BEDFORD, Ind. (Legal Newsline) - Indiana Attorney General Greg Zoeller announced a lawsuit on Monday against a former school treasurer demanding that she repay more than $110,000 in public funds she allegedly misappropriated and used for personal expenses.

Kathy J. Kirk, the school corporation treasurer at Mitchell Community Schools in Bedford until January 2011, allegedly owes the school system $110,889.59 for public funds she mishandled, misappropriated and embezzled and for the cost of a State Board of Accounts certified audit.

"The ex-treasurer's scheme involved frequent, brazen instances of her paying personal expenses using tax dollars from the school corporation," Zoeller said.

"This abuse of public trust in misappropriating funds for personal use is intolerable and we will use every legal tool at our disposal to compel repayment from this defendant and reimburse the public treasury."

The special audit of the school system's finances examining the time frame between December 2006 and June 2011 found four types of alleged misappropriation. Kirk allegedly used $76,926.35 to pay personal or non-school expenses, received unapproved travel reimbursement worth $1,469.88, diverted two school payroll checks worth $3,156.48 for a former school employee into her own bank account, failed to deposit three collections the school received into school bank accounts for $1,129.55 and incurred interest, penalties and late charges from vendors worth $4,007.33.

The audit found that Kirk allegedly used one of the school's credit cards to charge purchases for greeting cards, groceries, household appliances, men's and women's clothing, PayPal, cable services, insurance, jewelry, clocks, catalogue purchases, fuel and restaurants. In addition, Kirk allegedly used school funds to pay personal utility bills for Duke Energy, Verizon and AT&T, in addition to IRS tax bills, invoices to companies that did no business with Mitchell Schools and payments to Ball State University. Kirk also allegedly charged the school for false mileage claims, hotel stays at locations where there were no meetings or school business, and duplicate payments. The school corporation had to pay for the interest, penalties and late charges that occurred while Kirk was in her position.

The Mitchell School Corporation directly lost $86,689.59 for which repayment is sought from Kirk, Zoeller says. The SBOA incurred $24,200 in audit costs, which are added to the total sought from Kirk. When the board issues a certified audit report, Zoeller's office is authorized to recover the money to reimburse the public treasury for the amount that has been misappropriated.

Zoeller's complaint to recover public funds was filed on Monday in Lawrence Circuit Court against Kirk seeking $110,889.59 and triple damages. The court granted a motion for a temporary restraining order to freeze Kirk's assets, including two vehicles, her home, and any bank, pension or retirement accounts, until a hearing on the motion for a preliminary injunction has been granted. If the injunction is granted, Kirk will be unable to transfer, sell or conceal the property until the lawsuit is resolved. The defendant will be able to respond to the allegations at the hearing on May 22 at 9:30 a.m. in Lawrence Circuit Court.

Fidelity Deposit Company of Maryland of Schaumburg, Ill., has also been named as a defendant in the lawsuit. The company wrote a series of five public official bonds for $200,000 each as an insurance policy against theft under which Kirk was covered. The state seeks to redeem the bonds to reimburse the school corporation for the amount owed. Any portion not covered by the bonds would be Kirk's personal responsibility. Kirk was charged with corrupt business influence, forgery and theft in April and awaits trial on September 4 for the counts.

If Zoeller's request to enter a civil judgment against Kirk is granted, Zoeller's office can pursue the monetary judgment through collections and can try to attach liens on property, garnish wages or take other actions a creditor can take against a debtor for debt collection.

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