Indiana Attorney General Greg Zoeller’s office filed a lawsuit against former Warsaw Street Superintendent Lacy Francis Jr. and a Mishawaka pipe contractor, demanding nearly $334,000 as repayment for taxpayer money the defendants allegedly defrauded from the city.
Filed in Kosciusko County Circuit Court Thursday, the lawsuit to recover public funds seeks repayment of $333,733.88 from Francis, Pro Form Pipe Lining Company and Marc Campbell, Pro Form owner and president. Francis is alleged to have overbilled the city by over $250,000 during a storm sewer line repair project involving Pro Form, and the State Board of Accounts figured his full liability in July including other invoices and state investigation costs.
“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,” Zoeller said in his statement on the lawsuit.
According to the July 15 certified audit report by the SBA, between January 2011 and December 2013, Francis 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 SBA audit found that Francis used his position 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 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, according to the audit.
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 Kosciusko County Prosecutor Dan Hampton 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 Monday and Francis on Sept. 29 in the criminal cases. Criminal charges are solely the jurisdiction of the county prosecutor, notes the attorney general’s office.
In the separate civil lawsuit filed Thursday, the attorney general’s office serves as collection agent for the SBA and seeks to recover public funds from the defendants to reimburse the treasury for the amount misappropriated. The lawsuit seeks the underlying amount of loss, $318,569, plus reimbursement for the additional costs SBA 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, garnishing 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.
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 order and scheduled a hearing Wednesday on a motion for a preliminary injunction that would freeze the defendants’ assets until the lawsuit is concluded.
Zoeller noted in his statement that the total amount sought from Francis, Campbell and Pro Form places the misappropriation scheme among the top 10 loss amounts his office has been assigned to collect by the SBA. Since January 2009, his office has collected approximately $4.5 million that audits identified as misappropriated and returned those funds to the public treasury.