Lawrence developer Thomas Fritzel sentenced to year in prison for criminal conspiracy; judge denies request to recommend home confinement

photo by: Nick Krug

Thomas S. Fritzel leaves the Frank Carlson Federal Courthouse in Topeka, Kan. on Tuesday, Aug. 14, 2018.

Story updated at 5:47 p.m. Wednesday:

Lawrence developer Thomas Fritzel has been sentenced to a year in prison for his scheme to collect fraudulent tax refunds from the City of Lawrence, and the judge is not recommending Fritzel be allowed to serve that sentence in his multimillion-dollar home as requested.

Fritzel previously pleaded guilty to one count of criminal conspiracy for scheming to collect fraudulent tax refunds from the city as part of his development of The Oread hotel. As part of the plea agreement in that case, attorneys for both parties agreed to recommend a sentence of 12 months and a day in federal prison and a fine of $25,000. Fritzel subsequently requested to serve his sentence at home because of the COVID-19 pandemic and concerns that he would be susceptible to the disease in prison.

At a sentencing hearing Wednesday in U.S. District Court in Topeka, which some attorneys participated in via teleconference, Judge Daniel Crabtree ruled to impose the agreed-upon sentence and fine, including interest, and called for three years of supervised release once Fritzel has served his sentence.

After listening to a statement from Fritzel, Crabtree said he would accept the plea agreement based on U.S. sentencing guidelines, Fritzel’s statement, letters of support provided to the court, and the content of the presentence investigation. Crabtree began by saying that the court views conspiracy as a serious crime.

“I trust for a business owner-operator, a father, a husband, it is hard for you to swallow and no doubt will be difficult for you to overcome,” Crabtree said. “I think it’s fair to say that you made a series of poor choices and that they have imposed harm on you, your family, your business and, regrettably, your employees. But based on your statement today I am convinced that you recognize that.”

Fritzel and his bookkeeper Keela Lam were indicted in 2018, though charges against Lam were later dismissed. The indictment alleged that in 2008, Fritzel signed an agreement with the City of Lawrence to develop The Oread, a seven-story hotel with restaurants, bars and a gift shop. The city set up a Tax Increment Financing District and a Transportation Development District around the hotel and agreed to reimburse Fritzel for his development costs.

The funds to pay Fritzel were to come from property tax and sales taxes collected inside the redevelopment district. The indictment alleged that Fritzel conspired to defraud the city by seeking reimbursement of sales tax paid for hundreds of transactions that were not generated within the redevelopment district. That included the purchase of furniture and appliances, work on houses Fritzel owned in Lawrence and Colorado, landscaping materials, party tent rentals, car batteries and equipment for a car wash.

Before Crabtree made his decision, Fritzel read from a prepared statement, in which he began by saying he took full responsibility for his actions and that he had learned “very hard and expensive” lessons he would never forget. He contended, however, that he did not originally believe he was doing anything wrong.

“Originally I believed the tax district was properly formed,” Fritzel said. “I also believed it was properly used. I learned after a meeting with the State of Kansas that in fact we needed to amend our State of Kansas sales tax returns.”

Fritzel, whose voice strained with emotion at times, went on to say that he was sorry for the people he let down, and repeated that he took full responsibility.

“I thought I knew more about tax districts, sales tax, but I was wrong,” Fritzel said. “For everyone that I have let down, I want you to know I am sorry. I have wonderful friends, dedicated coworkers and a loving family. I’m ashamed for causing sadness upon my loving wife, my children, my grandchildren and my parents. I’m humbled and I’m embarrassed and I was wrong.”

Fritzel’s attorneys submitted 23 letters of support from Fritzel’s friends, family and business associates, which Crabtree reviewed as part of his decision. Fritzel’s attorneys chose not to enter the letters into the court record, so it is not publicly known who sent the letters or what they said. The Journal-World requested copies of the letters from Fritzel’s attorneys but did not immediately receive a response.

As part of Wednesday’s hearing, Crabtree also granted a request from Fritzel’s attorney Ed Novak that Fritzel’s sentence be served concurrently with a three-month sentence in a separate felony case related to the improper disposal of asbestos during a different construction project. Under that format, Fritzel will serve a total of approximately 12 months in prison for both cases instead of 15 months.

Regarding that request, Crabtree asked Novak why he thought concurrent sentences would be appropriate. Novak responded that though the two cases are disconnected factually, the indictments were filed on the same day and that in his view the asbestos case was weak and the federal government was “piling on” charges. Crabtree later said in conclusion that though separate criminal conduct generally deserves separate punishment, he thought a concurrent sentence was warranted based on those factors.

Regarding the request for home confinement, the motions and a letter from Fritzel’s doctor state that Fritzel has allergies and moderate to severe asthma and is required to take medication daily, including steroids that can lead to an immunocompromised state. The motions and letter also state that Fritzel has a family history of a lung disease called idiopathic pulmonary fibrosis and that the combination of Fritzel’s medical condition, family history and age “may make a successful recovery difficult” if he were to contract COVID-19.

