DENVER – A former Durango real estate developer was sentenced Monday by an unforgiving judge to 38 months in federal prison for evading $186,473 of income tax.
The sentence imposed on James G. Kreutzer by U.S. District Judge William Martinez was eight months longer than sought by the prosecutor and eight months longer than recommended in sentencing guidelines.
Martinez said the longer sentence was needed “to reflect the seriousness of the offense” and to protect the public from Kreutzer, a developer of several troubled subdivisions in Durango and other parts of Southwest Colorado.
The judge said he took into consideration that Kreutzer “operated a criminal enterprise over an extended period of time” by, among other things, lying repeatedly to investors, banks and others, while concealing that he and his development company were insolvent.
Kreutzer’s projects included the Cottonwoods at Dalton Ranch, The Cove, Ptarmigan Ridge Townhomes, Lightner Creek Village, and Southern Bluffs in Cortez.
Kreutzer, 52, pleaded guilty in July to filing a fraudulent return for 2007 taxes. He admitted that in 2007 and 2008 he took nearly $1.4 million from companies he controlled and used the money for payments on two high-priced homes, a Mercedes-Benz, gambling in Las Vegas and jewelry.
His tax return stated 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, but in reality he was using new loans to pay off old borrowings, the plea agreement states.
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. People in and out of Durango have won court judgments against him for hundreds of thousands or even millions of dollars.
Residents of Southern Bluffs, a south Cortez subdivision, were not seriously affected by the case against Kreutzer, said Terry Sadler, president of the homeowners association.
“They will continue to enjoy their homes and properties,” he said. “I was surprised by the case. I knew he had financial difficulties and a number of foreclosures.”
Kreutzer’s mishandling of investor funds did cause some financial hardship to those involved in the project, Sadler said.
“Bills had not been paid in years, and some small contractors were hurt,” he said. “We had to levy fees to pay back what was owed to the city, and we did so.”
The FBI and the Internal Revenue Service conducted a criminal investigation into Kreutzer’s real estate dealings, which resulted in the tax-evasion charge. In exchange for Kreutzer’s guilty plea, the prosecutor did not pursue fraud charges.
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.
Steve Gallagher, who ran a business in Denver that loaned money to Kreutzer, said the loan would not have been made if Kreutzer had not lied by saying he never had been convicted of a crime.
“He lied about everything,” Gallagher told the judge.
Kreutzer turned to face Gallagher and others in the courtroom and said, “I apologize to everyone of you folks for any harm I may have caused you.”
Kreutzer had defenders who spoke on his behalf at the sentencing, which lasted almost four hours. One of them, Durango attorney Chris Hamilton, said he loaned $600,00 to Kreutzer.
“I lost it all,” Hamilton said.
Despite that, Hamilton said much information used against Kreutzer by the prosecutor, Assistant U.S. Attorney Todd Norville, is “just flat wrong.” Even after Kreutzer was indicted, “Jim has been trying to help people,” Hamilton said.
Martinez ordered Kreutzer to report to a yet-undetermined prison by noon Jan. 2. The judge also ordered him to pay restitution of $186,473 to the IRS and a $10,000 fine.
Kreutzer’s attorney, Stanley Slonaker of Phoenix, said his client can’t pay the fine because he does not have $10,000. Slonaker had asked that his client be incarcerated for six months or less.