A federal jury announced the decision at 4 p.m. on Dec. 21 after deliberating more than eight hours over multiple days.
The FBI began investigating Capps after a 2020 Wichita Eagle investigation found Capps inflated payroll information, revenues and employee numbers to maximize federal awards to three entities under his control — Midwest Business Group, Krivacy and the nonprofit Fourth and Long Foundation.
Krivacy and Fourth and Long are both defunct. Midwest Business Group, which Capps co-owns with Uber driver and former Wichita City Council member James Clendenin, recently closed its downtown office.
A federal grand jury indicted Capps in September 2021. His trial focused on 18 felony charges related to COVID-19 fraud. He was found guilty on multiple counts of making false and fraudulent statements, bank fraud, four counts of wire fraud and four counts of money laundering.
Capps defrauded Emprise Bank, U.S. Small Business Administration and Kansas Department of Commerce out of $355,550 in COVID-19 recovery funds, the jury found. He then transferred the money through business and personal accounts, including some money that went into investment funds.
Capps remains out on bond while he awaits his sentencing hearing, which is scheduled for March 10. He could face millions of dollars in fines and decades in prison.
After the verdict, Capps and his defense lawyer Kurt Kerns did not respond to questions from reporters outside the federal courthouse. Clendenin, who did not attend court but showed up outside the courthouse after the verdict, was asked whether he would like to comment on the verdict.
"What do you think?" he said.
Counting Employees, Revenue
The government programs Capps tapped for the money included the Paycheck Protection Program ($80,500), Economic Injury Disaster Loan ($349,700) and Working Capital Grants ($40,000). In the early days of the pandemic, all three programs worked on the honor system, allowing applicants to self-certify the information they provided was true and correct — with little to no verification.
The jury found Capps defrauded federal and state agencies out of $355,550.
Self-certification allowed government agencies to quickly send federal money to businesses in need. But it also led to fraud, with conservative estimates of how much money was stolen overall in the tens of billions of dollars.
At trial, Capps admitted to including Clendenin's daughters, ages 10 and 14, as employees in a Paycheck Protection Program application and to "comingling" federal funds with personal, business and charitable funds. But he denied any wrongdoing, blaming an Emprise Bank employee for how he calculated payroll.
Capps acknowledged during the trial that the numbers he provided to get COVID money did not represent actual employees or payroll costs for his businesses and charity.
In his PPP loan application, Capps claimed Midwest Business Group had eight employees, an average monthly payroll of $32,715 and paid eligible payroll costs of $380,000 in 2019.
To calculate the numbers he submitted, Capps said he used "expected payroll" based on "forward-looking" estimates for the year 2020, instead of the actual employees and payroll costs in 2019.
In his EIDL funding application, Capps claimed Midwest Business Group had eight employees and gross revenue of $252,738 for the 12-month period prior to Jan. 31, 2020. Federal investigators found the company had no employees at the time and substantially less revenue. The jury found Capps not guilty on charges related the the Midwest Business Group's EIDL loan but guilty on charges related to its PPP loan and its grant from the Kansas Department of Commerce.
Capps also falsely represented to the Small Business Administration that Krivacy had 18 employees and gross revenue of $728,520 for the 12-month period prior to Jan. 31, 2020.
Capps testified that he counted himself and 17 contractors as Krivacy employees; prosecutors said he had no employees. Capps also admitted to sending inaccurate revenue numbers for Krivacy, saying "I'll fall on my sword" because he "missed a decimal point" somewhere in the application. He did not say where the decimal point should have been.
The U.S. Attorney's Office said Capps lied about the number of employees and gross revenues for Krivacy across multiple applications to different agencies.
Capps also falsely represented to the SBA that Fourth and Long Foundation had 12 employees and gross revenue of $285,000 for the 12-month period prior to Jan. 31, 2020, the indictment alleged. He said he counted himself and 11 employees from a separate nonprofit organization that runs the Automobilia Car Show. He said he also included Automobilia's revenue as Fourth and Long's.
The federal government found no record of employees at Fourth and Long.
