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[ATG] AG Zoeller files suit against ex-school superintendent for $615K
Start Date: 8/24/2012Start Time: 12:00 AM
End Date: 8/24/2012
Entry Description

TELL CITY, Ind. – Taking action in one of the largest government misappropriation cases in recent years, Indiana Attorney General Greg Zoeller’s office today filed a lawsuit against a former school superintendent in Cannelton who misspent more than $615,000 in public school funds, according to an audit. Zoeller said he hopes the civil lawsuit the State has filed against the terminated ex-superintendent will send a message to other government employees who handle public money that they can’t embezzle or misspend public funds without legal consequences.

“The amount that the audit found misappropriated is simply shocking even without the misuse of a trust fund gift worth one-third of a million dollars; but what’s truly disheartening is that a top school official – a person to whom teachers, students and parents ought to look to for leadership – has drained public school funds intended for children’s education in order to overpay himself. This is a betrayal of the public trust, and my office will use all our legal tools to make this individual reimburse the school system,” Zoeller said.

Named as a defendant in the Attorney General’s civil lawsuit is Marion A. “Al” Chapman who was school superintendent in Cannelton City School Corporation from July 2005 to December 22, 2011, when the school board terminated him. A State Board of Accounts certified audit report issued August 14 found that Chapman owes Cannelton schools a total $615,586.55 for public funds that he overpaid himself, a trust fund gift he misused, ineligible travel advances he took, fees and penalties incurred due to his actions, and costs of the audit.

In the certified audit report of the Cannelton City School system’s finances spanning July 2005 to December 2011, State Board of Accounts examiners found multiple types of misappropriation by Chapman:

-Over six and a half years, until his termination, Chapman authorized additional payments to himself beyond his contract. Through payroll or annuities he was overpaid a total $206,688.27 that he must repay, the audit found.

-The school corporation received $333,333.33 – one third of $1 million – as a gift from the Dorothy von Solbrig Income Trust in 2011. By law, the base amount or principal of such a gift from a trust is to remain untouched; but any interest income derived from it can be used by the school corporation. Interest from this gift was intended for high school improvements or scholarships. Instead, the audit said, Chapman instructed the school treasurer to use the gift to pay invoices and catch up on withholding taxes the school system owed. The audit found the entire gift amount – the principal, not the interest – had been disbursed, and the school’s general fund was overdrawn by $430,091. The State Board of Accounts found that Chapman must repay the school system the entire trust gift amount.

-Because of Chapman’s discontinuing payment of federal taxes, Cannelton schools owed delinquent taxes to the Internal Revenue Service. The school system then incurred $50,185.64 in attorneys’ fees for legal representation in the IRS tax case. The audit found Chapman must reimburse the attorneys’ fees.

-Chapman was pre-paid a total $9,000 in “travel allowances” even though the State Board of Accounts does not allow such advance payments. Travel expenses must be reimbursed only after the fact and when supported by receipts; so the advances must be repaid, the audit said.

-Another $1,221.42 in various penalties, interest, late fees and other charges were incurred by the school system while Chapman was superintendent and responsible for its funds. The audit said they must be repaid.

The direct loss to the Cannelton City School Corporation was $600,428.66. In investigating the misappropriation, the State Board of Accounts incurred another $15,157.89 in audit costs, an expense also sought from Chapman.

When the State Board of Accounts issues a certified audit report, it authorizes the Attorney General’s Office to attempt to recover the money to reimburse the public treasury for the amount misappropriated. Zoeller’s lawsuit, called a complaint to recover public funds, was filed today in Perry County Circuit Court against Chapman. It seeks $615,586.55, plus treble damages, attorneys fees, costs and prejudgment interest.

Through his role as lawyer for the State Board of Accounts seeking to reimburse the public treasury, the Attorney General has legal jurisdiction to file civil lawsuits. This is the 46th lawsuit since January 2009 where Attorney General Zoeller’s office has sought a temporary restraining order following an audit where the State Board of Accounts found misappropriation by a public official or government employee.


The original balance sought in the Cannelton lawsuit is one of the largest the Attorney General’s Office has sought since January 2009 when Zoeller, shortly after taking office, began aggressive civil prosecution of misappropriation based on certified audit reports. In November 2009, Zoeller’s office filed suit in Madison County against five former employees of the Town of Chesterfield accused of embezzling $259,626 in town funds. A civil judgment including triple damages against one of the defendants who was held jointly and severally liable now totals $747,347, which the Attorney General’s Office still is seeking to collect.

Also today, the Attorney General’s Office asked the Perry County Circuit Court to issue a temporary restraining order to freeze ex-superintendent Chapman’s assets, including bank accounts, pension and retirement accounts and Chapman’s four vehicles – a 2008 Chevrolet Silverado, a 2008 Dodge Grand Caravan, a 1995 Pontiac Grand Prix and 1993 Ford Econoline. Perry County Circuit Court Judge Lucy Goffinet today signed the temporary restraining order and scheduled a hearing for 1 p.m. August 30 on the State’s motion for a preliminary injunction. If granted, the preliminary injunction would prevent Chapman from selling, transferring or concealing property until the underlying lawsuit is resolved to preserve assets that could be recovered later to reimburse Cannelton City Schools for the amounts misappropriated.

In the State’s underlying complaint to recover public funds, Zoeller asked the court to enter a civil judgment against Chapman. If it is granted, the Attorney General then could pursue the monetary judgment through collections, and could seek to attach liens on property, garnish wages or take any other actions a creditor could take against a debtor to collect on a debt.

Also named as defendant in the lawsuit filed today is Indiana Insurance Company of Indianapolis. Each year Chapman was employed as superintendent, the school had a $1 million insurance policy through the company, covering errors, omissions or crime by school leaders. By naming the insurance company, the State’s lawsuit seeks payment on the policy to reimburse the school treasury for the loss. Any portion not covered by insurance would be Chapman’s personal responsibility, Zoeller said. Whether a public official is civilly responsible for repaying misappropriated funds is a separate issue from whether they are criminally responsible for a loss. Decisions about any criminal charges would be up to the county prosecutor’s office.

In 2009, the Legislature at Zoeller’s urging passed House Enrolled Act 1514-2009 that allowed the Attorney General’s Office to intervene earlier if misappropriation is suspected in government offices. The new law also increased the amount of surety bond that officials are required to carry, to a minimum $30,000. So that one individual is not left with the sole ability to charge expenses to taxpayers without some oversight or accountability, Zoeller also has recommended that government offices require approvals from at least two employees to authorize expenditures of public funds.


NOTE: Attached is an as-filed copy of the lawsuit, motion for a temporary restraining order and motion for a preliminary injunction that the Attorney General filed today in Perry County Circuit Court. The State Board of Accounts certified audit report of the Cannelton City School Corporation is at this link:


Contact Information:
Name: Bryan Corbin
Phone: 317.233.3970
Attachments For This Entry:
    > State v Chapman complaint and motions for TRO and preliminary injunction
Entry Type:
Press Release
Entry Category:
  • Announcements
  • Category:
  • Education
  • Government
  • Taxes & Finance
  • Agency Name
    Attorney General

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