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Algonquin Township Road District sues supervisor in alleged fraud case

Civil case asks for more than $1 million in damages from supervisor

Algonquin Township Supervisor Charles Lutzow attends a township meeting. Another lawsuit has launched from the Algonquin Township Highway Department – and it's asking for more than $1 million dollars in alleged damages from Lutzow.
Algonquin Township Supervisor Charles Lutzow attends a township meeting. Another lawsuit has launched from the Algonquin Township Highway Department – and it's asking for more than $1 million dollars in alleged damages from Lutzow.

Another lawsuit has been launched by the Algonquin Township Highway Department – and it’s asking for more than $1 million dollars in alleged damages from Supervisor Charles Lutzow.

Filed in McHenry County court Thursday, the lawsuit alleges Lutzow committed constructive fraud when he opened road district accounts at American Community Bank and named the accounts something other than “Algonquin Township Road District.”

“The failure to keep the financial accounts of the road district in the name of the road district is the gist of the complaint,” Woodstock attorney Robert Hanlon wrote in the complaint.

The six-page lawsuit asks for at least $1 million in compensation and punitive damages totaling “at least three times the amount” of road district funds held in accounts “in names other than the Algonquin Township Road District.”

The accounts, managed by Lutzow, instead are named “Algonquin Township Highway Equipment & Building” and “Algonquin Township Highway Road & Bridge Fund.”

Algonquin Township Highway Commissioner Andrew Gasser could not be reached for comment, but in an email, Hanlon said this about the lawsuit to the Northwest Herald: “First, I have made it abundantly clear to you, that I do not discuss any of my clients’ business in the tabloids. That is all I have to say about your inquiry of today.”

The township’s longtime accountant called the lawsuit a “frivolous” attack filed without any merits to support it.

“There’s nothing weird going on there,” said Mary Miller, the Crystal Lake-based accountant who has been working with the township for more than a decade. “This is such a waste of taxpayer dollars.” 

The latest in a long string of lawsuits from the road district offers little about the genesis of what led to the legal action, but an examination of court records filled in some of the details.

Hanlon’s filing of the lawsuit on behalf of the highway department is tied to a separate lawsuit Crystal Lake attorney Denise Ambroziak filed on behalf of a self-appointed watchdog operation called the Edgar County Watchdogs.

In April, Kirk Allen and John Kraft – founders of the 501(c)(4) organization from downstate Illinois – filed a public records lawsuit naming both Algonquin Township and the Algonquin Township Highway Department. They alleged that the governments on multiple occasions did not comply with the Freedom of Information Act.

In October, Hanlon negotiated a deal to cut a $40,000 settlement payment to the Edgar County Watchdogs to get the name of the road district taken off the lawsuit, a move that stirred the concerns of township officials.

A paragraph in the settlement agreement gave the township board 10 days after its October meeting to approve the payment – or else the settlement would increase at a rate of $5,000 a month until paid in full.

The township objected to the settlement terms in court, but McHenry County Judge Thomas Meyer in November overruled and ordered the road district to pay $45,000 to the Edgar County Watchdogs.

In December, the office of Ambroziak, the attorney representing the watchdogs, served American Community Bank in Woodstock with a citation to discover whether the financial institution had money in the accounts of the Algonquin Township Road District – described as the “debtor” – to satisfy the settlement.

A bank employee signed her name to the citation document stating the bank had no assets belonging to a debtor known as the Algonquin Township Road District.

Ambroziak told the Northwest Herald she later visited the bank herself to discuss the matter, concerned the bank acted in a willfully uncooperative manner.

American Community Bank later filed an amended response letting Ambroziak and her clients know there was an account tied to the road district stocked with enough money to fund the settlement.

The road district’s civil suit that was filed Thursday alleges Lutzow, working as the highway department’s treasurer, transferred road district money from Fifth Third Bank to American Community Bank “but did not put those monies into an account in the name of the road district.”

What Lutzow actually did, he said, was open multiple accounts – each corresponding to different funds within the township and highway department.

“I did it because it was the prudent accounting method,” Lutzow said. “There’s four different [funds], and we’ve always kept the money separate for prudent accounting. You don’t want accounts co-mingled for different purposes.”

Lutzow also opened what he characterized as four “sweep accounts” – accounts with a minimum balance of $65,000 and where any money above that amount would be deposited into an interest-bearing program.

“In the past, the township was getting charged just to have their money in the bank,” Lutzow said. “This way the township was actually getting more interest on their money.”

To Lutzow, the lawsuit represents another blow in the road district’s “continued attack” against the township and officials there. To the township’s accountant, Lutzow did nothing wrong. Miller called the lawsuit “silly” and pointed to another township that keeps all money assets in a single account.

Township attorney Jim Kelly said the lawsuit is without merit.

“And we’re going to defend against it,” he said.

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