Capps' Testimony
Capps claimed at trial, without evidence, that an Emprise Bank employee instructed him to file false and fraudulent information. The emails his lawyer presented at trial to support his claim did not include any such instructions and instead showed the employee instructing Capps to use his 2019 numbers, prosecutors said. Capps said the bank employee gave him the instructions over the phone.
Capps also attempted to cast doubt on the FBI's investigation, saying the agency did not review up to 10 separate bank accounts he could have used to pay employees, including PayPal, Venmo and CashApp.
Capps did not provide any of those records when federal investigators sent a subpoena for any and all records that would show payments to employees and income to businesses, according to FBI special agent Andrew Campbell.
Capps produced a record of CashApp payments at trial in an attempt to show that he paid two people — Matthew Colborn and Nathaniel Thomas, who helped run Capps' 2020 House campaign. Clendenin testified that Colborn and Thomas have done work for Midwest Business Group as contractors.
Assistant U.S. Attorney Alan Metzger showed that only one such payment was made during the eligible time period before the pandemic — an $8 reimbursement to Thomas for a Starbucks purchase.
Capps said he did not recall what he handed over to federal authorities but noted that it's not his job to prove his innocence.
Campbell testified that he searched all records provided by Capps and found no deposits to employees from other accounts or employee tax records, which Capps would have been required to disclose if they included records of payments to employees.
"I cannot dispute Agent Campbell's testimony, but I'm not going to acknowledge it as fact," Capps said Monday, Dec. 19.
Capps also said that he and Clendenin decided to return the PPP money within 10 days of receiving it. But emails shown at trial showed no discussion of returning the funds, only Capps receiving and requesting information about loan forgiveness. Clendenin testified that the money was not returned until seven months later — a few days after the December 2020 Eagle article.
Businesses in Smear Campaign
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.
The video was shot at the Midwest Business Group office at 300 S. Broadway; Krivacy registered a domain name (protectwichitagirls.com) before the video published online; and donors paid for the video by writing checks to Fourth and Long, a 501(c)(3) youth sports charity, which allowed the donations to be anonymous and tax deductible.
Whipple is suing Capps along with Clendenin and former Sedgwick County Commissioner Michael O'Donnell in state court for defamation over the video.
Guilty on These Counts
Count 1 — False statement to Emprise Bank for an $80,500 PPP loan.
Count 2 — Bank fraud for "knowingly execut[ing] a scheme to obtain" funds from Emprise Bank "by means of materially false and fraudulent pretenses and representations" about Midwest Business Group.
Count 4 — False statement to SBA for a $149,900 EIDL loan to Krivacy.
Count 5 — False statement to SBA for a $84,400 EIDL loan to Fourth and Long.
Count 7 — Wire fraud for $149,900 EIDL loan to Krivacy.
Count 8 — Wire fraud for $84,400 EIDL loan to Fourth and Long.
Count 9 — Wire fraud for using false statements to get a $20,000 grant for Midwest Business Group from the Kansas Department of Commerce's Small Business Working Capital Grant program.
Count 10 — Wire fraud for using false statements to get a $20,000 grant for Krivacy from the Kansas Department of Commerce's Small Business Working Capital Grant program.
Count 12 — Money laundering for transfer of $84,900 from Fourth and Long to Krivacy.
Count 13 — Money laundering for transfer of $100,000 by check to Pershing LLC, an investment company.
Count 14 — Money laundering for transfer of $14,519.40 from Krivacy to Capps.
Count 15 — Money laundering for transfer of $50,000 by check to Pershing.
Not Guilty on These Counts
Count 3 — False statement to the SBA for $114,700 EIDL loan to Midwest Business Group.
Count 6 — Wire fraud for EIDL loans to Midwest Business Group.
Count 16 — Money laundering for a $104,314.12 transfer of money from Midwest Business Group to Krivacy.
Count 17 — Money laundering for a $50,000 check to Pershing.
Count 18 — Money laundering for a transfer of $50,000 from Krivacy to TD Ameritrade.
Count 19 — Money laundering for a $30,000 check to Navy Federal Credit Union.
(Count 11, related to a $5,000 grant from Sedgwick County, was dismissed before trial.)
(c)2022 The Wichita Eagle (Wichita, Kan.) Distributed by Tribune Content Agency, LLC.
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