The State Board of Accounts released its preliminary special investigation report last week after its examination of documents and interviews it did into the the operations of the Clinton County Sheriff’s Office.
The main thrust of the investigation deals with the handling of funds from the commissary fund from January 1, 2018 through September 30, 2021, as well as the documents related to the business organization and bank statements for Leonne, LLC, from November 27, 2018, through September 30, 2021.
The SBOA report finds that $329,360.47 is to be reimbursed from Clinton County Sheriff Rich Kelly, and his wife, Ashley Kelly, who also serves as Matron at the facility. Included in that sum is $109,725.82 in special investigation costs.
In its report, the SBOA says it received a complaint regarding Sheriff Kelly’s use of jail commissary funds. One specific concern involved payments totaling $64,000 to Leonne, LL, (Leonne) which the complainant believed to be a CPA firm.
Checks were issued from the CCSO jail commissary funds totaling $190,916.61 to Leonne and $32,967.92 to Ashley Kelly from January 1, 2019, to September 30, 2021, for 50 percent of commissary profit on merchandise sales, with the remaining 50 percent of the profit being retained in the jail commissary fund for use by the sheriff in accordance with Indiana Code 36-8-10-21(d). As of the date of this report, $28,718.04 of the $32,967.92 of checks issued to Ashley Kelly have been presented for payment and verified as deposited.
The report also states that Leonne is an Indiana based limited liability corporation established on November 27, 2018, which was approximately two months before prior to Sheriff Kelly taking office. Leonne is owned and operated by its two members, Richard Kelly and Ashley Kelly.
Documentation reviewed during the examination revealed Richard Kelly and Ashley Kelly owned, operated, and were the sole members of Leonne at all relevant times. Richard Kelly and Ashley Kelly have a 49 percent and 51 percent ownership interest, respectively, in Leonne. Under Section VIII of Leonne’s Operating Agreement, all profits and losses were allocated to each member based on the above ownership interests. All commissary payments to Leonne were deposited in Leonne’s checking account.
Also, the “Address of Legal Entity” was listed as Richard and Ashley Kellys’ residence, which was not the business address of Leonne provided in the filings with the Indiana Secretary of State.
Additionally, examination of disbursements from the Leonne checking account indicate Richard and Ashley Kellys’ household expenditures were paid directly from the Leonne checking account, including the purchase of a 2021 GMC Yukon Denali purchased and co-owned by Richard Kelly and Leonne, per the vehicle buyer’s order. Also, all commissary checks deposited by Ashley Kelly were deposited to the Leonne checking account.
Neither Richard nor Ashley Kelly filed a Conflict of Interest Disclosure Form to disclose their ownership interest in Leonne or to disclose their marital status.
It is the SBOA’s audit position that the payments to Leonne and Ashley Kelly violated the Clinton County nepotism policy under the Clinton County Employee Handbook, effective as of January 1, 2019, which states, in relevant part, that employees who are relatives of an Elected Official or Department Head may not be employed by the County in a position that results in one relative being in the direct line of supervision of the other relative.