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Local attorney accused of misrepresenting funds by ex-employees

By Staff | Jan 18, 2017

HUGHESVILLE – A surprise raid last Tuesday at the law offices of Mary C. Kilgus – which resulted in law enforcement officers seizing nearly 60 boxes of records and several laptops – was sparked by allegations from two former employees who accuse Kilgus of misappropriating in excess of $100,000 last year from her own firm, according to court papers.

The two former employees, Heather Crowell and Barbara Barnes, told state police that Kilgus allegedly charged clients “for work that was never done or billed them for a greater number of hours than was actually spent working on a case,” Trooper Jason Miller said in an affidavit.

Initially hired at the firm at 185 N. Main St. last January as a part-time secretary, Barnes was promoted to full-time paralegal and office manager, Miller said. Crowell joined the firm last April also a part-time secretary but “was soon promoted to billing clerk,” Miller said.

Both women resigned from the firm last month after discovering alleged “improprieties” at the business, Miller said, adding that he, along with county Detective Dave Burns, first interviewed Crowell and Barnes on Jan. 3 after the county’s district attorney’s office, which received the initial complaint, referred the matter to state police.

Crowell and Barnes “wanted to report unethical and possibly illegal behaviors that were being conducted by Kilgus and her daughter, Schawnne Kilgus” at the law firm, Miller said in the affidavit, which became public on Wednesday afternoon. Schawnne Kilgus also is an attorney.

The two former employees also “filed a complaint regarding these misbehaviors” with the Attorney Disciplinary Board of the state Supreme Court, which handles complaints about possible misconduct by attorneys licensed to practice in the state, Miller said.

No criminal charges have been filed in the case.

In an email, Mary Kilgus said Wednesday she had no comment about the search warrant or the allegations presented by her two former employees.

While the law firm charged a flat rate for criminal cases, “the bulk of the firm’s work was civil and was handled by retainer,” in which clients are billed an hourly rate, Miller explained.

“Barnes stated Mary Kilgus would bill her time at an hourly rate of $195 while Schawnne would bill $175 an hour,” Miller said, adding that Barnes billed her paralegal services at $95 an hour.

“Both Crowell and Barnes reported they witnessed Mary Kilgus at times bill a client at her hourly rate for work that was actually done by Schawnne or Barnes,” Miller said.

“It was a regular practice at the firm to find ways to fully exhaust retainers, demand additional retainer (fees from clients) and make every effort to avoid having to return any balance” of the clients’ money back to the clients, Miller said the former employees told investigators.

“Based on the firm’s financial records, Barnes and Crowell report that Mary Kilgus and Schawnne Kilgus allegedly failed to deposit more than $127,000 of client retainer fees” into two required business accounts held at the Muncy Bank and Trust, Miller said.

“Barnes and Crowell state Mary Kilgus would at times accept retainer payments from clients at the courthouse or during meetings, (payments) that Kilgus did not report to the billing clerk, causing a great deal of upset with clients who received bills not reflecting the payments,” the trooper said.

“These undocumented payments are unaccounted for,” Miller added.

Crowell reported there were times when cash payments were brought to the office by clients and the payments “went right into Mary’s wallet,” the trooper said.

Even though large retainer fees were coming into the office, the law firm “appeared to be having financial difficulty,” Barnes and Crowell claimed to investigators.

The two women reported there were times when “checks would bounce for insufficient funds, and past-due notices from creditors arrived at the office,” Miller said.

Barnes and Crowell allege Mary Kilgus regularly used the firm’s business account for personal expenses, including “alcohol, restaurants, shopping, vacations, her mother’s maid service and a daughter’s wedding,” Miller said.

District Attorney Eric R. Linhardt stressed the raid was the result of “a joint investigation” involving not only the state police but also the state attorney general as well as his office.

“I am well aware of the potential sensitivities of this case, and it is one of the reasons why multiple agencies have been brought in to assist from its very early stages. With that being said, I will not prejudge the evidence in this case,” Linhardt said.

“If – and I emphasize if – at the conclusion of this investigation, sufficient evidence is found to charge, my office and the attorney general’s office will have discussions about who is in the best position to assume responsibility for its criminal prosecution,” he added.