A former accountant for the Gnaw Bone and Helmsburg sewer districts has been charged with three felonies after police say he took more than $59,000 from the districts’ accounts for his personal use.
Frank Muzzillo, 55, of New Castle was formally charged on Jan. 18 with corrupt business influence, a Level 5 felony, and two counts of Level 6 felony theft.
Indiana State Police Det. Ian Matthews began his investigation into Muzzillo in August 2020 after an employee with Citizens Bank of Mooresville contacted police. Over numerous months, the bank had flagged suspicious activity among several accounts Muzzillo managed.
According to a state police report, Muzzillo opened two accounts in June 2019 at a Citizens Bank branch in Indianapolis to manage money from the Gnaw Bone Regional Sewer District and the Helmsburg Regional Sewer District. The accounts were approved by a member of each sewer district board. However, Muzzillo was the only authorized signer on both accounts, according to a report from the Indiana State Board of Accounts that was released in November.
Muzzillo managed sewer billing and the budgets of both utilities from 2018 to September 2020. His contract with both boards was terminated the first week of September. At that time, members of both boards would not comment on the reason for his termination, saying the matter was under investigation.
In 2019, the Helmsburg and Gnaw Bone sewer boards had decided to work together to buy billing software and hire Muzzillo to do the work from his accounting office instead of paying $20.50 per customer to Brown County Water Utility to send sewer bills with water bills. BCWU had been doing sewer billing for both districts for nearly 20 years, but was planning an increase to cover its costs. Muzzillo had agreed to charge the districts $8.50 per customer to do the billings, plus $150 per month for other financial activities and attending meetings when needed, according to newspaper archives.
The accounts Muzzillo set up at Citizens Bank of Mooresville were to receive monthly payments from sewer customers. The bank employee told police that within the same month of opening the accounts and as recently as August 2020, “numerous monetary transfers” had been made from both sewer accounts into Muzzillo’s personal and business accounts. Transfers into Muzzillo’s personal account are what raised suspicion. The bank reported that the transferred money was being used for personal expenses, the majority of which included ATM cash withdrawals at casinos, and hotel and restaurant bills, the affidavit states.
From July 2020 to August 2020, around $6,400 had been transferred from the Gnaw Bone account to Muzzillo’s business account for his financial company FLM Financial Group and an additional $1,400 was transferred from HRSD to FLM, the affidavit states. At the same time, around $9,700 was withdrawn at an ATM from the FLM business account.
Five days after meeting with the bank employee, Matthews reached out to the Indiana State Board of Accounts, which committed to doing its own investigation while Matthews looked into possible criminal activity.
In late August 2020, Matthews interviewed two members from each sewer board as well as attorney John Young, who had represented both boards during the investigation timeframe. None of them said they were aware of any financial irregularities. But after being alerted to the investigation and looking further into their records, Denise Broussard, then the president of the Helmsburg sewer board, and Dave Hess, president of the Gnaw Bone sewer board, both reported seeing “major issues” with their boards’ finances.
On Sept. 4, 2020, members of both boards went to FLM Financial Group office in Indianapolis to deliver the termination letters to Muzzillo directly and to get a copy of their software so they could continue billing their customers. Muzzillo eventually let the members into his office, but he refused to make eye contact and repeatedly apologized “for what he had done,” the affidavit states.
A different firm was hired to do all accounting for both boards.
On Sept. 11, 2020, Broussard called Matthews to report a charge of $980 on the sewer district’s credit card for “legal fees” made by Muzzillo. She said that at no time was Muzzillo authorized to use the card for personal legal fees. Later that day, Muzzillo’s attorney, Allen Lidy, declined to make his client available to speak to police “until further notice,” the report said.
Where the money went
The SBOA released a special investigation report in November covering June 2019 to September 2020.
The report says that each month, Muzzillo sent bills to sewer customers, who then would mail payments to FLM Financial Group or transfer money electronically to the sewer district’s fund. Muzzillo was then to transfer that money to the main account for both sewer districts, which was controlled by the board members, the report states.
Between July 1, 2019, and Aug. 18, 2020, Muzzillo transferred $6,840 from the Helmsburg sewer account to his personal account and an additional $15,210 to FLM’s bank account. From July 8, 2019, to Aug. 21, 2020, Muzzillo transferred $6,660 from the Gnaw Bone sewer account to his personal account and an additional $30,499.50 to FLM’s bank account, according to the affidavit.
The report notes that some of the transfers were made on days that both accounts had casino activity. No documentation was provided to support why any transfers should have been made to either account.
The SBOA report also says that $13,268.33 was transferred to the Helmsburg Regional Sewer District account from an account owned by the Gnaw Bone Regional Sewer District. It states that “no business purpose for these transfers could be established,” and because of that, Helmsburg Regional Sewer should reimburse Gnaw Bone Regional Sewer for the “unsupported transfers into their account.”
The SBOA reported that there was no “little or no oversight” from the boards into what Muzzillo was doing while he was billing customers, receiving and depositing customer payments, and recording activity on customer accounts. “Due to this lack of segregation of duties, Muzzillo was able to: Transfer district funds to his personal and business bank accounts; write and sign checks on the business account; and transfer funds between separate governmental units he handled,” both SBOA reports state.
The lack of oversight also allowed Muzzillo to “control the timing and amounts to be transferred to the business account, resulting in the business account to be overdrawn in two separate months,” the SBOA reported about the Helmsburg sewer board.
Both boards received the SBOA’s investigative reports in November.
Helmsburg’s board now has two new members who were not on the board when Muzzillo was employed, as well as a new attorney.
According to the SBOA, Muzzillo owes $39,095.10 for the transfers from the HRSD account and to cover the cost of the investigation. Muzzillo also owes $37,159.50 to the Gnaw Bone Regional Sewer District and an additional $17,598.82 for the investigative costs to create that report.
“We’ve been cooperative with the State Board of Accounts and are happy to see this step toward closure,” said new HRSD attorney Jacob Moore of the SBOA report.
“A great deal has changed in the last year, including new procedures to minimize the risk of any such problems in the future.”
Young still represents the Gnaw Bone Regional Sewer District. He did not respond to a request for comment by deadline.
Lidy, Muzzillo’s attorney, also did not respond to a request for comment.
A warrant was issued for Muzzillo’s arrest on Jan. 19. As of Jan. 31, he had not been booked into the Brown County jail. THIS WILL BE UPDATED MONDAY
