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Paul Bauman / NorCal Tennis Czar

Deepal Wannakuwatte, second from right, and his wife, Betsy, pose with twin brothers Mike, left, and Bob Bryan of the Texas Wild tennis team after a Sacramento Capitals match last July.

Former Sacramento Capitals team owner pleads guilty to fraud; faces 20 years in prison

Published: Thursday, May. 8, 2014 - 12:11 pm
Last Modified: Friday, May. 9, 2014 - 6:38 am

Barely three months ago, Deepal Wannakuwatte was the picture of success: owner of a medical-supply company and of the Sacramento Capitals professional tennis team.

Today he’s an admitted felon, awaiting a likely 20-year prison term, exposed as possibly the most prolific con artist in Sacramento history. His assets will be liquidated to repay victims of a $150 million Ponzi scheme, and even the tennis team is gone, killed off by the league.

Dressed in a grubby jail-issued orange jumpsuit, Wannakuwatte, 63, pleaded guilty Thursday to a single count of wire fraud in U.S. District Court. His plea followed weeks of negotiations between his lawyer and federal prosecutors.

The case is tied to his medical-supply business, International Manufacturing Group. According to prosecutors, Wannakuwatte duped individual investors and professional bankers alike into pouring $150 million into the company over the past decade or so. Wannakuwatte told his victims he had $100 million worth of contracts to supply latex gloves to veterans hospitals, when in fact the contracts totaled just $25,000 a year.

As part of his plea agreement, Wannakuwatte will file for bankruptcy protection and forfeit more than $330,000 in bank accounts to the government, along with 16 pieces of property, including his South Land Park house and vacation homes in Hawaii, Oregon and Sonoma County.

He will also surrender $8 million to $12 million worth of federal income tax refunds. He’s owed the refunds, ironically, because he deliberately overpaid his taxes in order to lull his victims into complacency by showing them IRS returns with vastly inflated incomes.

“He essentially overpaid, using the victims’ money,” said U.S. Attorney Benjamin Wagner at a news conference following Wannakuwatte’s court appearance.

The tax refunds and other assets will be eventually distributed among his victims, but it’s all but certain they won’t get full recovery. Wagner said losses to investors totaled around $100 million.

“Many of the victims will never be made whole,” Wagner said. He said Wannakuwatte spent the money on personal and business expenses.

At least two of the investors were in court to watch Wannakuwatte plead guilty. Neither agreed to talk to The Bee afterward.

Wannakuwatte’s decadelong crime constitutes “very possibly” the largest Ponzi scheme in the region’s history, Wagner said. It rivals the Loomis Wealth Solutions case, a Roseville scam exposed in 2008 that generated an estimated $100 million in losses to investors.

Under Wannakuwatte’s plea deal, both the government and defense recommended a 20-year prison term. Wannakuwatte will be sentenced July 24 by U.S. District Judge Troy Nunley. He has been held without bail since his arrest in late February.

Wannakuwatte pleaded guilty unusually early in the process. He was indicted in March. But prosecutor Michael Beckwith had called the evidence overwhelming, and defense attorney Donald Heller said it was clear almost from the start that a plea bargain made more sense than a trial. “When you realize the case has problems from the defense side, you want to recognize those problems early on,” Heller said after the court hearing.

Under his original indictment, Wannakuwatte could have received up to 90 years in prison. “The exposure was gigantic,” Heller said. With time off for good behavior, he could be out of prison by the time he’s 79 or 80, “giving him the opportunity to see his grandchildren.”

Although prosecutors have said Wannakuwatte lured investors and lenders into giving him around $150 million, Wagner pegged the actual net loss at around $100 million. The reason for the lower figure was that some investors got their money back. In a Ponzi scheme, early investors often get repaid with dollars pumped in by newcomers.

Prosecutors said at least 100 individuals and corporations were victimized by Wannakuwatte.

One of the properties Wannakuwatte hasn’t yet surrendered is his West Sacramento medical company, whose assets were frozen after a group of investors sued. Wagner said he believes the company’s assets will eventually be turned over to the bankruptcy court.

It isn’t known how much the company is worth. Wagner said it’s still operating, although at a far lower volume than what Wannakuwatte had represented to investors.

Wannakuwatte took over the Capitals in 2012 after previous owner Bob Cook filed for bankruptcy protection. In early February, he announced he was moving the team to Las Vegas because he couldn’t secure a permanent home stadium for the Capitals in Sacramento. After his arrest, the World TeamTennis league revoked his franchise and disbanded the team.


Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

Read more articles by Dale Kasler



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