A north Spokane day care center has shut down and its owner was disqualified from working with children amid a state fraud investigation.

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Investigators searched the Little Lambs Learning Center, 1814 W. Northwest Blvd., on Tuesday for evidence that its owner has been overbilling the state for the subsidized day care, according to an affidavit for a search warrant obtained by the Department of Social and Health Service’s Office of Fraud and Accountability.

The search came after a five-month review of the center’s records that indicated its owner, Lori Crull, had overbilled the state more than $112,000.

In addition, the state Department of Early Learning notified Crull that she has been disqualified from working with children, citing the fraud investigation as well as inappropriate use of discipline and concerns about her ability to provide the necessary level of care to children.

Little Lambs Learning Center, which began operation in 2008, was licensed to care for up to 62 children ages 1 month to 12 years.

Under state law, Crull has the right to contest her disqualification and to request a hearing before an administrative law judge.

A federal grand jury in Indianapolis on Tuesday indicted a City-County Council member and two associates linked to a foundation under investigation for more than two years with multiple counts of wire fraud and money laundering.

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Paul C. Bateman Jr., a Democrat who is leaving his Northeastside council seat at the end of the year; Michael L. Russell, a founder of the Russell Foundation; and Manuel Gonzalez, who held various foundation positions, are accused in the indictment with defrauding an Indiana physician in his 70s of about $1.7 million.

Bateman was charged with eight counts of wire fraud and 10 counts of money laundering, Russell with eight counts of wire fraud and 12 counts of money laundering and Gonzalez with three counts of wire fraud and two counts of money laundering.

Each count of wire fraud carries up to 20 years in prison and each count of money laundering up to 10 years in prison, if resulting in a conviction, said Joe Vaughn, lead prosecutor on the case for the U.S. attorney’s office.

The indictments come in the wake of the federal trial and conviction of another man who served on the City-County Council, Lincoln Plowman, a Republican. Plowman was sentenced earlier this month in federal court in Indianapolis to 40 months in prison on his convictions for bribery and attempted extortion.

Summonses will be issued to the three defendants in the current case, and a court date set for their appearances before a U.S. magistrate, U.S. Attorney Joe Hogsett said Tuesday evening.

Instead of investing the money in the ways told to the physician, the three men used the money for a variety of personal expenses for themselves, family members, friends and others associated with the foundation, according to the indictment.

The purchases included vehicles, entertainment, clothing, jewelry, travel, housing and home furnishings, the indictment states.

The Russell Foundation was created in 2003 as ostensibly a nonprofit, tax-exempt corporation “organized exclusively for charitable, religious (and) educational purposes, according to the indictment.

The indictment alleges the three men used the foundation to lure the physician first to invest about $702,000 in early 2007 to invest in Indiana ethanol production and distribution.

Then, later in the year, the indictment alleges, the three men successfully schemed to obtain a $1 million corporate cash bond from the physician purportedly to invest in the foundation’s humanitarian projects, with the physician being told he would get back $1.6 million in about seven months.

The indictment alleges Russell falsely told the physician at the time that he would receive his promised return on his investment “because there were going to be many additional investors in The Russell Foundation, when, in truth and in fact, and as Russell then knew, there were no credible potential investors in The Russell Foundation.”

The indictment also alleges that within just a few weeks after each of the physician’s two investments, nearly all of the money had been spent by the three men now indicted on a variety of personal items and uses. The foundation went into bankruptcy in May 2008, and a trustee was appointed to oversee the bankruptcy.

Hogsett said Bateman, in his role on the council, and an unnamed high-ranking officer of the Indianapolis Metropolitan Police Department who was a member of the foundation “lended credibility and legitimacy to the investment offerings and to the foundation as a whole.”

Bateman had served as chief administrative officer and chief corporate officer of the foundation, according to the indictment.

Hogsett said the indictment carries a message especially to those who may think of abusing their influence associated with holding public office.

“This indictment is another example of this office’s dedication to ending a culture of corruption that has no place in Indianapolis, or anywhere else in this state,” Hogsett said in a written statement. “Our policy on public corruption is very simple. It doesn’t matter who you are, who you know or what your politics happen to be. This office will find you, we will investigate you, and we will hold you accountable.

“The allegations in this indictment paint a picture of excessive personal greed. Such a violation of trust would be tragic under any circumstances, but the fact that this scheme allegedly involved a repeated violation of the public trust makes this case even more disheartening.”