DENVER – An embattled Durango real estate developer is likely headed to prison after admitting to filing a fraudulent tax return.
James G. Kreutzer, 52, currently of Grand Junction, pleaded guilty to evading his 2007 taxes Monday in U.S. District Court in Denver.
Kreutzer’s failed real estate developments have spawned several civil lawsuits that have been tied up in the courts for years, with people in and out of Durango winning court judgments against him for hundreds of thousands or even millions of dollars.
Court documents released Monday reveal that in 2007 and 2008, Kreutzer took nearly $1.4 million from companies he controlled and used the money for payments on two homes, a Mercedes-Benz, gambling in Las Vegas and jewelry. He filed tax returns stating he owed no taxes, but if the fraudulently earned money had been reported, he would have owed about $187,000, according to his plea agreement.
From 2001 to 2008, Kreutzer courted investors for subdivisions around Durango, according to the plea agreement. In reality, he was using new loans to pay off old borrowings. Investors in The Cove subdivision in the Animas Valley sued him in federal court, claiming $7.8 million in losses. Kreutzer and his companies also were defendants in 22 cases filed in state court in La Plata County.
Federal authorities conducted a criminal probe into his real estate dealings, which resulted in the tax-evasion charge.
He pleaded guilty to one count of filing a fraudulent income-tax return for his 2007 earnings. The charge carries a maximum prison sentence of five years, although lawyers on both sides said sentencing guidelines call for 18 months to 30 months in prison. U.S. District Judge William Martinez will impose the sentence at a Sept. 18 hearing in Denver.
Minutes after pleading guilty, Kreutzer asked permission to continue brokering real estate deals, but Martinez denied the request.
In exchange for pleading guilty, prosecutors pledged not to charge Kreutzer with several crimes including frauds and swindles, wire fraud, bank fraud and conspiracy to commit fraud, said La Fonda Traore, his public defender.
Kreutzer gave brief answers to Martinez’s questions, except when the judge asked him to explain in his own words what he did wrong.
“I took company funds and paid personal expenses for mortgage payments and car payments and things like that and did not report it as income,” Kreutzer said.
Kreutzer was the developer behind several local projects, including Cottonwoods at Dalton Ranch, The Cove, Ptarmigan Ridge Townhomes and Lightner Creek Village. He operated through a series of limited liability companies, including Southern Bluffs, Hermosa Park, Wildcat Properties and Animas Investments and a corporation called Village Nursery Inc.
Assistant U.S. Attorney Todd Norvell mentioned Village Nursery when discussing the background of the case in court Monday.
“The defendant devised and executed a scheme to defraud lenders and others by various means. Much of that money ended up in his company,” and he did not pay taxes on it, Norvell said.
Kreutzer is broke, and he has not been able to pay back many of his investors. He has three real estate transactions in the works that could help him pay people back, Traore said.
“He would like to be able to complete those projects,” she said.
But Norvell asked the judge to modify the conditions of Kreutzer’s bond to prevent him from working in real estate while he awaits sentencing.
Kreutzer frequently told investors he needed to do just one more deal to get them their money, Norvell said.
“His conduct has always been of the type of, ‘The check is in the mail,’” Norvell said.
Traore said one of Kreutzer’s aggrieved investors was in the courtroom and wanted the judge to grant him permission to do his real estate deals.
After the hearing ended, the man approached a Herald reporter and began to complain about the judge’s ruling, but Kreutzer took him aside, and then the man refused to give his name or answer any questions.
This is Kreutzer’s second federal conviction for a financial crime. In 1992, an Arizona jury found him guilty of attempted bank fraud, a felony. He was sentenced to three years on probation in that case.