Business & Real Estate

Ponzi defendant Wannakuwatte pleads Fifth in bankruptcy hearing

Deepal Wannakuwatte seemed prepared, barely a week ago, to accept a lengthy prison term for orchestrating one of the biggest Ponzi schemes in Sacramento history.

Then last week he turned the whole case upside down, firing his lawyer and charging that he’d been bullied into pleading guilty. Now he appears to be unwilling to cooperate with creditors seeking information about his finances.

On Tuesday, he invoked his Fifth Amendment rights and refused to answer questions about his finances at an informal hearing in U.S. Bankruptcy Court.

Joining in by telephone from the Sacramento County Main Jail, Wannakuwatte was supposed to field questions from creditors and the court-appointed bankruptcy trustee. When trustee Hank Spacone began questioning him, Wannakuwatte repeatedly invoked his Fifth Amendment right against self-incrimination.

“I respectfully decline to answer any questions,” he said, his voice crackling though a speaker phone.

Spacone adjourned the hearing after five minutes. Afterward, he said he isn’t sure whether Wannakuwatte’s refusal to testify will affect the ability of his alleged Ponzi victims to be repaid.

With losses to investors totaling an estimated $108 million, authorities say it’s unlikely the victims will be made whole. So far they’ve tracked down 11 properties, including his home in South Land Park, and $400,000 in bank accounts and insurance policies, all of which he has agreed to surrender. But officials say those assets won’t be nearly enough to repay everyone in full.

Spacone said he doesn’t know if Wannakuwatte has any additional assets. “We’re moving towards an investigation of his financial affairs,” the trustee said.

Wannakuwatte pleaded guilty in May to a charge of wire fraud and was expected to get a 20-year prison term at sentencing last Thursday. But at the last minute, he fired his lawyer and said he had been coerced into pleading guilty.

Prosecutors said in court last week that Wannakuwatte might try to undo his plea agreement, although legal experts said it’s unlikely the judge will allow that. His new lawyer, Philip Cozens, has said he isn’t sure how to proceed. A hearing in the criminal case is set for Thursday, although sentencing has been postponed indefinitely.

The former owner of the now-defunct Sacramento Capitals professional tennis team, Wannakuwatte has been held without bail since his arrest in late February. Prosecutors said he persuaded banks and individual investors to pour money into his West Sacramento medical-supply business by telling them he had more than $100 million worth of contracts with veterans hospitals. In truth, the contracts were worth only $25,000.

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