Former Kansas lawmaker pleads not guilty to 19 federal charges, surrenders passport

Former Kansas Rep. Michael Capps, Wichita-R, pleaded not guilty Wednesday to 19 federal charges of COVID relief fraud, making false statements and money laundering during his time as a state lawmaker.

Capps also agreed to surrender his passport while awaiting trial.

The U.S. Attorney’s Office filed charges against Capps earlier this month following a probe by the Sedgwick County District Attorney’s Office and the Federal Bureau of Investigation.

That started effort began early as September 2020, when an Eagle reporter began asking the district attorney and Small Business Administration officials about discrepancies between the number of employees at Capps’ businesses and the amount of money his companies received through the CARES Act.

The Eagle first reported on the questionable awards in December. Capps, 43, has previously denied any wrongdoing.

During his arraignment Wednesday afternoon, he appeared in court by video conference from his lawyer’s office and offered his first official response to the charges.

“Not guilty, your honor,” he said.

Capps stands accused of lying on bank applications and defrauding federal, state and county government agencies out of more than $450,000 in CARES Act relief money from March to August 2020. If convicted, he faces decades in prison and millions of dollars in fines.

Capps has not been arrested or detained in connection with the case.

At an arraignment hearing on Wednesday, Capps pleading not guilty in an first appearance before U.S. Magistrate Judge Gwynne Birzer. In lieu of awaiting trial behind bars, Birzer granted Capps the right to remain released on a $25,000 unsecured bond.

“My client’s not a flight risk or a danger,” said Kurt Kerns, Capps’ defense lawyer.

Birzer said she didn’t feel it was appropriate to place Capps under supervision at this time, but she did place conditions on his release.

“Because there has been some travel outside the continental United States, I would like you to surrender your passport,” Birzer said, adding that he should not apply for a new passport while the case is pending. She also ordered him to report to the U.S. Marshal’s service to be fingerprinted.

Capps — via two companies and a nonprofit organization under his control control — applied for and was awarded $349,700 from the Paycheck Protection Program and Economic Injury Disaster Loan fund.

Both programs are operated by the U.S. Small Business Administration, a federal agency that once honored him as a “Wichita Emerging Leader” and took a leading role in dispensing CARES Act dollars to businesses.

Capps also received $40,000 from the Kansas Department of Commerce’s Small Business Working Capital Grant program and a $5,000 grant from Sedgwick County government.

To get the money, Capps inflated his payroll and revenue figures and claimed employees who did not exist, according to the indictment.

He claimed Midwest Business Group, a company he co-owned with former City Council member James Clendenin, had eight employees, an average monthly payroll of $32,715 and gross revenue of $252,738 in the 12 months prior to Jan. 31, 2020, the indictment says.

He also claimed a separate company, Krivacy, had 18 employees and gross revenue of $728,520. He claimed Fourth and Long Foundation had 12 employees and gross revenue of $285,000.

Those claims were all false, according to the indictment.

According to the indictment, Capps will face 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

▪ One count of wire fraud in connection with a grant from Sedgwick County, 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 did not immediately respond to questions Wednesday afternoon. The one-term Republican lawmaker served as District 85’s state representative from 2018 to 2020, when he was defeated by Patrick Penn in the Republican primary in August 2020.

Although Capps’ stint at the statehouse was brief, the freshman lawmaker was often at the center of controversy.

As a candidate in 2018, Capps survived a residency challenge that claimed he didn’t live in District 85, which includes areas of northeast Wichita, Bel Aire, Kechi and Benton.

That year, the Kansas Department for Children and Families found that he emotionally abused boys as a court-appointed volunteer. The investigation’s findings were reversed on a technicality, and Capps won his race.

In 2019, the Sedgwick County Republican Party called on Capps to resign after The Eagle linked him to a dark-money scheme and potentially libelous video that leveled false sexual harassment allegations against Wichita mayoral candidate Brandon Whipple, who was a Democratic state representative at the time.

Capps then attempted to shift the blame for the video, appearing on former Rep. John Whitmer’s talk radio show to accuse local GOP Chairman Dalton Glasscock of approving the attack ad.

The companies and nonprofit organization named in the indictment were all involved in the smear campaign against Whipple, previous Eagle reporting has shown.

Krivacy registered a website connected to the video, the Fourth and Long Foundation was used to funneled money for the ad and hide donors’ identities and Midwest Business Group’s office was used as the set for the video.

Whipple filed a defamation lawsuit against Capps, Clendenin and former Sedgwick County Commissioner Michael O’Donnell for their involvement in the plot last fall.

Capps, Clendenin and O’Donnell have requested summary judgment in the case and are awaiting a decision by a Sedgwick County District Court judge.

This story was originally published September 22, 2021 at 5:15 PM.