RENSSELAER, Ind. – Using the state’s new public accountability law, Indiana Attorney General Greg Zoeller’s office today took legal action against the former business manager of Lake Ridge Schools who is accused of misappropriating more than $133,000 in school funds.
In Jasper County Superior Court today, Zoeller’s office sought and obtained a temporary restraining order freezing the financial assets – including bank accounts and vehicles – of James W. Huddleston of Wheatfield, Ind., until a full audit can be completed. Until resigning in April, Huddleston had been the business manager of Lake Ridge Schools in Gary, Ind.
The Attorney General’s motions for a temporary restraining order and prejudgment attachment were filed under a state law the Legislature passed in 2009 at Zoeller’s urging: House Enrolled Act 1514-2009, the public accountability law.
“This new legal tool allows the State Board of Accounts to notify the Attorney General’s Office through a preliminary audit of potential fraud on public funds much earlier, and allows us to intervene in court to prevent defendants from transferring or concealing assets – preserving them to recover later to reimburse the public treasury,” Zoeller said.
The investigation began in April when the Lake Ridge School Corporation in Gary requested a special audit by the State Board of Accounts or SBoA after the school’s credit union reported suspicious transactions within a school savings account that Huddleston, the business manager, had opened without the knowledge of the superintendent or school board knowledge. Huddleston was the only authorized signature on that account.
A preliminary audit by SBoA examiners found that more than $150,000 – primarily refunds from employee healthcare and prescription drug benefit programs intended for the school’s self-insurance fund – had instead been deposited into Lake Ridge’s savings account. Huddleston had withdrawn $133,624.21 in cash and checks from the account between July 2011 and April 2013, causing the school to incur $525.85 in credit union fees. Huddleston spent the school funds on personal expenses such as credit card payments, electric and gas utility bills, medical, dental and orthodontist bills and payments to auto dealerships and wholesale stores, the preliminary audit found. State law prohibits using public funds to pay for personal items or expenses not related to government business. When school officials became aware of it, Huddleston resigned, the audit said.
In addition to the more than $133,000 misappropriated, the SBoA incurred nearly $7,000 in auditing costs. The total amount of restitution SBoA seeks from Huddleston is $141,149.15.
The State Board of Accounts conducts regularly scheduled audits of government units and, when completed, routinely certifies them to the Attorney General’s Office for collection if audits discover misappropriation of public funds. The 2009 state law allows the SBoA and Attorney General to take action earlier in the process based on a preliminary audit, when public funds would be at risk if the State waited for the regularly scheduled final audit to be completed.
In the motions filed today, the Attorney General’s Office asked the Jasper County Superior Court to freeze Huddleston’s assets, including real estate located in Wheatfield, four vehicles and any bank or retirement accounts. The Attorney General’s Office asked the court to order that Huddleston’s assets not be transferred, concealed or distributed, so that funds would be available to reimburse the school district if the court were to enter a judgment later. Garnishment of any contributions to or benefits from retirement accounts also is sought.
Based on the eventual final audit report, the Attorney General’s Office could file a complaint to recover public funds at a later date, to seek civil collection of the final amount from Huddleston in order to reimburse the school treasury.
Although the misappropriation occurred in Lake County, the State’s motions were filed today in Jasper County because Huddleston resides there. Jasper County Superior Court Judge James R. Ahler granted the temporary restraining order today against Huddleston and set the hearing on the motion for prejudgment attachment and garnishment for May 16.
There was no requirement that the school carry a surety bond or insurance coverage on its former business manager, so any judgment against Huddleston would be his personal responsibility to repay, Zoeller said.
“When a school official is accused of paying personal bills with school funds it is an egregious violation of the public trust, and my office will use all means at our disposal to claw back taxpayers’ money and reimburse the school treasury,” Zoeller said.
The Attorney General’s jurisdiction is civil only, to collect misappropriated public funds that have been misappropriated. Criminal charges, if any, would be the jurisdiction of the county prosecutor and police.
NOTE: The State’s motion for prejudgment attachment and garnishment and motion for a temporary restraining order, filed today in Jasper County Superior Court, is attached.