misappropriated funds.

“The ex-trustee’s misuse of public funds as her own personal blank check has left the Knight Township office and its new management in a terrible bind as they try to meet the basic responsibilities of providing emergency relief to the poor and paying for fire protection. My goal is that we can eventually claw back some of Durham’s ill-gotten gains so that the new management can restore the township office to financial health,” Zoeller added.

Public officials who handle money are required by state law to obtain a surety bond – essentially, an insurance policy against employee theft so that there is money that can be tapped to reimburse taxpayer funds. Zoeller’s lawsuit seeks to redeem three bonds taken out on Durham totaling $60,000. The suit names the bonding company, Platte River Insurance Company, as a defendant.

Separate from the Attorney General’s civil case, Durham was indicted by a Vanderburgh County grand jury on two Class D felony criminal charges – theft and official misconduct – and Durham awaits trial.

Today’s action filed in Vanderburgh County follows a similar complaint for public funds filed last week in another Southern Indiana county, Lawrence County, against three officials of Shawswick Township in Bedford, Ind., after an SBoA audit. The lawsuit alleges former township clerk April Eagen-Dorsett owes $180,376.28 for the misappropriation of public funds for personal expenses; her husband Randy Dorsett owes $113, 017.38 and current township trustee Peggy Dorsett owes $3,952.87. The Lawrence County Circuit Court granted the State a temporary restraining order against all three defendants last week, prohibiting them from concealing or transferring their assets.

Zoeller’s actions in Vanderburgh and Lawrence counties are part of a stepped-up effort to file actions to seek public accountability of tax dollars from public officials who misappropriated them. In 2009, the Indiana General Assembly passed a new state law, House Enrolled Act 1514-2009, that allows the Attorney General to intervene earlier in the State Board of Accounts audit process to prevent public funds from being squandered or depleted during an embezzlement investigation. The new law, which Zoeller supported, also doubled the amount of surety bond that officials must carry, to have more available if reimbursement is needed.

NOTE: Attached is an unsigned copy of the Attorney General’s complaint for recovery of public funds, filed today in Vanderburgh County Superior Court under cause number 82D03-1008-PO-4704. The State Board of Accounts certified audit of the Knight Township Trustee’s Office dated August 1, 2010, is found at this link:
http://www.in.gov/sboa/WebReports/B37346.pdf