Wichita ex-lawmaker to stand trial on charges of COVID-19 aid fraud, money laundering

Michael Capps, a Wichita business owner and former Republican state legislator, is set to stand trial in federal court starting Monday on 18 counts of COVID-19 relief fraud and money laundering.

A grand jury indicted Capps in September 2021 after a Wichita Eagle investigation found his businesses and a charity under his control submitted false and inflated payroll and revenue information to get more than $450,000 in pandemic relief aid from federal and state agencies while he was a member of the Kansas House of Representatives.

Capps is charged with multiple counts of making a false statement, bank fraud, wire fraud and money laundering. He faces decades in prison and millions of dollars in fines if convicted.

Capps has pleaded not guilty and said he has done nothing wrong.

His business partner, former Wichita City Council member James Clendenin, was not named in the indictment and is on the witness list for both the federal government and Capps, court records show.

The indictment accuses Capps of defrauding Emprise Bank, the Small Business Association, Kansas Department of Commerce and Sedgwick County. The coronavirus relief aid programs include the Paycheck Protection Program, Economic Injury Disaster Loan Program and Working Capital Grant program.

Federal prosecutors say Capps reported having employees who didn’t exist, inflated payroll expenses and overstated revenues in the year leading up to the pandemic for Midwest Business Group LLC, which is co-owned by Clendenin and does business as VR Business Brokers of the Heartland; Krivacy LLC, a cyber security firm he owns; and Fourth and Long Foundation, a 501(c)(3) nonprofit he founded as a sports charity.

Capps claimed Midwest Business Group LLC had eight employees and an average monthly payroll of $32,715 and gross revenues of $252,738; Krivacy LLC had 18 employees and gross revenue of $728,520; and Fourth and Long had 12 employees with gross revenue of $285,000, according to a court filing by the U.S. Attorney’s Office.

Court records reviewed by The Eagle showed Midwest Business Group had one employee who was paid on a commission basis and Krivacy and Fourth and Long had no employees in 2019.

In emails to The Eagle in 2020, Capps said “as with all businesses, operations change over time, especially a young company in growth mode.”

He claimed his companies had added “numerous staff, agents and partnerships” by December 2020 and that he planned to return some of the money to the federal government. It’s unclear whether he did.

Capps faces the following charges and potential penalties:

▪ One count of making a false statement to a bank for a PPP loan, carrying a maximum sentence of 30 years in prison, five years of supervised release and a $1 million fine

▪ One count of bank fraud in connection with a PPP loan, carrying a maximum sentence of 30 years in prison, five years of supervised release and a $1 million fine

▪ Three counts of false statements to the SBA for EIDL loans, each carrying a maximum sentence of five years in prison, three years of supervised release and a $250,000 fine

▪ Three counts of wire fraud in connection with EIDL loans from the SBA, each carrying a maximum sentence of 20 years in prison and five years of supervised release and a $1 million fine

▪ Two counts of wire fraud in connection with grants from the Kansas Department of Commerce, each carrying a maximum sentence of 20 years in prison and five years of supervised release and a $1 million fine

▪ Eight counts of money laundering, each carrying a maximum sentence of 10 years in prison, three years of supervised release and a fine of $250,000.

Capps previously faced 19 charges. The U.S. Attorney’s Office moved to dismiss a wire fraud charge related to a Sedgwick County grant program on Friday.

Kurt Kerns, Capps’ defense lawyer, pointed to Capps’ military record in a written statement Friday and complained about news coverage surrounding his client.

“Mike Capps has been continually prosecuted in the media with no recognition that he is presumed innocent under the law,” Kerns wrote. “It is the Government that has the burden to actually prove these false accusations and to prove them to the exclusion of all reasonable doubt. Mike served two tours in Afghanistan during the war on terror and he’s earned the right to be viewed as the good man that he is. No hit-piece newspaper article is going to change that.”

Kerns did not offer an explanation about the money that went to Capps’ businesses and nonprofit.

The federal jury trial is expected to last four days.

Capps is one of three Wichita-area Republican officials involved in a smear campaign against Wichita Mayor Brandon Whipple and a cover-up that sought to blame then-Sedgwick County GOP Chairman Dalton Glasscock for a video that falsely accused Whipple of sexual harassment during the 2019 Wichita mayoral campaign.

Capps’ businesses and nonprofit organization served as vehicles for the dark money campaign, which was funded by construction and real estate developers who supported former Mayor Jeff Longwell.

Eagle reporting tied Capps to the video in 2019 and later found Clendenin and former Sedgwick County Commissioner Michael O’Donnell were involved.

In 2020, Capps lost in the Republican primary to Patrick Penn. Clendenin and O’Donnell both resigned after Sedgwick County District Attorney Marc Bennett announced he was seeking to remove them from office based on their involvement.

Whipple is suing all three officials in state court for defamation. That trial is scheduled for March 27.