Former Stillwater mayor Ken Harycki pleads guilty to conspiracy; potential sentence could be reduced for cooperation

Ken Harycki
Ken Harycki

Based on a plea agreement entered in federal court Jan. 15, former Stillwater mayor Ken Harycki could face 37-46 months in prison and pay a $3,000-$30,000 fine after pleading guilty to felony conspiracy charges.

While those penalties are not binding on Judge Ann D. Montgomery, they are based on sentencing guidelines for the offense level outlined in the agreement.

The sentence could be reduced if Harycki provides “substantial” assistance to the prosecution of his alleged co-conspirators Thurlee and Roylee Belfrey, accused of defrauding the government of more than $10 million over more than 10 years. Harycki has agreed to cooperate in that case, but that does not guarantee a reduced sentence. The Belfreys’ trial is scheduled for Feb. 17.

As part of his own plea, Harycki also agreed to pay restitution as determined by the court. A sentencing date has not yet been set.

Harycki, 51, pleaded guilty to one count of conspiracy to defraud the United States. According to the plea agreement, the tax loss from all his relevant actions was $1-2.5 million.

When Mongomery read the charge against him, Harycki responded, “I did that your honor. I am guilty.”

In court, Harycki admitted to intentionally filing false tax forms on behalf of himself and his former clients, the Belfreys. He also admitted to incorporating a business to further the conspiracy.

According to the plea, from 2007 to 2014 Harycki provided payroll and accounting services to Model Health Care, a home health care company controlled by the Belfreys. At some point, Harycki became aware that although his clients were withholding payroll taxes from employees, they weren’t paying those taxes to the government. Harycki said he knowingly filed false Forms 941, which report the amount being paid to the government from wages withheld from employees. He also admitted to preparing false income tax returns for the Belfreys.

On Feb. 18, 2010, Harycki created the company MKH Holdings, which he admitted was used to further the conspiracy. According to the U.S. attorney’s office, the entity was used to pay funds falsely reported on tax returns to the Belfreys and others.

Harycki’s lawyer Joe Friedberg also said in court that Harycki was putting his own money into the operation to try and save it, and withdrew approximately $1 million from his own IRA. Although Harycki owed taxes on the withdrawal, he didn’t have the money, so he falsified his personal tax return.

In March 2014, federal agents raided Harycki’s Stillwater business, Customized Payroll Solutions. Then in November, he abruptly resigned as mayor of Stillwater to “focus on personal issues.” His second term as mayor was set to expire at the end of the year. He began serving on the city council in January 2005 and was elected mayor two years later.

Harycki was charged by “information” Dec. 17, which does not require the convening of a grand jury. For felony charges, this typically means the defendant intends to plead guilty.

The maximum penalty for Harycki’s offense is five years in prison, a fine of up to $250,000, up to three years supervised release, a special assessment of $100, plus the cost of prosecution, imprisonment and supervision.

“As a former mayor, Mr. Harycki understands, better than most, the magnitude and impact of the fraud he helped to perpetrate,” said U.S. Attorney Andrew M. Luger. “By his guilty plea, Mr. Harycki has taken responsibility for his actions, but that does not excuse his criminal acts. This defendant not only violated his accounting license by covering up a tax fraud, he eroded the trust of the residents of Stillwater, who elected him to a position of high public office.”

Harycki, accompanied by his wife, Mary, declined to comment following the hearing.

He was released on an “unsecured bond” of $25,000, which means he will be fined $25,000 if he fails to appear at a hearing.

The case is being prosecuted by Assistant U.S. Attorney Robert Lewis.

This article has been updated with additional information.

  • Mike Phillips

    Hmm… Harycki is mishandling money, and about the same time the council and Larry Hansen decide it is time for Larry to retire.. Maybe a full audit of the city finances should be conducted by an outside forensic firm. I see something possibly fishy!