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Former Muncie police chief sues city, mayor in lawsuit that confirms FBI corruption probe

MUNCIE, Ind. — A federal lawsuit filed by the former police chief of the Muncie Police Department provides new insight into the circumstances surrounding his departure.

Former Muncie Police Chief Steve Stewart filed the lawsuit Wednesday in U.S. District Court. It names Mayor Dennis Tyler and the City of Muncie as defendants.

Stewart seeks unpaid wages, attorney fees and punitive damages and asks for a jury trial. Brian Pierce, the attorney representing Stewart, released the following statement on behalf of his client:

”After dedicating his entire law enforcement career to the city of Muncie, Mr. Stewart was forced to resign when he refused to cross the line between the good guys and the bad guys. And for upholding the law, he was denied the compensation and benefits to which he was entitled.”

Stewart submitted his letter of retirement on Nov. 1, 2016. He’d been with the Muncie Police Department since 1985 and served as chief from January 2012 after his appointment by Tyler until his resignation. Stewart also served as chairman of the local Democrat Central Committee at the request of Tyler and Phil Nichols, a prominent Democratic figure in the area.

Stewart alleges that he endured a hostile workplace environment after being ordered to investigate a longtime city employee who, after being fired from her job, offered to share information about public corruption if her termination wasn't changed to retirement and her benefits were restored.

In May 2016, the FBI was investigating allegations of corruption in Muncie city government. The probe led to charges against Muncie Building Commissioner Craig Nichols, who was appointed by Tyler and is the son of Phil Nichols. Craig Nichols faces several counts, including wire fraud, money laundering and theft, in a case focused on city contracts awarded to his private demolition companies.

Stewart alleges that Tyler became aware that an employee was cooperating with the FBI probe into corruption. The lawsuit said that Tyler told Stewart that the employee had committed crimes but didn’t specify what those crimes were and ordered him to start an investigation.

Stewart, who said in the suit that he was concerned about the ethical ramifications of such an investigation, declined to investigate the employee because he thought it would be viewed as local interference or obstruction with the federal investigation.

The lawsuit details several requests by the mayor to get Stewart to begin an investigation into the employee, but Stewart wouldn’t comply, saying he didn’t want to interfere with an FBI probe.

In late spring or early summer 2016, Tyler again asked Stewart to investigate the employee for possible criminal wrongdoing or to find out what the employee had told the FBI, the lawsuit said. Stewart met with other Muncie officers who were “equally uncomfortable” about the request.

Stewart's attorney, Brian Pierce, said he believes the former chief had no reason to investigate the former employee.

"There’s no question the city wanted to know what information this former employee had provided to the FBI," Pierce said. "They wanted emails off her computer to potential FBI agents, they wanted emails off her computer to other individuals that shared, discussed, or disclosed the information."

Tyler continued to apply pressure to Stewart, the lawsuit said, implying that failure to launch an investigation would result in his removal or termination from his post as police chief. Stewart continued to say that he wouldn’t conduct the investigation due to ethics concerns and possible FBI obstruction.

Tyler then told Stewart to conduct investigations on other employees “with the sole purpose of getting to the former employee, without doing so directly,” court documents alleged.

In September 2016, Stewart met at Democratic Party Headquarters with Tyler and Phil Nichols. The lawsuit said Nichols “yelled and screamed” at Stewart and told him he would conduct the investigation as requested. Stewart again refused.

He attended a meeting the next morning in which he walked away thinking he was going to be fired as police chief, the lawsuit said. He resigned as Democratic Party chairman on Sept. 2, 2016.

A local prosecutor met with Tyler and Stewart about the investigation, with the local prosecutor explaining to Tyler why the investigation wouldn’t happen. For the next seven weeks, the lawsuit said, Tyler continued to request the investigation. Stewart continued to say he wouldn’t do it.

"In this particular case, it doesn’t surprise me. This is a case where small town politics are at its worst," Pierce said.

Stewart made the decision to resign as chief on Oct. 31, 2016, a day after he said Tyler had asked someone to make “false allegations” against Stewart. Stewart said he could “no longer endure the continuous requests to initiate an unfounded local investigation of a witness in an ongoing federal investigation” and submitted his letter of resignation.

Tyler told Stewart he “didn’t like the proposed letter of resignation” and said Stewart would “pay for this.”

"If you don’t conduct the investigation or don’t do what you are asked, then the alternative is then you’ll pay for it and you’ll pay for it by your character or you’ll pay for it with your salary. So to me, it’s politics as usual," said Pierce.

He submitted a letter of retirement on Nov. 1, 2016.

The lawsuit alleges that the city owes him for hundreds of sick and vacation days that were “recalculated” to be far fewer in number than Stewart believed he was owed. He said Tyler made “false and defamatory statements” to the media about his conduct and tried to get other employees to make similar allegations.

The City of Muncie responded by saying it “has not yet received a copy of the lawsuit” and “cannot comment on pending litigation.”