Crabtree said he did not feel it was appropriate for him to make a recommendation regarding Fritzel’s request for home confinement, as that is a decision that he believes is up to the Federal Bureau of Prisons. Crabtree did grant Fritzel’s request that Crabtree recommend placement in the federal prison in Yankton, S.D. Crabtree said that Yankton was a “perfectly appropriate” recommendation, but he reminded Fritzel that his recommendation was not binding on the Bureau of Prisons.

Yankton is a minimum-security federal prison camp, according to its website. A 2009 Forbes article included it on its list of the country’s “10 Cushiest Prisons.”

In the other case, Fritzel was found guilty of three felonies related to illegal disposal of asbestos during a construction project at the former Alvamar Country Club, now known as the Jayhawk Club. In February, U.S. District Court Judge Holly Teeter sentenced Fritzel to three months in prison and a $55,000 fine for those crimes. Teeter previously agreed to suspend Fritzel’s prison sentence until after the sentencing date in the criminal conspiracy case, and a status conference for the asbestos case is scheduled for July 21.

Fritzel has been out on bond during the proceedings for both felony cases, and Crabtree told him that he could remain on release until he is notified by the U.S. Marshals Service to report to the prison facility that the Bureau of Prisons designates.

Related story: Thomas Fritzel tax fraud case

● Jan. 9, 2020 — Lawrence developer Thomas Fritzel pleads guilty to criminal conspiracy in Oread tax fraud case

More coverage: Thomas Fritzel asbestos trial, sentencing

● Feb. 20, 2020 — Lawrence developer Thomas Fritzel sentenced to 3 months in prison for asbestos violations

● July 30, 2019 — Lawrence developer Thomas Fritzel found guilty of improperly disposing of asbestos

● July 29, 2019 — Witness: Purchase contract for Alvamar says site did not contain asbestos, indemnified Lawrence developer Thomas Fritzel

● July 26, 2019 — Witnesses say truckloads of debris were removed from Alvamar site after potential for asbestos was known

● July 25, 2019 — Witnesses say they tried to inform Lawrence developer Thomas Fritzel and others about asbestos ahead of demolition

● July 24, 2019 — Contrasting stories emerge as trial begins against Lawrence developer Thomas Fritzel on asbestos charges

Timeline: City of Lawrence tax dispute with Thomas Fritzel, Oread hotel

● May 10, 2017 — Judge officially dismisses city’s lawsuit against The Oread in wake of settlement

● April 28, 2017 — All parties sign settlement in city’s lawsuit against Oread hotel

● April 19, 2017 — City leaders approve Oread hotel settlement that reduces incentives, removes Fritzel from management

● April 14, 2017 — Tentative settlement would reduce incentives to Oread hotel by millions, require Fritzel to resign management duties

● March 29, 2017 — Judge orders conclusion of mediation in Oread hotel lawsuit

● March 6, 2017 — After 10 hours of mediation and executive session, no public update in city’s lawsuit against The Oread hotel

● March 3, 2017 — City leaders to take part in second court-ordered mediation Monday for lawsuit against Oread hotel

● Feb. 22, 2017 — Mediation session does not resolve city’s suit against The Oread hotel; judge orders second session

● Jan. 20, 2017 — Judge orders mediation in city’s lawsuit against Oread hotel

● Dec. 9, 2016 — City’s lawsuit against Oread hotel moved to federal court

● Dec. 4, 2016 — City: Oread hotel developer admitted to much of alleged tax scheme

● Nov. 16, 2016 — Lawsuit against Oread group cites personal purchases, faked sales in alleged scheme to defraud city

● June 9, 2016 — Auditors continue to review Oread sales tax documents; timeline for resolution uncertain

● April 19, 2016 — After Oread kerfuffle, city suggests adding right to audit into future incentive deals

● April 6, 2016 — City awaiting findings from Oread sales tax documents; Fritzel sends letter to community

● March 15, 2016 — Oread developers agree to comply with city demands

● Feb. 22, 2016 — Developer-commissioned analysis: Oread Inn owes fraction of what city says

● Feb. 17, 2016 — Oread group willing to comply with some city demands, asks for meeting ‘immediately’

● Feb. 11, 2016 — Lawrence declares Oread Inn in default of redevelopment agreement; developer says city is in default

● Feb. 10, 2016 — Oread Wholesale submits report about city-ordered audit; record not released

● Jan. 22, 2016 — As deadline passes, city mum about next move on Oread hotel tax dispute; new questions about Oread tenants emerge

● Jan. 19, 2016 — Oread group again contests city’s demands, accuses city of violating state law

● Jan. 6, 2016 — City mum on action against Oread Inn, waiting on last deadline to comply with demands

● Dec. 31, 2015 — Oread group pays nearly $500,000 to city ‘under protest’

● Dec. 30, 2015 — City seeking more than money from Oread group as deadline nears

● Dec. 29, 2015 — Oread group has not yet responded to city letter demanding $500,000; city has discussed issue with law enforcement

● Dec. 16, 2015 — City seeks more than $500,000 from Oread group after audit finds possible violations of state sales tax law

● Dec. 16, 2015 — City overpaid Oread hotel’s development group, mayor says

● Nov. 22, 2015 — Lawrence hires firm to evaluate Oread tax district


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