A Sacramento real estate executive sued jailed businessman Deepal Wannakuwatte this week, saying he lost millions in the alleged Ponzi scheme run by the owner of the defunct Sacramento Capitals tennis team.
Sammy Cemo, the head of Cemo Commercial Inc. in Folsom, charged that he, his friends and family members were duped into investing $7.1 million in Wannakuwattes medical-supply business starting in 2007. While the investors got some money back, the bulk of the monies have not been returned or recovered, the lawsuit says.
Semos lawsuit in U.S. District Court in Sacramento is the second filed against Wannakuwatte since the businessman was arrested last month. Active in commercial real estate since the 1960s, Semo is the most prominent investor to come forward publicly in the case. He declined to comment on the lawsuit Wednesday.
According to the suit, Cemos charitable trust was among the victims and is now having difficulties meeting its charitable pledges. The trusts beneficiaries include Mercy Hospital of Folsom and Sacramentos Crocker Art Museum.
The trust first invested $325,000 in 2007, the lawsuit says, after Wannakuwatte invited Cemo on a tour of his West Sacramento warehouse and promised a minimum guaranteed profit of 19 percent. After that initial investment panned out, the two men formed a business called Cemo Deepal Holdings to secure investments from others.
Wannakuwatte was playing off Cemos good name and reputation to reel in new lender and investor victims, the suit says. Furthermore, the lawsuit alleges, he ingratiated himself with Cemo and those around Cemo, including Cemos family. Eventually, Wannakuwatte was actually attending Cemos family sporting events.
The lawsuit also names as defendants Wannakuwattes businesses, his wife, Betsy, and their daughter Sarah.
Federal prosecutors said at a court hearing last week they believe Wannakuwatte conned investors out of as much as $150 million. The government says Wannakuwatte told investors he had $100 million worth of contracts to supply medical supplies to veterans hospitals, when in fact those contracts totaled just $25,000 a year.
In his lawsuit, Cemo said he gave Wannakuwatte a personal loan of $100,000 last month. Wannakuwatte repaid the loan with a check that bounced, the lawsuit says.
Another group of investors, after sending $2.3 million to Wannakuwatte through a North Carolina financial firm, won a court order last week freezing Wannakuwattes assets. The order was converted into a preliminary injunction Wednesday by U.S. District Judge John A. Mendez.
The order covers his personal assets, plus the assets of Wannakuwattes main business, International Manufacturing Group Inc. of West Sacramento.
Wannakuwatte hasnt been indicted and hasnt entered a plea. He is being held without bail. His lawyer, Donald Heller, has declined comment on the allegations but said Wednesday that investors are gaining nothing by suing his client.
In time, Wannakuwattes assets will likely be liquidated and distributed among the investors, and Heller said those who filed suit wont be allowed to jump in front of other investors. No one gets a preference by filing, the attorney said.
Heller also said the order freezing Wannakuwattes business assets has forced the shutdown of the companys operations, eliminating a possible source of funds for repaying investors. They put people out of work, he added.
Wannakuwatte for the past two years owned the Capitals tennis team, which announced in early February that it was moving to Las Vegas. Since his arrest was announced, the World TeamTennis league has revoked the franchise and eliminated the team.
Call The Bees Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.