Woman accused of using company funds to pay own bills sues business partner

A North Liberty woman arrested Friday on suspicion of taking money from her business' savings account to cover more than $22,000 in personal credit card bills is suing her business partner on accusations he went to police to cover up his own criminal behavior.

Melissa Marie Frost, 31, is asking a court to dissolve her company, Iowa City-based C & M Tax Service LLC, expel her business partner as a member of the company and award monetary damages for, among other things, her “humiliation and severe mental and emotional distress.”

According to a lawsuit filed in Johnson County District Court on Monday, the day news outlets first reported Frost's arrest on suspicion of felony first-degree fraudulent practices, Frost and Charles P. Wolfe are each 50 percent owners in the tax service company.

Frost, in the lawsuit, accuses Wolfe of “refusing to address matters of company management” in October, causing deadlock on company decisions. She alleges that Wolfe promised to take on aspects of company management and failed to do so.

Frost accuses Wolfe of making false statements to third parties about her ability to do her job, and she accuses him of going to police with “false and misleading information suggesting Frost was committing indictable offenses,” according to the lawsuit.

She argues, in the lawsuit, that Wolfe went to police to cover up his own “wrongful conduct by attributing such conduct to Frost.”

“Since Jan. 1, 2012, Mr. Wolfe has taken thousands of dollars from the company savings account without recording those transactions,” according to an affidavit of Frost attached to the lawsuit. “When confronted with those actions through his attorney, he refused to acknowledge the problem.”

Wolfe has not been charged with any crime. He could not be reached for comment Tuesday.

Frost states, in the affidavit, that she was arrested Friday on a felony charge based on “an allegation from Mr. Wolfe that I used money from the company savings account to pay off $22,000 in personal debt.”

“This is false,” Frost states in the affidavit. “Because of this pending criminal action, I am unable to manage my business.”

Frost, in the affidavit, alleges that Wolfe fired “one of our most valuable employees without my consent” on Friday and locked the company doors during business hours. She accuses him of interfering with customer appointments and causing problems with employees.

“Mr. Wolfe should be stopped from continuing to harm me and the business,” Frost states in the affidavit. “It is the busiest time of the year for us because we are a tax-preparation business.”

Frost also is suing Wolfe's wife, Tracy Wolfe, on allegations she made false and defaming statements to third parties causing Frost to lose her job, lose business clients and suffer emotional distress, among other things.

Frost is asking the court to appoint a “receiver to take charge of and control company property” pending litigation of her lawsuit.

In her criminal case, Frost posted a $10,000 cash-only bond Friday and is set to have a preliminary hearing April 26.

Frost's husband, Cory Frost, 33, also was arrested Friday afternoon on suspicion of public intoxication and third-degree harassment after he went to North Bend Elementary in North Liberty to confront an employee there concerning his wife, according to North Liberty police.

He left the school without finding the employee and later crashed his vehicle, said police Chief Jim Warkentin. Officers located the vehicle and arrested Frost, Warkentin said.

Cory Frost on Monday pleaded not guilty to the harassment charge, and a judge set a bench trial for May 29. Because the public intoxication charge was his second, he is scheduled for a preliminary hearing on that count on April 26.