Federal government lends millions to company allegedly linked to Oread’s tax system

Laurent

That same month, a businessman from Lawrence showed up at a federal prison, a company related to him received a $ 9 million loan from the federal government.

Warren LC, a Lawrence-based company, was approved for a loan in August under the Federal Reserve’s Main Street Lending Program, one of several federal programs put in place to help businesses weather the COVID pandemic -19.

The company is owned by Dru Fritzel, the wife of Lawrence developer Thomas Fritzel, who is currently serving a sentence of one to one year. federal minimum security prison in South Dakota for two felony convictions.

Thomas Fritzel, the owner of the Oread hotel in Lawrence, pleaded guilty earlier this year to fraud, admitting that the Oread had submitted false sales tax returns to the state of Kansas to benefit from the special tax district the city had set up around the hotel.

The false statements presented the affiliate sales as taking place in the Special Tax District – defrauding Lawrence of over $ 400,000 in tax revenue from 2009 to 2015.

Warren LC was among 30 companies involved in the project, the City of Lawrence alleged in a 2016 civil complaint. Fritzel settled the civil case with Lawrence in 2017 before being prosecuted in the federal criminal case the following year.

“We had questions about what was going on in this neighborhood… and one of the things that was important for us was to make the whole city (recoup the lost income) and that’s what happened,” he said. said State Representative Mike Amyx, a Democrat who served as mayor of Lawrence in 2016.

When asked if he had any concerns about the federal loan to a company linked to Fritzel, Amyx said he had to “assume that there are always collateral in place to ensure that whoever receives it meets all of these necessary requirements, so hopefully it did. “

It is not immediately clear what Warren LC is doing.

Warren LC is registered with the United States Department of Transportation as a private cargo carrier that transports garbage and waste in the state of Kansas. The company has three drivers, according to the Department of Transportation.

Dru Fritzel, interviewed by a Star reporter last week, said Warren LC is a construction company.

According to city records, the company has a license to install signs.

The company’s physical address is that of the Fritzels’ home in Lawrence, while the mailing address is a post office box associated with Tucker Fritzel, the couple’s son.

Diane Stoddard, deputy city manager for Lawrence, said in an email that the city had been unable to corroborate specific allegations regarding Warren LC’s involvement in the Oread tax jurisdiction case prior to the settlement of the trial.

The lawsuit was not in court long before the parties reached a settlement. Lawrence sued Thomas Fritzel and others in November 2016. The case was settled the following May.

Ed Novak, a lawyer for Polsinelli who represented Fritzel in his criminal case, said he did not know the answer to specific questions about Warren LC and his client. Steve Six, who represented Fritzel in his civil case with Lawrence, did not respond to an email.

While Dru Fritzel is the listed owner of the company, her husband signed on his behalf the annual report that the company filed with the Kansas Secretary of State’s office in 2019 for the 2018 tax year.

Dru Fritzel acknowledged her husband’s previous involvement in the firm, but said he had not taken an active role in recent years.

“He was a manager a long time ago, but he signed these rights some time ago,” she said. “He’s not a manager, he’s not an owner. I own the business 100%.

Responding to just a few questions on the front porch of his home northwest of Lawrence, Dru Fritzel said Warren LC was never involved in Oread’s tax scheme.

“It was not a problem,” she said. “The town thing was like completely done and sorted out. And Warren was not one of them.

She provided few details on the type of work Warren LC does or how many people it employs.

“Technically, I’m not sure exactly how many employees report to Warren,” she said. “We have several different companies, so it’s not easy for me to turn on and off. “

Dru Fritzell acknowledged receiving the Main Street loan and said it was important for the company to stay in business.

“Just to run a wholesale business. We have continuous work that we need to continue our projects, ”she said.

The rules of the Main Street Loan program require that no business is eligible if an owner of 20% or more equity has been convicted of a felony in the past year. Warren LC probably meets this standard because the participation is on behalf of Dru Fritzel rather than Thomas Fritzel.

But Accountable US, a watchdog group with ties to National Democrats, argues the Kansas business loan shows a worrying lack of oversight of the program.

“This money was intended to help Main Street businesses stay above water during the pandemic, not to help those at the heart of tax evasion problems,” said Derek Martin, spokesperson for the group. and originally from Kansas. “But instead of reforming the program, the Trump team is shutting it down to upset the next administration.”

The future of the Main Street Lending Program is uncertain. Treasury Secretary Steve Mnuchin announced in November that he would not approve an extension beyond December 31. Most of the $ 600 billion approved program for business loans has not been allocated as of December 1.

The Federal Reserve declined to weigh in on the loan to Warren LC, saying it did not comment on individual loans.

The Kansas District Attorney’s Office, which prosecuted Thomas Fritzel, declined to comment on the case.

Thomas Fritzel tried unsuccessfully to be transferred from South Dakota prison during the COVID-19 pandemic to confinement at the couple’s home in Lawrence, the address Dru Fritzel lists on documents related to Warren LC

The Federal Bureau of Prisons has confirmed that he remains in prison in Yankton, South Dakota, and that his release date is set for July 2021.

Like the more widely used paycheck protection program, Federal Reserve loans required underwriting by banks. The $ 9 million loan to Warren LC was facilitated by Silver Lake Bank in Topeka.

Many recipients of PPP loans expected them to be canceled. But the biggest Main Street loans have strict repayment requirements, said Patrick Gideon, chairman and CEO of Silver Lake Bank.

“I think a lot of people watched it and didn’t like some of the stipulations and requirements of the program,” he said. “So we had very little interest in the fact that companies were following this Main Street program. This is what they have found across the country.

Gideon said his bank has helped more than 400 businesses with PPP loans, but only took out one Main Street loan. He declined to speak specifically about the Warren LC loan, but said the bank would not have helped an applicant who did not follow the program’s clear guidelines.

“We always play by the rules. And the rules were very clear, ”he said. “If you have something that is going to keep you out that is glaring or obvious, the banks will not touch it. And I guess the Fed would have done the same sort of thing because you’re talking about a lot of money.

The Federal Reserve required the underwriting banks to back 5% of the principal amount. This means that Silver Lake Bank would be at the mercy of $ 450,000 on the $ 9 million loan to Warren LC.

While not specifically commenting on the Fritzels, Gideon said the loan process looks at the backgrounds and creditworthiness of individual applicants – not their partners or relatives.

“If I were your partner in a business but I didn’t own any of the businesses and you were, and I had problems, that wouldn’t prevent you from getting a loan,” he said. declared. “I think this is where you try to tie two ropes together where they don’t tie together.”

This story was originally published 7 December 2020 13:53.