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Federal investigation: Center Grove school employee pleads guilty to fraud and other federal charges

Scheme involved more than $350,000 in school funds
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Posted at 4:24 PM, Feb 04, 2020
and last updated 2020-02-04 16:51:06-05

INDIANAPOLIS — A former Center Grove School Corporation employee is pleading guilty in an elaborate fraud scheme involving more than $350,000 in school funds.

According to information released Tuesday by the U.S. Attorney for the Southern District of Indiana, Emily Holmes, who was a Center Grove payroll specialist, defrauded the school system of $352,000 over a three year period from March 2016 to April 2019.

She was charged with wire fraud, aggravated identity theft, and tax evasion.

Holmes was doctoring the pay records of 35 part-time employees—people such as substitute teachers and assistant coaches—and they didn't know it. She would make up hours they did not work and change their direct deposit accounts to an account she controlled.

The investigation also found that Holmes was intercepting IRS W2 forms meant for the 35 part-timers. As a result, the employees did not pay federal, state and Social Security taxes totaling more than $30,000. When they started getting back tax notices, they realized something was up.

As the case came to light, the school system fired Holmes. She is now pleading guilty and will be sentenced at a later date.

Two of the three counts carry sentences of up to 20 years and one has a maximum sentence of five years. A sentencing date in federal court has not been set. As part of the plea agreement, Holmes must pay back $413,242.89 to the school system and the IRS.

On Tuesday, the Center Grove superintendent sent this letter to parents:

Center Grove Families,

As we shared with you in early May, a terminated employee of Center Grove Schools was the subject of a fraud investigation. Now that the investigation has concluded, we can share additional information with you.

The person was employed in payroll in our district’s Business Office. As soon as our Business Office was made aware of improper practices, the Center Grove Police Department and the Johnson County Sheriff’s Department were contacted. The person was terminated and an extensive investigation began.

The US Attorney has now filed charges against the terminated employee. We can assure you that this fraud did not involve student information. The investigation determined the terminated employee used her knowledge and system credentials to make fraudulent payroll payments directed to her own accounts. They determined the fraudulent payroll payments were made using the names of 35 former employees, mostly part-time or substitutes, over the last four years and amounted to just over $350,000.

The investigation revealed these people were not owed, nor did they receive these wages. However, some of the wages were reported to the Internal Revenue Service through Center Grove’s payroll system. The terminated employee is facing
federal charges of wire fraud, aggravated identity theft, and tax evasion.

Center Grove has been working with an outside accounting firm for the last eight months to make right any issues created by this fraud for the former employees who were victims. That includes correcting IRS reports and any other related concerns.

As a public school corporation, we work very hard to be good stewards of the taxpayers’ hard-earned money. We have begun the process of recovering funds and will continue to do whatever we can to recover the funds taken from our accounts. We have contracted an independent review of our processes and put in place additional controls in our systems to ensure that an incident like this does not happen again.

We would like to thank the Johnson County Sheriff’s Department, the State Board of Accounts, the FBI, and the IRS for their work investigating this case and bringing the terminated employee to justice.

Sincerely,

Richard A. Arkanoff, Ed.D.

Superintendent