The former owner of the defunct Sacramento Capitals professional tennis team plans to plead guilty after being charged with fraud in a massive Ponzi scheme, his lawyer said Tuesday.
After pleading not guilty to bank fraud and other charges last month, businessman Deepal Wannakuwatte has a change of plea hearing set for May 1 in U.S. District Court in Sacramento.
While the hearing will likely be pushed back, its anticipated hes going to plead guilty, said his lawyer, Donald Heller. He wouldnt elaborate on Wannakuwattes decision.
Prosecutor Michael Beckwith, an assistant U.S. attorney, said, The evidence in the case is very strong. I think thats a lot of whats driving this.
Wannakuwatte, 63, was indicted last month on charges connected to his West Sacramento medical-supply business, International Manufacturing Group Inc.
According to an FBI agents affidavit, Wannakuwatte duped investors and bankers into believing the company had obtained $100 million worth of contracts to supply latex gloves to veterans hospitals. In truth, the contracts were worth only $25,000 a year.
The indictment is limited to a single $4.5 million loan he obtained from Bridge Bank of San Jose, but prosecutors said the scheme was much larger. In a court appearance in February, Beckwith said authorities believe Wannakuwatte swindled investors out of $150 million over several years.
Wannakuwatte has been held without bail at the Sacramento County Main Jail since his arrest in February. At his bail hearing, Beckwith described Wannakuwatte as a flight risk.
One of his investors, prominent Folsom commercial real estate executive Sammy Cemo, this week won a default judgment against Wannakuwatte and his wife and daughter, as well as his businesses. Cemo and his charitable foundation charged in a lawsuit that Cemo and several friends and family members were defrauded out of $7.1 million.
Heller said the default judgment has little practical effect because Wannakuwatte and his wife and daughter plan to file for bankruptcy protection soon. He said the Cemo lawsuit is an exercise that I dont see the purpose of.
Cemos lawyer, Kevin Hughey, said the lawsuit and default judgment represent the first step in recovering assets for Cemo and his foundation. But he acknowledged that a Wannakuwatte bankruptcy would complicate matters. Typically, someone who goes bankrupt is shielded from litigation.
Hughey said Cemos primary concern is not himself, but for those around him who invested.
Wannakuwatte is also being sued by a group of about 20 investors who were working through a North Carolina financial firm. That suit is pending.
Wannakuwatte bought the Capitals tennis team two years ago after the previous owner went bankrupt and the team was in danger of folding. Just before Wannakuwatte was arrested, the team announced it was moving to Las Vegas because Sacramento lacks a suitable stadium. Soon after the arrest, the team was ordered disbanded by the World TeamTennis league.
Call The Bees Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.