Marion woman faces prison for funneling son's special needs trust funds for gambling

A Marion woman, Megan Middaugh, previously known as Megan Barry, has pleaded guilty to wire fraud after misusing nearly all the funds from her son’s special needs trust for personal expenses, including online gambling. The 39-year-old entered her plea last week in U.S. District Court and is facing a potential sentence of up to 20 years in federal prison.

Middaugh established a conservatorship for her son in September 2019 following a settlement from a personal injury lawsuit against the Cedar Rapids Community School District. The lawsuit, filed in 2017, claimed that a school bus driver assaulted her son, who has cerebral palsy. After the court approved the conservatorship in October 2019, Middaugh received a $105,000 settlement, which was deposited into a checking account held in her and her son's name.

In February 2020, she set up a special needs trust account for her son, transferring over $67,000 from the settlement into this new account. However, between February 2020 and January 2021, Middaugh spent approximately $52,000 from the trust on gambling activities. Additionally, she neglected her legal obligations to file annual accountings of the trust, instead submitting false reports to display regular expenditures intended for her son's benefit.

Middaugh appeared at a compliance hearing where her fraudulent activities were uncovered. U.S. District Chief Judge C.J. Williams is set to impose a sentence following the completion of a presentencing report, but Maddaugh remains free on previously established bond.

The prosecution of this case is being handled by Assistant U.S. Attorney Kyndra Lundquist, with the investigation led by Marion Police Department. If convicted, Middaugh faces significant penalties, including potential prison time, a $250,000 fine, and supervised release following her incarceration.