Brett W. Todd - page 5

FRANKFORT, Ind. (July 6, 2025) – A legal battle is unfolding in Clinton County, as the State of Indiana, led by Attorney General Todd Rokita, seeks to recover over $329,000 (plus treble damages pursuant to Indiana’s Crime Victims Relief Act) from Clinton County Sheriff Richard Kelly, his wife Ashley Kelly, and their limited liability company, Leonne, LLC.

The State alleges misappropriation of public funds, malfeasance, misfeasance, and nonfeasance related to Ashley Kelly’s roles as Jail Matron and Commissary Manager, while the Kellys vehemently deny wrongdoing, asserting their actions were lawful and based on professional advice.

Due to the nature of this case a special judge from Tipton County has been named to oversee the case, Thomas R. Lett.

The parties of this case will meet in Tipton County Circuit Court on Tuesday, July 8 at 2pm.

A brief overview of the claims alleged by the Attorney General Rokita and the Kellys’ defenses.

The State’s Allegations: Misappropriation and Policy Violations

The lawsuit, filed in Clinton Circuit Court, stems from a Special Investigation Report by the State Board of Accounts (SBOA) covering January 1, 2019, to September 30, 2021. The SBOA report, cited as Exhibit 1 in the State’s complaint, alleges that public funds were “misappropriated, diverted, or unaccounted for,” “illegally received,” “illegally retained,” “obtained by fraud or in any unlawful manner,” and/or “wrongfully withheld from the public treasury”.

Key allegations from the State include:

* Nepotism Violations: Richard Kelly, as Sheriff, hired his spouse, Ashley Kelly, as both jail matron and commissary manager, which the State claims violated Clinton County’s anti-nepotism policy. The State also asserts the Kellys failed to properly disclose their ownership interest in Leonne, LLC, and their marital status on conflict disclosure forms.

* Improper Disbursements: The SBOA found that checks totaling $190,916.61 were improperly issued from the Jail Commissary Fund to Leonne, LLC, and $32,967.92 to Ashley Kelly, between January 1, 2019, and September 30, 2021, without written agreements to support or authorize these payments. These payments were calculated as 50% of commissary profit on merchandise sales.

* Dual Compensation and Undocumented Hours: Ashley Kelly received a salary as jail matron from the County General Fund and additional compensation as commissary manager from commissary profits. The State alleges her hours for these positions were not documented and that she may have been receiving disability pay from the Indiana State Police (ISP) concurrently.

* Pecuniary Loss and Audit Costs: The State claims Clinton County suffered a pecuniary loss of $219,634.65 due to these alleged breaches of duty, and the SBOA incurred $109,725.82 in additional audit costs, for a combined total of $329,360.47. The State is seeking this total amount, disgorgement of “ill-gotten gains,” and enhanced damages, including treble damages under Indiana’s Crime Victims Relief Act, which applies to losses resulting from certain criminal codes like conversion or theft.

* Surety Liability: Western Surety Company and RLI Insurance Company, as sureties for Richard and Ashley Kelly respectively, are also named as defendants, with potential liabilities of $90,000 and $15,000.

The Attorney General’s office argues that for Count I of the complaint (malfeasance, misfeasance, and nonfeasance), proof of criminal intent is not required for the State to recover funds. Citing the Indiana Court of Appeals case Montalvo v. State ex rel. Zoeller, the State contends that its authority to recover misappropriated or diverted public funds is “irrespective of whether the person who wrongfully received public money knew that he or she was not lawfully entitled to receive it”.

They define misfeasance as performing a lawful act in an unlawful manner, and nonfeasance as an omission to perform a required act, neither of which necessarily requires intent. The State notes that prior legal rulings have already established as undisputed facts that the Kellys created Leonne LLC to receive profits and that their agreements were not submitted to the County for approval.

The Kellys’ Defense: Good Faith, Reliance on Advice, and Alleged Retaliation

Richard and Ashley Kelly, represented by counsel Theodore J. Minch, contest the State’s claims, arguing they acted in good faith and that the lawsuit is part of a pattern of “selective enforcement, retaliatory actions, and unequal treatment”.

Their defense rests on several points:

* Reliance on Legal and Professional Advice:

Sheriff Richard Kelly states he sought legal counsel from Clinton County Attorney Thomas Little both prior to and after taking office regarding Ashley’s appointment and his own compensation. Attorney Little allegedly advised that appointing his wife as Jail Matron and Commissary Manager was lawful under Indiana statute and consistent with historical practice, referencing three prior sheriffs whose wives held similar roles and shared a 50/50 split of commissary profits with the County.

