This article was originally published in the June 6, 2013 edition of Howey Politics Indiana.

By BRIAN A. HOWEY

    
INDIANAPOLIS – Misty Buck was a deputy clerk in the Muncie clerk’s office and failed to deposit $11,325.50.
    
Brittany Cohee of the Benton Township trustee’s office in Monroe County made $2,370 overpayments of salary.
    
Chandler Clerk-Treasurer Timothy D. Osha rolled up $143,010.36 in personal expenses on credit cards, personal property use, penalties and interest and audit costs.
    
Bunker Hill Town Court Judge Melvin Smith didn’t make deposits of $37,052.50, including speeding tickets some of you might have incurred on U.S. 31 in Miami County.
    
Supt. Marion Chapman of Cannelton School Corporation rolled up $615,586.55 misappropriated compensation and benefits and improper handling of a trust fund principal.
    
Melody Buchanan, deputy clerk-treasurer of West Terre Haute, was responsible for $463,752.19 in missing collections.
    
Debbie Deitrich was a cafeteria employee at Logansport Memorial Hospital responsible for $60,403.24 in missing cafeteria receipts.
    
These public servants are part of a rogues gallery which in combination misappropriated $9,785,401 between 2009 and 2012, according to the office of the Indiana Attorney General. There is $9,017,490 in original balances for audit report cases still open. They are part of what is called the civil prosecution of public corruption that included 142 cases between 2009 and 2012 during the Zoeller administration.
    
Another 29 cases have been filed as of last week in 2013, pushing the total to more than $10 million. There have been 221 audit report cases, some of which did not result in civil litigation to recover funds. The amount still owed by defendants in currently open cases is $8.8 million, according to AG spokesman Bryan Corbin.
    
Indiana has some 30,000 public employees, around 10,000 elected officials and 3,000 units of government, so 221 misappropriation cases over a four-year period is, in a way, good news. A fraction of 1% have been caught. And $10 million in misappropriated funds in the context of more than $40 billion in government funds is also heartening.
    
Of the more than 164 cases provided on a SBA spreadship provided by the Attorney General, 37 cases involved towns, 33 in school corporations, 26 in townships, 23 in cities, 20 in counties, 18 in agencies and various districts (library and sewer), and 11 with the state.
    
The message for the tiny fraction of unscrupulous characters is that the State Board of Accounts, the two federal District Attorneys and the 92 county prosecutors are watching.
    
When the State Board of Accounts in a certified audit report finds that public money has been misappropriated from a local government office, the audit authorizes the Indiana Attorney General’s Office to attempt to collect the amount in order to reimburse the public treasury. The attorney general’s office does that by sending demand letters and then filing legal actions to freeze the assets of public officials and seeking civil judgments against them to require repayment. The attorney general’s office also pursues any surety bonds or insurance policies covering public officials in order to recover funds that can be put toward reimbursement.
    
In 2009, the Indiana General Assembly at Attorney General Greg Zoeller’s recommendation passed House Enrolled Act 1514-2009. It requires government officials to carry larger bond amounts – $30,000 – to ensure there is something available to reimburse the public treasury if misappropriation occurs. It also allows the attorney general’s office to intervene earlier in ongoing embezzlement situations, to freeze assets based on an SBA preliminary audit, if a final audit is not yet complete. The charts above show the amounts misappropriated where audits were referred to the attorney general’s office for collection – both before the Zoeller administration took office in January 2009 and since then – and the amounts collected.
    
In the case of Bunker Hill Judge Smith and court clerk Kimberly Zehring, the Kokomo Tribune reported that Smith said in a letter to the state he was never trained in the accounting system used by the court, and never personally entered any data into the system. He said he wasn’t aware of any accounting problems until December 2011. “If I’m guilty of anything, it is being too trusting of what I considered a good, honest employee [Zehring]. I don’t feel that I should be held partially responsible for the missing funds since I did everything I could in full faith to maintain the integrity of the court,” he said.
    
