SOUTH BEND, Ind. – Today Indiana Attorney General Greg Zoeller’s office filed a lawsuit against a former public library director demanding he repay nearly $96,000 in public funds embezzled from the library and misspent on restaurants, personal travel and other miscellaneous expenses. Among the expenses that an audit found the former library director had billed to taxpayers: admission fees to the Biltmore Estate tourist attraction in Asheville, North Carolina.
Named as defendant in the Attorney General’s lawsuit to recover public funds is Scott Klingerman, former interim director of the Walkerton-Lincoln Township Public Library, located in Walkerton, Ind., in St. Joseph County. A certified audit report by the State Board of Accounts found that between January 2011 and March 2013, Klingerman misappropriated nearly $57,000 in library funds and caused the library to incur nearly $33,000 in tax penalties and fees, necessitating an audit of library records that cost another $6,200.
“This audit uncovered a brazen misappropriation of public funds for personal use that cannot be attributed to mistakes or errors. The funds this individual embezzled could have been used so much more productively to benefit library patrons, especially young people, and my office will apply all the legal tools in our toolkit to make him repay it to the library,” Zoeller said.
When the State Board of Accounts issues a certified audit report about a local government unit finding that public funds have been misappropriated, it authorizes the Indiana Attorney General’s Office to take legal action to collect the funds.
Zoeller’s office today filed a complaint to recover public funds against Klingerman in St. Joseph County Superior Court 6. Zoeller’s office also requested a temporary restraining order freezing Klingerman’s financial assets to prevent him from transferring or selling them. Judge David C. Chopleau granted the temporary restraining order that will be in effect until an August 6 hearing on the Attorney General’s motion for a preliminary injunction, which would keep Klingerman’s assets frozen indefinitely. Among the assets frozen are Klingerman’s real estate, four vehicles and bank and retirement accounts. Zoeller noted the State’s objective in freezing assets is to have something available later to reimburse the public treasury when the lawsuit is ultimately concluded.
According to the State Board of Accounts audit issued July 25, when the Walkerton-Lincoln Township Public Library hired Klingerman to serve as interim director, Klingerman initially offered to work without compensation, but the library board later decided to pay him an annual salary of $20,000. The audit found that Klingerman, who managed the library’s finances, then overpaid himself $15,922.77 beyond the salary the board approved.
Klingerman made $23,081.25 in ATM withdrawals from the library’s bank account without documentation or explanation, the audit found. Klingerman also made numerous payments without documentation for purposes that appear unrelated to library business. For example, Klingerman used library funds to pay restaurant bills at Red Lobster in Mishawaka, Ind.,Tilted Kilt in Granger, Ind., and Melrose Restaurant in Chicago; for hotel stays in Knoxville, Tenn., and Louisville, Ky.; and for health club fees and numerous purchases at Subway, Staples and Wal-Mart. Among the questionable expenses that were undocumented and apparently unrelated to library business: $138 in admission fees for Klingerman’s December 26 visit to the Biltmore Estate, one of America’s largest homes and now a major North Carolina tourist attraction. Klingerman’s undocumented expenses that are ineligible for reimbursement by the library total $14,846.25, the audit said.
Moreover, Klingerman wrote $3,065 in checks out to himself or to cash, using the library’s account, without documentation. And under Klingerman’s management, the library incurred tax penalties, interest and fees to the Internal Revenue Service, the Indiana Department of Revenue and the library’s bank, totaling $32,801.44, the audit said. Examiners from the State Board of Accounts incurred another $6,238.68 in auditing costs.
The Attorney General’s lawsuit seeks a total $95,955.39 from Klingerman along with treble damages, attorneys’ fees and costs. Because the library had no surety bond coverage on Klingerman, the amount is his personal responsibility to repay. If the court eventually enters a civil judgment against Klingerman, then the Attorney General’s Office can pursue a civil collections action against him to garnish wages, attach liens, or take other actions any creditor can take against a debtor to collect on a debt.
Decisions about filing criminal charges in audit cases are solely the jurisdiction of county prosecutors, not the Attorney General. Whether a public employee is civilly responsible for repaying misappropriated funds is a separate issue from whether they are criminally responsible for a loss. Through his role as collection agent for the State, the Attorney General has legal jurisdiction to file civil lawsuits to recover public funds based on State Board of Accounts certified audit reports.
Since January 2009, the Attorney General's Office has collected more than $2.4 million from former local government officials whom the State Board of Accounts found had misappropriated public money. Many of the acts of misappropriation occurred because an individual had the ability to divert or embezzle public funds with no oversight or supervision. Earlier this year, the Legislature passed a bill that Attorney General Zoeller had recommended, House Enrolled Act 1333, which authorized a legislative study of requiring internal accounting controls – such as dual signatures – on public employees who handle public money. Zoeller noted that if two or more employees were required to sign off on large transactions involving public funds, then misappropriation and embezzlement would be more difficult for one individual to commit without being detected.
NOTE: At this link is the State Board of Accounts certified audit report (audit number B42411) of the Walkerton-Lincoln Township Public Library in St. Joseph County: http://www.in.gov/sboa/WebReports/B42411.pdf
Attached is the Attorney General’s complaint to recover public funds, filed in St. Joseph County Superior Court.