Marion Woman Pleads Guilty to Wire Fraud for Misspending Money from Special Needs Trust

A woman who spent nearly all of the funds in a special needs trust on her own expenses pled guilty on March 20, 2025, in federal court in Cedar Rapids.  Megan Middaugh, age 39, from Marion, Iowa, was convicted of wire fraud.

In a plea agreement, Middaugh admitted that in September 2019 she petitioned a state court for the authority to, among other things, settle a personal injury lawsuit on behalf of the victim and establish a special needs trust for the victim.  The court granted her petition in October 2019.  In February 2020, Middaugh opened a checking account as the medical assistance special needs trust for the victim and funded it with $67,070.50 from the lawsuit settlement.  Middaugh was the trustee on the account.  Thereafter, Middaugh spent nearly all of the funds in the trust on her own personal expenses, including gambling.  Between February 2020 and January 2021, Middaugh spent $52,000 of the trust funds on online gaming.  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 the behalf of the victim.

Sentencing before United States District Court Chief Judge C.J. Williams will be set after a presentence report is prepared.  Middaugh remains free on bond previously set.  Middaugh faces a possible maximum sentence of 20 years’ imprisonment, a $250,000 fine, and up to three years of supervised release following any imprisonment.

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

Court file information at https://ecf.iand.uscourts.gov/cgi-bin/login.pl.

The case file number is 24-CR-0089.  

Follow us on X @USAO_NDIA.