Mike Bozymski, deputy state examiner with the SBA, told the Tribune that it was “strange” court officials wouldn’t simply deposit the full amount shown in the court’s accounting system. Regardless how the money disappeared, Smith and Zehring are responsible to pay back the money, said Corbin.
    
Not all such cases result in criminal prosecution. Miami County Prosecutor Bruce Embrey told the Kokomo Tribune there isn’t enough evidence to establish the missing money was stolen. He said there is currently no active criminal prosecution against either Smith or Zehring.  “If more evidence is brought in, we’ll look at it,” he said.
    
WFIE-TV reported that Osha was charged with theft in December 2012 and turned himself in to the Warrick County jail. Osha’s arrest stems from an Indiana State Police investigation which revealed he allegedly made numerous unauthorized purchases from the town’s account for his personal use. Osha allegedly used the Chandler credit card to purchase unauthorized computers, iPads, golf cart batteries and components to build a home theater system.
    
Supt. Chapman was arrested in Shreveport, La., last month on theft charges stemming from Perry County after being suspended from duties in 2011. Perry County Prosecutor Rod Acchiardo says he asked Indiana State Police to conduct an investigation once the audit was finished. 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 $206,688.27 that he must repay, the audit found.
    
λ  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 SBA found that Chapman must repay the school system the entire trust gift amount.
    
λ 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 attorney fees for legal representation in the IRS tax case. The audit found Chapman must reimburse the attorney fees.
    
λ Chapman was pre-paid $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.
    
λ 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.
    
Is the $9 million in misappropriations normal?
    
“I got elected in ‘08 at the same time the housing market and the economy tanked, so as the economy tanked, I think all of the consumer protection scams went up and at least in my mind there was an uptick in the State Board of Accounts audits,” Zoeller told HPI. “Maybe I was just paying more attention to it since I was elected. In my mind, I thought there was more pressure on the economy for people to just take money.”
    
Zoeller, who worked in Attorney General Steve Carter’s office before his election, explained, “It is true when I was elected, I took a different approach. I created a collection action. If you’re a trustee, and the State Board of Accounts says you didn’t keep your receipts, you didn’t account for all the money, you owe us the money and we send you a collection action. We’ll work it out and you can pay it over time.”
    
“Now if money showed up in your pocket – you went out and gambled it or spent it on clothes or something – then we do something called civil prosecution,” Zoeller continued. “We file an action and we freeze bank accounts, we go after liens against property, real estate, homes. It’s a much more aggressive approach. We’ve done a lot more of that. It has brought a lot more attention and $9 million in collections. Some of them made off with like $300,000 or $400,000. But a lot of them took, like, band uniform money. I’m going to pursue that case the same way I’m going to pursue the $500,000 case, because they’ve abused the public’s trust. You can’t let that stand.”
    
“I know it is of great interest to the public,” Zoeller explained. “I always try to distinguish between the obligation to ensure the public that we are protecting taxpayer dollars. We are not catching everybody, but we are going to go after the people who took the money. I want to reassure people. I have been in public service for a majority of my career. Most of the people I’ve worked with have been ethical, well-intended servants. I don’t want people to think it’s at all levels of government and a majority of people in government. It’s not. But if there’s a case, it needs to be pursued.”
    
Lake County leads the state with 28 civil prosecutions of public corruption, for more than $1 million; followed by 11 in Knox County with $133,000; nine in Marion (with $1.3 million misappropriated) and Monroe counties; seven in Johnson and Montgomery; six Delaware and Clinton counties; five in St. Joseph, LaPorte, Fountain, Morgan and Clinton counties.
    
Two counties – Jackson and LaGrange – have fewer cases but around $450,000 in misappropriated funds. Vigo County has three cases but $1 million in misappropriated funds. Noble County has one case at $435,000.
        
Zoeller said he has had to “pursue vigorously” cases in Lake County. “They know that we and (Northern District Attorney) Dave Capp are not going to allow this as normal business practices,” Zoeller said. “He’s had 10 times the cases as this other district has had.”
        
Zoeller is in East Chicago today to discuss recovery of public funds and their distribution with Mayor Anthony Copeland.