Clear Lake city employees embezzled more than $200K, charges say

CLEAR LAKE, Minn. (FOX 9) - Criminal charges are filed against three people accused of embezzling more than $200,000 from the City of Clear Lake from late 2022 to 2023.

The three people accused of embezzlement are 48-year-old former City Clerk Kari Kay Koren, 39-year-old now-retired firefighter Chad Matthew Koren, both from Clear Lake, and 55-year-old former Clear Lake Public Works Director Dustin James Luhning of Rogers.   

Authorities say they used their roles as a city clerk, firefighter and public works director to access city funds that were used for their own expenditures from late 2022 through 2023. They are also accused of intentionally receiving overpayments for hours they did not work.

Clear Lake embezzlement charges 

Big picture view:

Court documents show the Sherburne County Sheriff’s Office received a complaint in April 2024, prompting a forensic investigation into the city's financial activities. The investigation reviewed credit card statements, vendor billing, payroll records, disbursements, and bank statements.

Investigators then found all three were overpaid for hours they did not work and used city-issued credit cards for personal expenses, charges said.

Luhning, a former public works director, initially told law enforcement the overpayments were a mistake and the purchases at a hardware store actually saved the city money. He later admitted to creating vendor accounts and profiting from the price the city paid for the purchases. He is accused of profiting more than $71,077.45 from city payments. 

Kari Koren, who worked as a city clerk, initially claimed the overpayments were accounting or software errors. She then admitted she intended to pay the city back for the purchases made on city credit accounts, even though she "knew it was wrong to do so," according to the criminal complaint. Her alleged fraud reached a total amount of $125,217.37.

Chad Koren, a retired firefighter, later admitted that "money was tight" and that things "snowballed" as he and his wife, Kari Koren, went through financial difficulty. He is accused of using a city credit card to defraud the city of more than $4,987.17. 

Dig deeper:

A report from the Minnesota State Auditor shows that Clear Lake made about $800,000 in revenue in 2024 with about $326,000 in expenditures.