Boise’s Capital City Public Market won’t suffer from the loss of its founder and longtime executive director, members of the market’s board of directors said hours after firing her Tuesday.

In fact, vendors and customers will see improvements with Karen Ellis’ departure, said Kurtis Williams, a board member and former president of the board.

Members said failure to pay employee taxes, sloppy record-keeping and overall poor business practices led to Ellis’ dismissal.

The board says the market will tighten its business practices, which will make the market fairer to all vendors. Williams said he hopes the market can streamline and relax some of the rules that guide vendors.

The rules, he said, were “too restrictive at times and then too — just confusing. It just doesn’t have to be this confusing.”

The market has those rules for a reason, said Lee Rice, owner of veteran vendor Rice Family Farms.

The emphasis is on authentic local, organic foods and other products. Without strict rules, Rice said, the market could be compromised.

“How good’s the market going to do if the public finds out the authenticity’s not what it’s supposed to be?” Rice said.

Board members described their unanimous decision Tuesday to remove Ellis as a step in the market’s transition from infancy to maturity. Williams said they lost confidence in her ability to manage its business side.

A search through records exposed the fact that Ellis paid some employees “under the table” and couldn’t account for large chunks of revenue, treasurer Heather Hall-Dudney said. The market won’t be liable for unpaid taxes, Hall-Dudney said.

Ellis’ records were so erratic, Hall-Dudney said, that board members haven’t been able to track expenditures and income.

They shouldn’t act so shocked, said Ellis, who spoke to the Statesman briefly but didn’t respond to specific concerns about the market’s management.

“All the board members were aware of my business practices,” she said. “I always made full disclosure.”

James Holesinsky said he suspects ego, not business sense, was at the root of Ellis’ dismissal.

In his six years as a market vendor, the owner of Holesinsky Winery said, political squabbles between Ellis, the board and vendors have grown worse.

“They were just looking for anything and everything they could to let her go,” he said.

Holesinsky said he worries the market’s atmosphere will suffer if the board expands the bureaucracy to the point of micromanaging the event.

John Collins, who sells organic fertilizer at the market, said he’s glad Ellis is gone. He said the market had grown beyond Ellis’ vision and needed new leadership.

Besides that, Collins said, Ellis routinely placed favored vendors in high-profile spots at the market while banishing ones she didn’t like to areas that diminished their customer exposure.

“There was way too much old cronyism and favoritism being shown, especially over the last couple of years,” Collins said.

Ellis founded the Capital City Public Market in the mid 1990s with dreams of growing it into one of the top markets in the West. On that account, she was largely successful, board members said. Today, some 180 vendors pay for space at the market and anywhere between 13,000 and 18,000 people visit on the market’s peak days.

“She’s a great visionary, and that’s why the market started and became what it became,” Williams said. “But, essentially, we needed a better business person, a business manager … and she just couldn’t perform that duty.”

For years, Ellis’ shortcomings as a business manager were concealed by the fact that she ran the business virtually by herself, board members said.

Williams said the board kept a distant eye on things, but mostly “rubber-stamped” her activities.

Hall-Dudney said she has no idea how much money should be in the market’s accounts because there was no system in place to record transactions.

She said vendors pay between $35 and $60 each week to place a booth in the market.

That means the market would collect at least $100,000 in vendor fees during the peak season from June through September. Fewer vendors set up booths in the non-peak months of April, May and October, Williams said.

The board reversed its hands-off approach to the market this year, Hall-Dudney said. Board members began digging through records in the spring as they overhauled the market’s corporate structure, she said. That was when they discovered the gaps in record-keeping and a failure to pay taxes for about seven market employees, Hall-Dudney said.

A state investigation occurred about the same time. The probe ended with the Idaho Industrial Commission — which oversees state workers’ compensation policy — assessing no fines, board members and Ellis said.

Efforts to contact a commission representative Tuesday were unsuccessful.

Board members also discovered last year’s Harvest Moon Dinner — an annual fundraiser for the market —lost about $4,000, Hall-Dudney said. They expect this weekend’s 2012 dinner to bring in about $10,000.

Hall-Dudney, Williams and board president Mike Goulder said they don’t believe Ellis’ failings were malicious. The market simply grew too big for her, they said.

“I believe she just was naïve in her business sense,” Hall-Dudney said. “It probably doesn’t make it right, but she just was naïve.”

Mike Smith, a market volunteer who helped organize this year’s Harvest Moon Dinner, said he’s not so sure. At best, Smith said, the failure to record cash flow to and from the market indicates sloppiness. At worst, it has the appearance of illegal activity, he said.

“You can’t accuse Karen of anything until she provides you accounting for this cash,” Smith said. “But if she can’t provide you accounting, you’ve got bigger problems.”

Assistant director Lisa Duplessie is serving as interim director, board members said. They said they’re working on a job description for Ellis’ long-term successor.

Still reeling from the board’s decision, Ellis said she doesn’t want anything negative to reflect on the market or affect its future growth.

“I’m happy to have been part of the market and I’m extremely sad to leave it,” Ellis says. “I will always support the true mission of the market and those who support it.”

Sven Berg: 377-6275

Statesman reporter Dana Oland contributed to this story.