A California man who once owned a professional tennis team has been sentenced to a twenty-year prison term for orchestrating a massive Ponzi scheme that duped victims out of over $100 million. Deepal Wannakuwatte, 63, received the sentence from U.S. District Judge Troy Nunley who, after hearing testimony from various victims defrauded by the scheme, branded Wannakuwatte a "liar" and "evil person" and delivered the maximum sentence under the law. Wannakuwatte had previously agreed to plead guilty to a single count of wire fraud after facing charges that could have resulted in up to a 90-year sentence.
Wannakuwatte operated International Manufacturing Group ("IMG") and RelyAid Global Healthcare Inc. ("RelyAid") (collectively, the "Companies"), telling potential investors that the Companies had lucrative contracts providing surgical gloves to various government agencies. Investors were told that the Companies had annual sales exceeding $100 million, including more than $125 million in contracts from the U.S. Department of Veteran Affairs ("VA") alone. Based on these representations, Wannakuwatte and the Companies took in more than $200 million from at least 100 victims.
However, authorities allege that Wannakuwatte grossly overstated the extent of the Companies' dealings with the VA - indeed, rather than $100 million in sales from the supply of medical gloves, authorities claim that the actual amount of the contracts were $25,000, and the Companies; total 2013 sales were just $5 million. The scheme began unraveling late last year when Wannakuwatte, his wife, and the Companies were sued by a creditor, General Electric Capital Corp. ("GE Capital"), who claimed that RelyAid had defaulted on a loan it had taken out to purportedly build a latex glove factory. Wannakuwatte was ordered to turn over a $3 million King Air private plane that had been pledged as collateral on the loan, and multiple government agencies began investigating Wannakuwatte and the Companies shortly thereafter.
After being arrested in February on mail fraud, wire fraud, and bank fraud charges, Wannakuwatte pleaded guilty several months later to a single count of wire fraud. As part of that plea agreement, prosecutors agreed to seek a 20-year sentence - the maximum allowed under a wire fraud charge. After accounting for distributions received by victims, total losses were estimated at approximately $109 million.
However, Wannakuwatte's previous sentencing in August 2014 was delayed when, at the sentencing hearing, Wannakuwatte's lawyer presented Judge Nunley with a note claiming that his current lawyer, Donald Heller, had been "intimidating" towards him and that he had retained another attorney. Heller, a well-regarded criminal defense attorney and former federal prosecutor, later denied the accusations to a reporter and stated that it was in Wannakuwatte's best interests to plead guilty given the "overwhelming" case against him. Wannakuwatte's new counsel, Philip Cozens, appears to have convinced his client that he was facing a significant uphill battle in trying to revoke his plea agreement.
A hearing is scheduled in January 2015 to determine the exact amount of losses, as the figures advanced by the government and Wannakuwatte's defense differ by tens of millions of dollars.