Columbia business owner Kat Cunningham pleaded guilty Tuesday in federal court to bank, wire and tax fraud, and she could spend up to 25 years in prison for the crimes.
Between 2016 and 2020, Cunningham embezzled more than $1.5 million from 24 of her company’s clients, according to the original indictment.
Many were prominent local businesses that later sued her, including the Boone County Fire Protection District, Cleek’s Home Furnishings, The Pet Fair, Advanced Drywall Inc. and TrueSon Exteriors & Interiors. The lawsuit was settled in 2022.
Cunningham was indicted in January 2023 on 38 federal charges of fraud. On Tuesday, she admitted she was guilty on two felony counts, one for defrauding her clients and one for failing to pay their taxes to the Internal Revenue Service.
The first carries a maximum sentence of 20 years in prison, and the second could result in a five-year sentence. Each could also come with a $250,000 fine.
Her sentencing will be held at a later date, to be determined by a judge after an investigation into the nature and impact of the crimes.
Cunningham’s scheme to defraud took place through Moresource Inc., a company on Vandiver Drive she founded in 1994. Moresource then managed payroll and taxes for thousands of clients for nearly three decades. In 2015, Cunningham told Vox Magazine she worked with 3,000 businesses.
According to federal court documents, she began depositing clients’ money for payroll and payroll taxes, which she claimed she forwarded to the IRS. Instead, she used the money for her personal benefit and to fund Moresource operations.
As a result, the clients were assessed penalties and interest by the IRS, which many of them paid. To substantiate her claim, Cunningham gave clients fake documents indicating that the payments had been made. When the clients asked her about the late payment notices, she told them the IRS was late in processing payments or had misapplied them.
In 2017, Cunningham also obtained a Small Business Administration loan and an SBA line of credit to cover shortfalls in the Moresource payroll account.
During the plea hearing Tuesday, Willie Epps Jr., chief U.S. magistrate judge, had to offer words of comfort and encouragement to an emotional Cunningham as she admitted her guilt.
At one point, the judge asked Cunningham, 64, if she was pleading because she was actually guilty, and she responded, “absolutely.”
“I know this has been a very tough morning for you, but guess what? We got through it,” Epps told her.
Cunningham was the company’s sole owner of Moresource until 2014 when she sold a 15% stake, but she remained responsible for the company’s actions, according to court documents.
Moresource had more than 141 clients before closing June 2020 because of the company’s deteriorating financial condition.
The same month, Columbia-based remodeling company TrueSon Exteriors & Interiors sued Moresource. The lawsuit, which was joined by at least 15 other businesses, claimed Moresource took money meant for taxes but never relayed it to the IRS.
According to the 2015 Vox article, Cunningham said she had served on the boards of the Boone Hospital Foundation, the Missouri History Museum in St. Louis and the Greater Missouri Leadership Foundation, a leadership program for women executives throughout the state.
