An investigation by a suspicious business partner into the accounts of Lee & Morris Enterprises LLC helped uncover an eight-month-long fraud scheme that allegedly siphoned more than $1 million from Family First Credit Union in Orem and led to the arrest of Lee & Morris’s owner on Wednesday.

Zeldon Thomas Morris, 42, who owns a controlling interest in Provo-based Lee & Morris, was charged with one count of bank fraud for allegedly using passwords he was given as a computer systems consultant to access the credit union’s accounts and steal more than $1 million through fraudulent electronic funds transfers.

Morris, who entered a notguilty plea at his arraignment Thursday, faces a potential maximum sentence of 30 years in federal prison and a $1 million fine. Morris, who was initially thought a flight risk because he has made frequent trips to Korea and is married to a woman of Korean descent who has family in that country, was released under conditions on Thursday.

According to a complaint that was filed under seal Wednesday and unsealed Thursday, Morris was hired as an outside contractor by the Orem office of Open Solutions Inc. in March 2008 to repair and maintain Family First’s data processing systems in Orem.

Morris was given passwords by Open Solutions to access the credit union’s computer system at its Orem office and via remote location, said Jason Craddock, vice president of Family First.

According to the complaint, Morris, from June 13, 2008, through mid-January, accessed the credit union system and through several fraudulent electronic funds transfers, deposited more than $1 million into his personal accounts and into a business account for Lee & Morris.

An investigation by credit union officials found that the fraudulent transfers were made using fake “trace numbers” or numbers that help identify an individual transaction, or by “duplicating other legitimate trace numbers but using fictitious amounts, or by remotely accessing the bank system through the ‘e-teller’ system and overriding it to accept deposits to accounts” that Morris controlled, court documents said.

The credit union’s investigation also found that Morris’s sign-on had been used to access the system shortly before the fake transactions were made, or from an un-terminated session from a previous day. The source of the stolen funds was from “one or more internal general ledger accounts at the credit union,” in particular, “the interest income general ledger account because it recently had a larger- than-expected drop,” court documents said.

According to the complaint, Morris transferred the funds to his personal accounts at other financial institutions, and to other businesses or individuals, as well as to a Family First account in the name of his wife.

The funds were allegedly used for a remodelling job on Morris’s house in Provo, mortgage payments for that house and either a second house or a vacant lot that he owns, and also to pay off his two vehicles and pay various banks, credit card companies and others, court documents said.

Several cashiers’ checks were also purchased with the stolen funds, which included the phrase “Re: Zeldon Thomas Morris” on the face of the checks. The endorsements on the checks were either to Morris, or to an account that required his signature.

Court documents say Family First would not have discovered the fraud scheme if Eunyong Lee, who became business partners with Morris in April 2008, didn’t come forward with his findings after investigating the company’s accounts in October.

Lee initially suspected Morris of embezzling funds from the company after he made suspicious withdrawals from the company, and failed to pay Lee for his work.

When he reviewed Morris’s accounts at the credit union, he found several very large deposits that appeared to be “real estate-related.” Morris, who confided in Lee of his financial difficulties, allegedly claimed those deposits were mortgage refinances. But Lee, in court documents, said he found no recorded real estate transactions on Utah County online property records to support the refinances, and also found Morris’s original mortgage loans were still outstanding.

Lee informed credit union officials of the suspicious deposits to Morris’s accounts last month. He also resigned from the company and asked Morris to buy out his portion. But Morris told Lee that his money was frozen by the bank, and he didn’t have any funds to travel to Korea, court documents said.

Family First’s Craddock said the credit union is still investigating the scheme but said that it has had no impact on its members.

“We can’t comment on whether [Morris] was able to access the members’ accounts but he has not taken any money from our approximately 26,000 credit union members’ accounts,” he said. “We have coverage for the stolen funds because the credit union is covered under the National Credit Union Association.”

The NCUA is a federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions.

“We’re doing what we can to see how it happened and to prevent it from happening in the future,” Craddock said.ough fraudulent electronic funds transfers.