Former Stillwater mayor charged in $10 million fraud scheme

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The former mayor of Stillwater has been indicted on federal charges of conspiracy to defraud the federal government of more than $10 million in concert with clients of his accounting firm.

U.S. Attorney Andrew Luger announced the charges Wednesday against Ken Harycki, 51, who was mayor from 2006 until last month, when he abruptly resigned from office.

Luger said Harycki prepared and filed fraudulent tax forms for the clients, brothers Thurley and Roylee Belfrey, both 48, of St. Paul, which helped them conceal millions in tax liabilities, according to the St. Paul Pioneer Press.

The Belfreys own and operate businesses in Minnesota that provide health care services such as nursing and home care, and get a significant portion of their revenue through the Medicaid program.

The Belfreys were arrested Tuesday and indicted on charges of Medicaid fraud. Prosecutors allege their businesses submitted thousands of fraudulent claims to Medicaid from 2002 until March 2014 totaling more than $10 million, according to the Minneapolis-St. Paul Business Journal.

Court documents accuse Harycki of helping the Belfreys hide their fraud by setting up shell companies, opening dozens of personal and business bank accounts – some of them in other people's names – and shuttling money between the accounts on a regular basis, according to the Star Tribune.

Harycki is also accused of regularly preparing and filing tax forms on their behalf that he knew were false.

The charges come nine months after federal agents raided Harycki's business as part of their investigation. At the time, Harcyki said in a statement that he was “deeply disappointed by this situation and we are fully cooperating with authorities,” according to the Star Tribune, but he has not commented on it since then.

No court date has been set for him to enter a plea.

Harycki served on the Stillwater City Council before being elected mayor in 2006, and he was re-elected in 2010. He did not run again this year, and under normal circumstances he would have remained in office until the new mayor, City Council member Ted Kozlowski, is sworn in next month.

With Harycki's resignation, vice mayor Mike Polehna is fulfilling the duties of the office in the interim.

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