CAMDEN, Maine — A woman who purchased a business earlier this year from former United Mid-Coast Charities Inc. Board President Russell “Rusty” Brace has filed a lawsuit claiming that his alleged embezzlement of $3.8 million from the charity has severely damaged her newly acquired company.
Tamara Swasey-Ballou filed the lawsuit Friday in Rockland District Court against Brace. Her attorney Christopher MacLean had asked that the court approve the imposition of liens on Brace’s properties without a hearing, but Judge Susan Sparaco rejected that request on Monday.
Swasey-Ballou is seeking damages of at least $125,000. She can still seek to have an attachment put on Brace’s properties but she would have to have him served papers to notify him of the request and a court hearing would have to be held.
This is the second lawsuit filed Friday against Brace. United Mid-Coast Charities filed a complaint alleging that Brace embezzled $3.8 million between 2001 and August 2014, when he stepped down as board president. The charity also failed to get the court to approve attaching his properties without a hearing. Justice Daniel Billings said the organization had already publicly stated its intent to sue Brace and therefore there was no element of surprise.
Sparaco ruled Monday that the claims in the request for an attachment were only conclusory allegations.
The charity claims Brace admitted he had been taking donation checks intended for the organization, depositing them in his Brace Management account at the First Bank, N.A. and then withdrawing the money for his personal use.
Swasey-Ballou claims in her lawsuit that Brace’s wife, Becky Brace, had approached her in February 2014 about purchasing KAX Office Center from Rusty Brace. The lawsuit claims that both Becky and Rusty Brace made representations to Swasey-Ballou about how strong the business was.
KAX provides bookkeeping, accounting, payroll and other services. One of the business’ largest clients was United Mid-Coast Charities.
Swasey-Ballou in July purchased the company, which is located in a commercial building owned by Brace in downtown Camden. She now states that her business has suffered a significant negative impact since clients became aware of Brace’s alleged misdeeds. Accounts have been lost and revenues declined sharply, she reported.
MacLean is asking the court to rescind the sale of the business and that Swasey-Ballou receive damages of at least $125,000.
The lawsuit claims that Brace’s actions were outrageous and malicious.
Brace has not been charged with a crime. United Mid-Coast Charities has said it has referred the case to the FBI.
Often when federal prosecutors are involved in alleged financial crimes, an investigation takes many months before a determination of whether to file criminal charges is made.
Brace has not returned repeated calls to his homes in Rockport and Rangeley.
Brace served on the charity’s board as its president from 1997 until August 2014.
New board president Stephen Crane, who was appointed to the post on Aug. 20, stated in an affidavit filed in court that on Sept. 20 he spoke with one of the larger donors to the organization. The donor, who is not named in the lawsuit, stated that he recently had made three large donations totaling $75,000. Crane said that there were no records of those donations in United Mid-Coast Charities’ financial reports.
The donor showed Crane the canceled checks and each had been deposited by Brace into another account at The First, N.A. bank, according to court documents. Crane stated in the affidavit that the charity had no account at that bank.
On Sept. 23, Crane and newly elected board treasurer Eric Belley met with Daniel Daigneault, president and chief executive officer of The First bank. The bank president showed the two men a list of checks made payable to the charity that were initialed by Brace and deposited into his Brace Management account at The First, according to the affidavit.
The lawsuit states that the checks dated back to December 2001 and totaled $3,803,000.
It further states that two days later, Crane and Belley met with Brace, who admitted he had stolen the donation checks for his personal use.
Among the checks that Brace illegally converted for his own use was one for $100,000 and another for $200,000, according to court documents.
A telephone message was left Monday morning for bank president Daigneault about how Brace was allowed to deposit the check in an account that did not belong to United Mid-Coast Charities. No return call was immediately received.
The lawsuit against Brace by United Mid-Coast Charities points out that Brace’s role as board president included receiving large donations that were intended to benefit other agencies in Knox and Waldo counties.
The organization is represented by attorney Jay McCloskey of Portland.
United Mid-Coast Charities, which was formed in 1942, has an all-volunteer board that could have as many as 45 members. It now lists 43 members. The officers of the board form an executive committee.
United Mid-Coast Charities’ federal income tax filings from 2004 through 2012 showed that it took in $3,857,000 and gave out $2,801,000.
A partner in the certified public accounting firm that has done the books for United Mid-Coast Charities issued an email Friday stating that a Bangor Daily News report on the amount of money taken in and given out in grants by the charity was misleading and irresponsible.
“I like, all members of the community, am devastated by this fraud that has taken place, “ CPA Stephen Spencer said in the email.
Spencer said some of the donations made from 2004 through 2012 were put into endowment accounts, as was the stated wishes of the donors. He pointed out that there was a $500,000 donation, for example, in 2005 intended to cover future operating expenses.
The income tax filings of United Mid-Coast Charities over the past several years showed that it paid KAX Office Center, while it was under Brace’s ownership, an average of $50,000 each year for business services.
The accountant also pointed out in his email that money put in the endowments helped to increase the overall net assets of the organization. The tax return showed on Oct. 1, 2004, net assets were $804,064. By Sept. 31, 2013, the net assets had reached $1,535,618, an increase of $731,554.
“The real issue is what was not known, an account which was not even in the name of UMCC and the activity that occurred within those accounts. Again, I will do whatever possible to help in the recovery of those assets,” Spencer concluded.