Former president of National Children’s Blanket Charity indicted for allegedly stealing more than $400,000 from the organization

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PEORIA, Ill. (WMBD) – Carol Babbitt, the former national president of the not-for-profit organization Project Linus, has been indicted on charges that she allegedly took more than $400,000 from the charity when it was based in McLean County.

The Department of Justice on Friday said a grand jury indicted Babbitt, 60, on Jan. 22, and the indictment remained sealed until Babbitt was arrested on Feb. 6. She made her initial appearance in federal court in North Carolina on Feb. 7 and was released from custody.

The U.S. Clerk of the Court has set Feb. 13 for Babbitt to appear for arraignment in federal court in Peoria.

According to the indictment, Babbitt began her involvement as a chapter coordinator with Project Linus, a not-for-profit organization that provides handmade blankets for children who are seriously ill, traumatized, and otherwise in need, back in 1998.

Babbitt served as national president of the organization from 2000 to 2016. During that time, Babbitt lived in McLean County and the organization was also headquartered there. 

The indictment alleges that beginning in 2010 and continuing to 2016, Babbitt defrauded the Project Linus organization, its volunteers and contributors, and the state of Illinois of approximately $400,000. As president, Babbitt controlled the organization’s operations, including its bank accounts.

Babbitt allegedly used Project Linus credit cards to pay for personal expenses, including clothing, electronics, pet grooming, furniture, tickets for sporting events, and personal travel. She also allegedly used funds from the organization’s operating account to make credit card payments, and falsely classified the personal expenditure in the business ledger to hide her personal use of the funds.

At various times, Babbitt allegedly said Project Linus was in extremely poor financial condition, and that because of the poor financial condition, others could not be reimbursed for their expenses. Because of the poor financial situation, Babbitt falsely represented to the board that she would take a pay cut or not take a salary at all.

Babbitt falsely stated that she was repaying Project Linus for her credit card purchases through payroll deductions. Babbitt did not disclose that she made the payments after taking more money than her salary from the organization, resulting in the organization repaying itself.

The indictment also alleges that Babbitt filed false and fraudulent personal tax returns with the state of Illinois in which she failed to report the funds she allegedly stole from Project Linus.

If convicted, the statutory penalty for mail fraud, wire fraud, and money laundering are a maximum of 20 years in prison and fines of up to $500,000.

The charges are the result of an investigation by the Internal Revenue Service, Criminal Investigation Division, the U.S. Postal Inspection Service, the Illinois Department of Revenue, and the Bloomington Police Department.

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