Duo accused of duping Minnesota, Kmart

Carolyn Louper-Morris and her son William Morris are set to go on trial Friday in federal court in Minneapolis on charges that they conspired to defraud customers, the state of Minnesota, and a big retailer out of more than $3 million.

The federal allegations say the pair set up and ran a company, CyberStudy 101, that fraudulently promised a Web-based tutorial service it never delivered, and illegally received state tax credits as payment, all the while defrauding Kmart Corp. of computers it gave to customers. Louper-Morris and Morris allegedly used the money to buy a house, luxury cars, a fur coat and jewelry.

Louper-Morris and Morris, of Minneapolis, may be no different from other defendants who started off with an innovative idea, lofty goals and noble intentions before running afoul of the law. They have rebuffed news media inquiries and waited until the eve of their trial to speak about their now-defunct business.

"This is not who we are," said Louper-Morris. She admits purchasing the home, cars and furs, but says she earned the money legally.

"The law does not say you cannot spend your money the way you want," she said. And accepting a guilty plea is out of the question. "I'm not going to accept anything that says I'm guilty of something I did not do," she said.

Instead, Louper-Morris and her son tell a story of a strong mother and the son she raised, of the business they created that sought to close the digital divide by getting computers to poor black kids on Minneapolis' North Side, and of what seemed to them was on-again, off-again support from bureaucrats.

William Morris was 5 when his father died. His mother sent him to private schools and made sure he had what he needed.

Now he works part time in a liquor store "to make ends meet," Morris says. The business failure forced him into bankruptcy, which along with legal troubles have kept him from practicing law, he said.

Louper-Morris, 63, was a deacon's daughter and a striver. She grew up in Chicago and went West for college, where she earned a doctorate in political science at the University of Washington. She made a career of teaching political science and African American studies and ended up a tenured faculty member at a small college in Connecticut.

She came to Minneapolis in 1997 to be with her son and to start a business with an online tutorial program called CyberStudy 101, which she had developed for college students and intended to adapt for kids in kindergarten through high school. She would sell it by having families of poor children pay for it through a $1,000-per-child state tax credit that was capped at $2,000 per family, and toss in a computer and Internet access for free.

Then the Internet bubble came along, and all sorts of technology startups were selling themselves on public stock markets for many times what they would ever be worth.

The company didn't deliver on its promises, according to the criminal indictment. The kid-friendly CyberStudy tutoring program simply didn't exist, the government said. Instead, the website contained only Louper-Morris's old program for college students.

And that is where the government's case gets curious, Louper-Morris said. She showed copies of numerous e-mails and letters between her company and officials in the Revenue Department and the Department of Children, Families & Learning (now the Department of Education), showing government officials trying to help her understand and comply with the law.

Further, she said, if officials believed her company had defrauded them, then they would have brought charges, which they haven't.

The document trail also shows that revenue and education officials were uncertain which agency had the authority to approve the CyberStudy tax credits. Revenue and education department officials wouldn't discuss the case. A spokeswoman for the U.S. Department of Justice said Minnesota officials may not have had the authority or the resources to prosecute.