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The Scoop

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AG’s lawsuit seeks $334K from ex-city employee, contractor in fraud scheme

The following statement was issued Thursday by the Office of the Indiana Attorney General:

WARSAW, Ind. – Today Indiana Attorney General Greg Zoeller’s Office filed a lawsuit against a former Warsaw city official and a pipe contractor demanding nearly $334,000 as repayment for the taxpayer’s money the defendants allegedly defrauded from the city.

Named as defendants in the Attorney General’s lawsuit to recover public funds are Lacy Francis Jr., former street superintendent for the City of Warsaw, Pro Form Pipe Lining Company of Mishawaka, Ind., and Marc Campbell, owner and president of Pro Form. Filed in Kosciusko County Circuit Court, the complaint to recover public funds seeks repayment of $333,733.88 from Francis, Campbell and the company, jointly and separately.

“Defrauding the taxpayers through overpayment for an infrastructure project for personal gain undermines the public trust. My office will use all the legal tools at our disposal to claw back funds from the defendants involved in this brazen scheme and will work with the county prosecutor to obtain restitution for the city,” Attorney General Zoeller said.

According to the July 15 certified audit report of the State Board of Accounts, between January 2011 and December 2013, the defendants participated in a scheme to defraud Warsaw by intentionally overbilling the city for the costs of storm sewer projects to install linings in the pipes and clean and repair them. The SBoA audit found that Francis used his position at the time as street superintendent to manipulate the public bidding process so that Campbell’s company would win the bid for the projects, conducted in 11 sections.

When the projects were conducted, Campbell allegedly billed the city for significantly more work than his company actually performed: A total of 1,813 more lineal feet of pipe lining was billed to the city than was actually installed, unnecessarily costing the city $267,569 over three years. The audit found Francis, the street superintendent, signed off on the fraudulent invoices from Pro Form. Moreover, Campbell allegedly paid $51,000 back to Francis for steering the work to his company, the audit alleged.

The scheme eventually was reported to authorities, and an engineer determined the actual length of pipe lining installed compared to the larger amount Pro Form overbilled the city for. Francis and Campbell previously were charged by the Kosciusko County Prosecutor with criminal counts of corrupt business influence, theft, aiding, inducing or causing theft, providing false information to a government entity to obtain a contract, official misconduct and conflict of interest. Campbell is scheduled to appear in court August 25 and Francis on September 29 in the criminal cases. Criminal charges are solely the jurisdiction of the county prosecutor.

In the separate civil lawsuit filed today, the Attorney General’s Office serves as collection agent for the State Board of Accounts and seeks to recover public funds from the defendants to reimburse the public treasury for the amount misappropriated. In this case, the Attorney General’s lawsuit seeks the underlying amount of loss, $318,569, plus reimbursement for the additional costs SBoA examiners incurred in their audit and investigation, $15,164.88. In the complaint to recover public funds, the Attorney General is seeking a civil judgment from the court against the defendants, and asking for treble damages and attorneys’ fees.

If a civil judgment is entered, then the State can use the same methods any creditor can use against a debtor to collect on a debt, including executing on assets, garnisheeing wages and/or bank accounts and placing liens on property.

The City of Warsaw had a blanket $25,000 policy through the Ohio Casualty Insurance Company against employee theft, but anything not covered by insurance would be the personal responsibility of the defendants. The Attorney General’s Office will work with the Prosecutor’s Office to apply any recovery toward restitution in the criminal case, Zoeller said.

Today, the Attorney General’s Office also asked the Kosciusko County Circuit Court for a temporary restraining order prohibiting the defendants from selling, moving, concealing or transferring any financial assets they own, including vehicles, real estate, bank accounts or pension and retirement accounts. Judge Michael W. Reed granted the TRO and scheduled an August 27 hearing on a motion for a preliminary injunction that would freeze the defendants’ assets indefinitely until the lawsuit is concluded.

Zoeller noted the total amount sought from Francis, Campbell and Pro Form Pipe Lining Company, more than one-third of $1 million, places this misappropriation scheme among the top 10 loss amounts the Attorney General’s Office has been assigned to collect by the State Board of Accounts. Since January 2009, the Attorney General’s Office has collected approximately $4.5 million that audits identified as misappropriated and returned those funds to the public treasury.

In light of previous examples of misappropriation in local units of government, Attorney General Zoeller recently convened the Indiana Public Integrity Coalition, a group that brings together experts and officials from municipalities, counties, schools, townships, the United States Attorney and government-employee associations. The coalition is developing a curriculum and holding a series of training sessions around the state where local officials can learn the best practices for accountability, transparency and managing taxpayers’ money. More information is at this link:

http://in.gov/attorneygeneral/3058.htm

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