AG files suit against Syracuse claiming misappropriated funds

SYRACUSE — The town of Syracuse is in a legal battle against Indiana State Attorney General Todd Rokita after allegations were made that officials misappropriated funds to pay for health insurance illegally.

Allegations from Rokita’s office spawn from a 2023 State Board of Accounts audit which identified past and present town council members, former clerk-treasurers, a former town manager and spouses as illegally claiming certain insurance benefits.

Rokita’s lawsuit calls the actions of the town a “diversion of misappropriation of public funds.”

The lawsuit from Rokita’s office claims that an Indiana State Board of Accounts audit of the town’s accounts and records from January 2015 to December 2023 found that the town funds were used to pay for or reimburse insurance premiums for private insurance policies other than the town’s group insurance plan.

A town ordinance passed in 2019 changed some parts of the old town insurance ordinance, allowing for town employee dependents and council members and their dependents to be provided health insurance, and adding spousal coverage.

The lawsuit also states the ordinance extends health insurance retroactively back to 2014 for “payment of reimbursement of Medicare insurance premiums and supplemental insurance premiums,” and calls the changes made in the ordinance in violation. SBOA also said the town violated IC 36-5-3-2, by not including in the salary ordinance the compensations for Medicare premiums.

Rokita’s lawsuit says that while the town provided group health insurance for full-time employees, the additional ordinance was passed granting the town authority to expand public money on health insurance for “certain individuals” in a “manner SBOA found to be inconsistent with the required and specific manner set forth in Indiana Code 5-10-8-2.6(b).”

Specifically, the SBOA and subsequent lawsuit claim that the town has been paying premiums for insurance obtained by individuals who were not eligible to participate in the town’s group insurance including reimbursement or payments of privately obtained insurance, supplemental Medicare insurance and reimbursements of amounts deduced by the federal government from the individual’s Social Security payments for Medicare insurance, the lawsuit states.

The state is seeking “damages, disgorgement of ill-gotten gains, and other appropriate relief,” the lawsuit reads

The town of Syracuse filed a Complaint for Declaratory Judgment on Dec. 19, 2024, against the SBOA and litigation on that matter is currently pending. Since the filing of the new lawsuit, the two cases have been consolidated.

THE ACCUSED

Specific individuals accused are: current council member Cynthia Kaiser and her husband Brent; current council member William Musser and his wife Margaret; current council member Larry Siegel, his wife Sharon and a child; current council member Paul Stoelting and his wife Martha; former councilman Thomas Hoover; late wife of former councilman Larry Martindale, Mary; former clerk-treasurers Julie Kline and Paula Kehr-Wicker and Kehr-Wicker’s husband Robert; former town manager Henry DeJulia and his wife Esther; former police matron Kathleen Goodyear; former street laborer Kenneth Plikerd; and former water department foreman Don Robertson and his wife Kathleen, and well as the Town of Syracuse, Western Surety Company and Employers Mutual Casualty Company. Some deceased individuals who may have received benefits are not included.

Rokita, in his lawsuit, lists several specific findings of the SBOA audit. They claim that Martha Stoelting, wife of councilman Paul Stoelting, was improperly reimbursed for Medicare and Medicare Supplemental Insurance premiums while divorced to the tune of about $19,000. In a letter submitted to the SBOA, Stoelting explains that the couple divorced in 2007 with intentions of remarrying on their anniversary in 2019 at the courthouse but were unable to do so and the COVID-19 pandemic prevented them from being able to remarry at the courthouse until 2022. He tells the SBOA that they had no intentions of wrongdoing but said they paid back the $19,000 owed to the town to satisfy the claim regardless.

The lawsuit also identifies improper contributions made to Health Saving Accounts of town council member Larry Siegel, and Police Matron Kathleen Goodyear’s husband Kenny. The report says that neither Larry Siegel nor Kenny Goodyear participated in the town’s group health plan.

The SBOA in total found that the town had suffered a pecuniary loss of about $617,000 as a result.

SBOA is also suing Western Surety Company under claims that it issued the public bonds for former clerk-treasurers Julie Kline and Paula Kehr-Wicker and former town manager Henry DeJulia, and a blanket position bond. The suit claims that DeJulia misapplied, misappropriated or diverted public funds to the tune of about $24,000, and for Kline, $11,000, and Kehr-Wicker, $241,0000, and called Western Surety jointly liable. In addition, it claims that because Western Surety issued a blanket bond for the town it is also being sued and said because of the malfeasance, misapplication, or diversion of the public funds at $617,000, Western Surety should be liable for the sum. Employers Mutual Casualty Company is also being sued.

The suit asks Kosciusko County Superior Court 4 Judge Christopher D. Kehler to hold the many current and former town employees and their spouses liable and enter into judgement for the total alleged $617,000 based on the individual calculations each is responsible for, and asks others to disgorge any ill-gotten gains from the diverted funds.

COUNTER CLAIM

According to a counter claim by the town, in April 2023, town council member Larry Siegel contacted the SBOA regarding the town’s practice of reimbursing individuals for insurance premiums.

“The SBOA responded to Mr. Siegel’s inquiry, advised Mr. Siegel on how the Town Council should administer the ordinance, and never mentioned or raised by concern that the town’s form of compensation was allegedly contrary to law,” the claim reads.

Later in the year, two others also contacted the SBOA asking if the town should continue the practice of reimbursing employees and council members for insurance premiums, and according to the town’s document, the auditor specifically told them that yes, they should.

This document also claims that the SBOA, in fact, violated IC 5-11-5-1, which requires results of the investigation to remain confidential until the final report is made public. The report was issued in December 2024, but the SBOA allegedly began contacting former town employees claiming the town had violated Indiana law and that former employees needed to pay back insurance premiums before the audit was released.

The audit concluded that between 2015 and 2023, the town had allegedly paid $503,000 of improper insurance amounts and said current town employees accused should pay back a total of $74,000 between them. Some, the Kaisers, the Robinsons and the Stoeltings, had credits applied their totals owed marking them as no balance due at the time of the lawsuit.

The town seeks a declaratory judgment that their ordinance did not violate Indiana Code nor prohibit the town from reimbursing insurance premiums including Medicare insurance premiums and supplemental insurance premiums, confirming it may continue paying or reimbursing those under IC 36-5-3-2, and that its officials past and present do not owe funds.

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