MARION, Iowa (U.S. Attorney’s Office) — Megan Middaugh, 39, of Marion, Iowa, pleaded guilty to wire fraud after using nearly all of the funds from a special needs trust to cover her own personal expenses, including significant gambling losses. The U.S. Attorney’s Office for the Northern District of Iowa announced her guilty plea on Tuesday.
Misuse of Trust Funds
In September 2019, Middaugh petitioned a state court to settle a personal injury lawsuit and establish a trust that was intended to benefit the victim. The court approved the petition in October 2019, allowing Middaugh to open a checking account for the trust in February 2020. This account was funded with $67,070.50 from the legal settlement.
As the trustee, Middaugh was responsible for managing the funds for the victim’s benefit. However, she admitted to using the trust funds for her own benefit, spending approximately $52,000 on online gambling between February 2020 and January 2021. She failed to submit required annual accountings to the court in 2020, 2021, and 2022.
False Reports and Financial Fraud
After a compliance hearing, Middaugh submitted false financial reports to the state court that appeared to show proper usage of the trust funds for the victim. However, the reports did not reflect her misuse of the funds for personal expenses.
Possible Sentencing
Middaugh faces up to 20 years in prison, a fine of up to $250,000, and up to three years of supervised release following any imprisonment. Sentencing will take place after a presentence report is prepared by the court.
Middaugh remains free on bond while awaiting her sentencing.
U.S. Attorney’s Statement
“The defendant’s actions in misappropriating funds intended for an individual’s well-being are reprehensible,” said the U.S. Attorney’s Office. “We will continue to pursue those who exploit vulnerable individuals for their personal gain.”
