In the latest twist in an increasingly bizarre case, admitted Ponzi scheme operator Deepal Wannakuwatte on Thursday swallowed a verbal beating from a federal judge, who accused him of lying in court and blamed him for delaying the case.
Wannakuwatte told U.S. District Judge Troy Nunley in court last week that he had hired Sacramento defense attorney Philip Cozens to replace Donald Heller, whom he had fired just before he was supposed to be sentenced to prison.
But on Thursday, at the beginning of a hearing on the status of the case, Cozens told the judge that he didn’t yet represent Wannakuwatte. “We’re still finalizing the financial arrangements,” the lawyer said.
Nunley quickly turned his attention to Wannakuwatte, dressed in an orange prison jumpsuit. He told the businessman he had “essentially lied to this court” the week before and added: “You’d better make sure you tell the truth or you’re going to suffer the consequences.”
Nunley set a new hearing for Sept. 11. He said Wannakuwatte needs to finish hiring a lawyer by then “or we’re going to proceed.”
Wannakuwatte pleaded guilty in May to perpetrating one of the biggest Ponzi schemes in Sacramento history. Last week, as he was about to be sentenced, the former owner of the Sacramento Capitals professional tennis team fired his first lawyer, Heller, and told the judge he had been coerced into pleading guilty. Prosecutors said they were concerned Wannakuwatte would try to unravel his plea agreement, which called for a likely sentence of 20 years in prison.
Experts say a federal judge is unlikely to let a defendant withdraw a guilty plea.
Cozens, after Thursday’s hearing, said he isn’t sure what Wannakuwatte will do.
“He’s looking for a second opinion,” the attorney said.
In pleading guilty, Wannakuwatte admitted that he duped investors into pouring millions into his West Sacramento medical supply company, International Manufacturing Group, under false pretenses. He allegedly told investors he had $100 million worth of contracts to supply surgical gloves to veterans hospitals; the contracts were really worth just $25,000.
Officials said Wannakuwatte’s scheme took in more than $200 million. Some early investors were repaid, as is typical in a Ponzi scheme, leaving the net loss to investors at an estimated $108 million. Although he has forfeited several millions of dollars worth of assets as part of his guilty plea, officials say it’s doubtful investors will be made whole.
Wannakuwatte filed for Chapter 11 bankruptcy protection. At a bankruptcy hearing earlier this week, he refused to answer questions about his finances and invoked his Fifth Amendment privilege against self-incrimination.
Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.