BARDSTOWN, Ky. — A federal grand jury in Louisville has indicted the former chief financial officer of the City of Bardstown.
Tracy Hudson, 41, was arrested without incident Tuesday, ahead of her initial appearance in federal court.
Hudson is accused of wire fraud after FBI investigators found she stole money from the City of Bardstown, first while serving as the occupational tax administrator and then as the city’s chief financial officer.
The indictment describes Hudson’s actions as “a scheme to defraud the city of Bardstown”, ultimately causing a loss of more than $762,000 to the small Kentucky town.
According to the federal indictment, Hudson took cash from the city for personal use, paid herself for false expense reimbursements, diverted payments into her 401k, and purchased personal items on a city of Bardstown credit card.
The investigation started internally, in 2019, after the city council noticed “financial irregularities.”
“The crime was the act of one rogue employee who concocted a scheme to undermine the checks and balances of prudent accounting practices that were previously in place,” Mayor Dick Heaton said after the findings were announced in 2019.
"It's not just a city crime, I think it's a crime against people all over Nelson County," Heaton added Tuesday.
The city has recovered $484,121 so far, according to the city of Bardstown. Mayor Heaton said the former CFO returned about $134,000 in cash. They got the rest through a bond the city of Bardstown has for its CFO, which is like insurance for embezzlement.
The city completed the audit and turned the findings over to the Kentucky State Police.
In 2021, a KSP spokesperson told WHAS11 News the agency’s investigation was complete and handed over to federal prosecutors - that’s when the FBI got involved.
Hudson’s actions constituted federal involvement when she used a city credit card to make purchases across state lines. According to the indictment, Hudson caused signs, signals and sounds to be transmitted in interstate commerce while executing the fraud scheme.
If convicted, Hudson could face up to 20 years in prison, a $250,000 fine and will have to forfeit any property which was derived from proceeds obtained as the result of her violation.
Contact reporter Shay McAlister at smcalister@whas11.com. Follow her on Twitter (@WHAS11Shay) and Facebook.
Bardstown Mayor news conference
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