Little reportedly “affirmatively agreed to ‘set up’ and ‘take care of’ the arrangement,” including filing conflict-of-interest and nepotism forms. Richard Kelly later learned Little had drafted these documents but “neglected” to provide them.

Ashley Kelly consulted Nancy Ward and Wanda Mitchell, wives of former sheriffs, who confirmed the duties and the practice of receiving additional money from commissary operations. Nancy Ward reportedly informed Ashley that commissary monies would be “sizeable” and she would receive a 1099 from the County.

The Kellys’ CPA and financial advisor, Dennis Hayden, advised them to form Leonne, LLC, as a two-member LLC (Ashley 51%, Richard 49%) to minimize personal liability and optimize tax consequences for the 1099 income. They assert Leonne, LLC, actually enhanced transparency compared to prior methods.

* Beneficial Commissary Management: Ashley Kelly insists that only she performed the work of Commissary Manager, and the money earned was not funded by tax dollars, but rather from net proceeds of commissary sales, identical to her three predecessors. She claims to have significantly increased revenue “by tens of thousands of dollars” by adding products and securing a lucrative agreement with the U.S. Marshals Service to house federal detainees. These increased profits allowed the Sheriff’s Office to purchase essential equipment, such as a body scanner, K9 unit, snowplow, and other items, “without using taxpayer money”. She also obtained a Tobacco Sales Certificate to legally sell e-cigarettes, further boosting sales.

* Transparency and Compliance: Ashley Kelly states she provided semi-annual commissary fund reports to the Clinton County Council as required by law since 2019, and monthly bank statements were sent to the SBOA by the Records Clerk. She notes that the County Council President even praised her “numbers” and told her to “keep doing what you’re doing” after a report.

* Allegations of Animosity and Retaliation: The Kellys contend that Clinton County officials, including Commissioners and Attorney Thomas Little, have consistently opposed and undermined them since Sheriff Kelly’s election. Richard Kelly believes this animosity is partly due to his Filipino ethnicity. They assert that hostilities began when Sheriff Kelly questioned his proposed salary, which was below the statutory minimum for Clinton County’s size.

Ashley Kelly alleges that County Council President Alan Dunn “recreated a commissary report” and Prosecutor Anthony Sommer “falsely represented this fabricated report to journalist Brett Todd as the official report,” which contained “numerous accounting and mathematical errors”. They view the SBOA audit as a “sham and witch hunt” timed for the 2022 Sheriff election, noting that a nepotism violation alleged in the SBOA report was later “adjudicated in Tippecanoe County where we were found to NOT be in violation”. They also state that despite the Commissioners’ public awareness of her role and compensation, they failed to provide her a formal contract, and she has not been paid for commissary work since September 15, 2021, though she continues to perform the duties.

* Legal Interpretation of Intent: The Kellys’ counsel argues that malfeasance, misfeasance, and nonfeasance, particularly when related to criminal charges or penalties, require proof of “intentional acts” or a “conscious objective” to cause a loss. They contend that their good-faith reliance on the advice of a licensed attorney and CPA negates any unlawful intent, and a “mistake of fact” defense is applicable if they honestly believed their actions were lawful due to the information they received. They emphasize that the State has not proven they intentionally caused a loss, and the Kellys’ actions actually increased County funds. They also argue that treble damages, being punitive, require “willful or knowing misconduct,” which they say is absent given their good faith actions and reliance on counsel.

Ongoing Legal Dispute

The case was originally filed on March 30, 2023, with the State requesting summary judgement on September 16, 2024, arguing that the material facts for Count I are undisputed and the legal issues were already determined in its favor by the Court of Appeals. The State has also filed a motion to strike the Kellys’ affidavits and exhibits, citing improper designation, lack of authentication, and untimeliness. The Kellys maintain that genuine issues of material fact preclude summary judgment and that their intent, or lack thereof, is central to the claims.

Criminal charges are also pending against Richard and Ashley Kelly in a correlated case. In the criminal case, the State has dropped the charge of Conflict of Interest leaving three charges of Official Misconduct, though these cases remain “undecided” with a trial date set for October 14.

The Kellys have filed lawsuits against County Attorney Thomas Little in Tippecanoe County and Clinton County Prosecutor Anthony Sommer in Boone County. Each of those cases remain “undecided.”