Due to be sentenced for masterminding a $125 million Ponzi scheme, a California man instead told a federal judge that he wanted to fire his lawyer, claiming he had been "intimidating" him and had coerced his guilty plea. Deepal Wannakuwatte, 63, had previously pleaded guilty to a single count of wire fraud and was set to receive a prison sentence no longer than the statutory maximum of 20 years. In a handwritten note provided to U.S. District Judge Troy Nunley, Wannakuwatte indicated that he had hired a different attorney and wished to fire his current lawyer. Judge Nunley postponed sentencing indefinitely, and a status hearing is scheduled for this Thursday.
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 are estimated at approximately $108 million.
However, 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 faces an uphill battle in his quest to undo his guilty plea. Prosecutors will focus on his appearance before Judge Nunley to enter his guilty plea, known as his plea colloquy, which would have consisted of a lengthy and detailed exchange between Judge Nunley and Wannakuwatte as to the charge in the plea agreement. Wannakuwatte would have testified under oath that he was pleading guilty voluntarily and because he was, in fact, guilty. Further, Wannakuwatte's plea agreement would have included an affirmation that he was pleading guilty on his own accord and that he was not being forced or coerced.
A Washington woman recently had a similar request denied after she entered a guilty plea to all 110 charges she was facing for an alleged $128 million Ponzi scheme. Doris Nelson had asked a Washington federal judge to grant her request to withdraw her guilty plea on several grounds, including her discovery that she could retain private counsel and the discovery of new evidence. In denying her request, the court noted her acknowledgement of her guilt in her plea colloquy and observed that her claims were simply not believable.
For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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