CAMPBELL COUNTY, Tenn. (WVLT) - JELLICO, Tenn. (WVLT) -- In December 2012, Jellico's police chief noticed money missing from the city's drug account and told Mayor Les Stiers. Stiers went to Linda Douglas's office to find out where it was. Douglas was the city recorder and handled all of Jellico's money.
"She said that she was looking for it. And there again, she continually looked for it and that afternoon, she had not produced them," said Stiers.
Stiers asked for Douglas' resignation - she gave him a hand written note and left. That's when the TBI and state comptroller's office began investigating. They said over two years, Douglas stole $73,000 from several accounts, including the city's drug fund.
On Friday, Douglas was officially charged with theft over $60,000 and three counts of official misconduct.
The police chief said the drug fund money could have been used to buy new equipment.
"We could use it if we needed to purchase a vehicle from it, or weapons," said Chris Anderson, Chief of Police for Jellico.
"It's sad, and it's another black eye for Jellico - but the main thing is that it's hurt our citizens, because that money belonged to the people of Jellico," said Stiers.
Many people in town said they're upset:
"I don't think it's right for somebody to go in and take tax payers money and just run off with it," said Tommy Worley.
"I wondered why the city was broke - now I know," said Rick Nabe.
After Douglas resigned, the state comptroller's office also discovered the city owed $161,000 in back federal payroll taxes and Medicare. Douglas doesn't face charges for that, but it did spiral into an IRS lien against the city.
Stiers said Jellico took out an $850,000 bond and paid off all of its long-term debt this spring, including the lien.
The mayor said steps are now in place to keep others from stealing from the city in the future.
"We receipt monies in the city, there's a different process on the checking accounts, and other checks and balances are in place," said Stiers.
Stiers said Douglas was bonded, meaning once the city files a claim with its insurance, it will likely get the stolen money back.
A former employee of the city of Jellico has been indicted on theft charges.
Linda Darrell Douglas, 65, is accused of stealing from a police department drug fund.
TBI Special Agents began investigating Douglas in December 2012, following an audit by the Tennessee Comptroller of the Treasury.
During the investigation, TBI Agents developed information that Douglas, while working as Jellico City Recorder, took around $73,000 from the police department drug fund and other city funds.
The city later fired Douglas, according to the TBI.
On Friday, the Campbell County Grand Jury returned indictments for Douglas, charging her with one count of Theft over $60,000 and three counts of Official Misconduct.