ROCK SPRINGS — The Rock Springs Young at Heart Senior Center (RSYAH) is alleging that former Executive Director Candace Rachelle Morris fraudulently established a limited liability company for the sole purpose of embezzling money for the Center.
New court documents claim that Morris established The Early Learning Center, LLC (ELC) for the sole purpose of using the company as a vehicle for a fraudulent scheme to defraud RSYAH of revenue generated by its child day care service.
The formal complaint filed on Tuesday alleges conversion, breach of fiduciary duty, negligent misrepresentation, fraud, constructive trust, fraudulent conveyance and unjust enrichment by Morris, her husband William Morris and The Early Learning Center, LLC.
The RSYAH alleges that the company established by Morris as its sole member is a “disregarded entity” for IRS tax purposes, and is the alter ego of Morris for the purposes of this action against her.
“Candace R. Morris named it the Early Learning Center, LLC for the purpose of sowing confusion with third parties so that it could pretend to be the legitimate Early Leaming Center that provides day care services for the children of Sweetwater County and which is owned and operated by RSYAH,” according to the complaint.
The RSYAH complaint lays out a series of events that allegedly resulted in the establishment of what is described in the court record as “The Phony ELC.”
It claims that Morris sought the RSYAH Executive Director position in 2016, but the board decided to hire Ryan Rust instead. Morris then allegedly convinced Rust to present a proposal to the RSYAH board that would split the partnership between the senior center and the day care center, essentially making them separate entities. She allegedly told Rust that the ELC would pay RSYAH for use of the facility “a sum roughly equivalent to the prorated utilities for the rented space.”
“Perhaps in anticipation of board approval of her suggestion to spin off the operations of the Real ELC to her, on June 3, 2016 Morris created the Phony ELC by filing Articles of Organization for ‘The Early Learning Center, LLC’ with the Wyoming Secretary of State,” the claim states.
On the same day Morris allegedly applied for an employer identification number (EIN) with the IRS and listed herself as the sole member of the business. Shortly after that she allegedly set up a Bank of America account, and in September 2016 the claim states she applied for an internet payment processor, Tuition Express, and gave Tuition Express a voided check in the name of “The Early Learning Center LLC” with and used her home address as the place of business.
The claim goes on to say that this fake bank account was the destination account for any “Real ELC” parents who might pay their child’s tuition using the Tuition Express app.
On the Tuition Express “Merchant Transaction Processing Agreement” application, Morris listed herself and her husband, William Morris, as co-owners of The Early Learning Center, LLC with corresponding signatures for both. Morris and William Morris are also listed as guarantors on the Tuition Express Agreement, with corresponding signatures for both.
However, RSYAH says it does not have knowledge or information sufficient to believe William Morris is a co-owner of the Phony ELC, whether he signed the Tuition Express agreement as an owner and guarantor or whether Rachelle Morris forged her husband’s signature.
RSYAH goes on to claim that Morris turned her rejected idea of separating the senior center and daycare center in October 2016 into a scheme to defraud the senior center.
“Her scheme was simple: she would have the parents of children attending the Real ELC enroll in a new, internet app based payment system called “Tuition Express,” according to the complaint.
Morris was promoted to Executive Director in June 2020 when Rust left for other employment. RSYAH claims Morris encouraged the new ELC director to sign parents up through the Tuition Express app rather than paying by check or at the point-of-sale system located at the RSYAH facilities.
Board members became suspicious of Morris when an annual insurance premium due of approximately $3,000 was not being paid in full. The response from the RSYAH bookkeeper was that the Real ELC’s bank account with Commerce Bank was nearly depleted. The new learning center director told the board members that funds were actually going to the Bank of America account and not to Commerce Bank. The complaint says that this was the first time any board member had ever heard of a second account.
The claim alleges that between January 1, 2018 and June 23, 2022, Morris embezzled more than $970,000 due this alleged diversion of funds. RSYAH is claiming she used the funds “to support a lavish lifestyle” and that Morris “took great care to conceal her fraudulent scheme from the RSYAH board.”
She was officially suspended of her duties without pay on June 27, 2022 and terminated for cause on July 1. RSYAH named William Morris in the complaint as well, claiming he knowingly received multiple fraudulent transactions as a result of his wife’s actions.
No court hearings date has been established on the case as of Friday, July 8. RSYAH is seeking both compensatory and punitive damages, equitable relief and cost of the lawsuit in its claim.