Marion woman faces prison for withdrawing son’s special needs trust funds for gambling

CEDAR RAPIDS — A Marion woman who spent nearly all of the funds set up for her son in a special needs trust on expenses for herself — including online gambling — pleaded guilty last week in federal court.

Megan Middaugh, formerly known as Megan Barry, 39, pleaded guilty in U.S. District Court to one count of wire fraud. She faces up to 20 years in federal prison.

According to a plea agreement, Middaugh, in September 2019, petitioned Linn County District Court to set up a conservatorship for her son who had a settlement from the Cedar Rapids Community School District from a personal injury lawsuit. She had filed the suit on behalf of her son in October 2017 and established a special needs trust for him. He is unable to handle his financial matters due to mental and physical disabilities, the plea stated.

The court granted her petition in October 2019, the plea stated. In November 2019 Middaugh received the $105,000 settlement and deposited the money into a checking account in the name of her son and herself, as the conservator.

Middaugh, as Barry, sued the Cedar Rapids Community School District in 2017 asserting a school bus driver slapped her 12-year-old son who was diagnosed with cerebral palsy.

In February 2020, Middaugh, as the trustee, opened a checking account as the medical assistance special needs trust for her son and deposited more than $67,000 from the settlement.

Between February 2020 and January 2021, Middaugh spent $52,000 of the trust funds on online gaming, according to the plea. Middaugh failed to file required annual accountings of the trust in 2020, 2021 and 2022 with the state court. After appearing at a compliance hearing with the court, Middaugh created and filed false reports that appeared to show regular expenditures on behalf of the minor.

U.S. District Chief Judge C.J. Williams will sentence Middaugh after a presentencing report has been completed. She remains free on bond previously set.

Middaugh faces up to 20 years in prison, a $250,000 fine, and up to three years of supervised release following her prison term.

The case is being prosecuted by Assistant U.S. Attorney Kyndra Lundquist and was investigated by Marion Police Department.

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