Commissioner asks Capps and Clendenin to return CARES Act grant to Sedgwick County

A $5,000 grant to two Wichita elected officials is under audit and a Sedgwick County Commissioner is asking them to return the money after an Eagle investigation uncovered nearly half a million dollars in questionable CARES Act awards to entities tied to a political smear campaign.

Michael Capps, a state legislator, and James Clendenin, a Wichita City Council member, are under investigation by the Sedgwick County District Attorney’s Office for possible abuse of federal programs meant to keep small businesses and their employees afloat during the coronavirus pandemic.

Capps and Clendenin tapped into CARES Act dollars at the federal, state and county level. Sedgwick County gave their company, Midwest Business Group, LLC, a Safe Operating Grant that could be used for a variety of costs or to reimburse companies and organizations for coronavirus-related expenses between March 1 and Nov. 30.

Questions about the grant to the two officials was raised by Commissioner David Dennis during a report on the county’s CARES Act spending.

“We gave $5,000 to Capps and Clendenin. Have we asked for that back?” Dennis asked.

“We have not yet asked for that back,” replied Brent Shelton, the county’s deputy chief financial officer.

But Shelton said the matter is under audit.

“They are being reviewed as part of a random review process, so we’ll be looking at that,” Shelton said. “There was an open-records request for that information yesterday. They have provided expenditure reports and proof of those expenses.

“I can’t tell you at this point what the disposition of that is, because I don’t know. Not that I won’t tell you, but I just don’t know at this point.”

Replied Dennis: “I appreciate it and I think we need to ask for the money back, thank you.”

Dennis is the first Wichita-area official to publicly address the awards to Capps and Clendenin, who attended the Wichita City Council meeting remotely on Tuesday and didn’t speak during the four-hour meeting. No one else on the council brought it up.

Federal funds, local response

An Eagle investigation found about $495,200 in CARES Act funds were awarded to entities controlled by Capps or co-owned by Capps and Clendenin.

The $5,000 grant from Sedgwick County is just over 1% of that amount. But it was part of a pattern of capitalizing on coronavirus relief aid to boost Capps’ and Clendenin’s business interests while other small businesses collapsed.

Capps did not answer questions posed by The Eagle and instead sent a written statement saying that “Contrary to the Eagle’s distortion of the facts, Midwest Business Group applied for the Sedgwick County Safe Operating Grant using the same procedures as all other recipients.

“Further, the funding received under the grant has been expended, properly documented and reported to Sedgwick County consistent with the terms of the grant,” he wrote.

Clendenin did not respond to questions.

The federal money went to two companies and a charity used to launch a political video advertisement that falsely accused Wichita Mayor Brandon Whipple of sexual harassment less than three weeks before the 2019 election.

That scandal has resulted in a civil lawsuit, a resignation and widespread condemnation of Capps, Clendenin and former Sedgwick County Commissioner Michael O’Donnell, who participated in the smear campaign but had no part in seeking federal awards.

In late October, the Sedgwick County Commission and Wichita City Council each censured Clendenin, Capps and O’Donnell for their roles in the anti-Whipple video and a cover-up plot that sought to frame local GOP leaders. The County Commission called on O’Donnell to resign; the City Council did not asked Clendenin to step down.

Sedgwick County District Attorney Marc Bennett is attempting to remove Clendenin from office for his role in the smear campaign and the subsequent cover up. He filed a petition last month alleging Clendenin engaged in criminal and unethical conduct that made him unfit to serve in office.

Capps was defeated in the August Republican primary and will leave office in January. The District Attorney and Kansas Attorney General Derek Schmidt both said they did not have the authority to oust Capps.

The federal coronavirus relief awards could bring more legal troubles for the two Republican business partners.

Congressman Ron Estes and U.S. Sen. Jerry Moran, both Kansas Republicans, have said any fraud identified in the CARES Act programs should be investigated and prosecuted. Federal law enforcement authorities have declined to comment.

Bennett, who as a district attorney enforces Kansas state law, confirmed Monday that his office has been investigating since September. He would not comment on the full scope of the investigation.

The two elected officials appear to have submitted false information to get federal money to their company, Midwest Business Group LLC, from the Paycheck Protect Program. Records indicate they inflated their payroll, asking for money to pay the salaries of workers who did not exist to obtain a forgivable $80,500 loan.

Capps also sought a $150,000 disaster loan to cover six months of expenses for Krivacy LLC, which has annual revenues of around $40,000 a year, according to Dun & Bradstreet, suggesting the company applied for far more than its fair share.

Capps did the same thing with a charity he controls called the Fourth and Long Foundation. The nonprofit was awarded an $85,000 disaster loan worth more than triple the revenue it has ever reported to the IRS in a single year. It also received a $10,000 disaster grant in the spring.

Six months later, Capps dissolved the charity. He told The Eagle that he plans to return the loan.

Krivacy LLC and Fourth and Long Foundation have no employees and Capps is the sole controlling member of each entity, records show.

This story was originally published December 16, 2020 at 4:20 PM.