Timothy T. Duax U.S. Attorney | U.S. Attorney for the Northern District of Iowa
A woman from Marion, Iowa, has admitted to wire fraud after misusing funds intended for a special needs trust. Megan Middaugh, 39, entered a guilty plea on March 20, 2025, in Cedar Rapids federal court.
Middaugh acknowledged in a plea agreement that she sought state court permission in September 2019 to settle a personal injury lawsuit and create a special needs trust for the victim. The court approved her request the following month. In February 2020, she established a checking account designated as the medical assistance special needs trust with $67,070.50 from the settlement. Middaugh was appointed trustee of this account.
However, instead of using the funds for their intended purpose, Middaugh spent almost all of them on personal expenses, including gambling. Between February 2020 and January 2021 alone, she used $52,000 of the trust's money on online gaming activities. Additionally, Middaugh failed to submit mandatory annual reports for the years 2020 through 2022. Following a compliance hearing appearance in court, she filed false documents suggesting regular spending on behalf of the victim.
Middaugh awaits sentencing by United States District Court Chief Judge C.J. Williams after completion of a presentence report. She remains free on previously set bond but faces up to 20 years in prison, along with potential fines totaling $250,000 and three years of supervised release post-incarceration.
Assistant United States Attorney Kyndra Lundquist is prosecuting the case which was investigated by Marion Police Department.
