Ran an elaborate Ponzi scheme.
By Deepak Chitnis
WASHINGTON, DC: Sixty-three year-old Deepal Wannakuwatte, a well-known businessman and so called ‘community leader’ of Sacramento, California, is in the crosshairs of the federal government for orchestrating an elaborate fraud scheme that could land him decades behind bars.
Wannakuwatte has been indicted on three charges of bank fraud and making false statements to a financial institution, which could land him 30 years in prison and $3 million worth of fines — $1 million for each charge. Wannakuwatte was arrested on February 21, 2014, and has been in federal custody ever since, awaiting trial.
According to a press release issued by the Department of Justice, Wannakuwatte used the two northern California firms that he owns, International Manufacturing Group (IMG) and Relyaid, to establish a line of credit with Bridge Bank in hopes of securing a loan which he told the bank would be used to upgrade a latex factory he owned in Olivehurst, California.
Wannakuwatte falsely told Bridge Bank that he does $100 million worth of business with the US Department of Veterans’ Affairs (VA), supplying latex products like gloves. The lengths to which Wannakuwatte went to establish his credibility with Bridge Bank were extensive. After initially applying for the loan in September of 2011, Wannakuwatte held a conference call that December with himself, an employee of the bank, and an employee of his own company who Wannakuwatte instructed to act as a representative of the VA.
Wannakuwatte had provided documentation to Bridge Bank regarding his relationship with the VA in hopes of establishing his credibility, and because the paperwork was fabricated, Wannakuwatte set up the conference call to convince the bank that he was truly on the level. Wannakuwatte fabricated over 60 invoices that showed nearly $26 millions in transactions with the VA — all of which never happened.
Eventually, Bridge Bank approved a loan for $4.5 million, which they believed would be going towards the aforementioned factory. In fact, however, Wannakuwatte used the funds to pay off debts he had incurred with other parties, ultimately drawing down the loan to $4.3 million. Essentially, he orchestrated a Ponzi scheme, paying off investors with money from loans he was receiving from other investors.
In a separate but related case, Wannakuwatte is being charged by businessman and philanthropist Sammy Cemo of establishing a friendship with him but ultimately conning him and a non-profit organization out of hundreds of thousands of dollars, with Cemo now demanding $7.1 million in total damages.
Cemo and Wannakuwatte met in 2007, and became fast friends. Allegedly, soon thereafter, the latter told the former about the $100 million worth of contracts he had supposedly secured with the VA. After giving Cemo a tour of the 60,000-square foot warehouse in Olivehurst, and promising Cemo a 19% return on his investment, Cemo’s trust invested $325,000 with Wannakuwatte in 2007.
“Wannakuwatte used what Cemo now understands to be doctored financials, fraudulent comprehensive and polished marketing and business plan materials, dummy product samples, fabricated performance histories and investor references, and copies of misrepresented government contracts, as well as staged offices and warehouse space to convince Cemo of the legitimacy of the investment opportunities,” said Cemo’s legal team in the official court filing.
Before the malfeasance was revealed to Cemo, Wannakuwatte asked him for a personal loan of $100,000 last month, which Cemo granted. Soon afterward, however, he found out about Wannakuwatte’s criminal activities, and was then informed that the $100 million contract he had been told about were really only worth about $25,000.
Now, Cemo is seeking “actual, special, consequential, and punitive damages for fraud, breach of fiduciary duty, unlawful and unfair business practices, unjust enrichment, and violations of state law,” according to Courthouse News.
Wannakuwatte, in addition to owning the two medical supply companies, was also the owner of the Sacramento Capitals tennis team, which moved to Las Vegas just last month.
To contact the author, email to deepakchitnis@americanbazaaronline.com