3/14/2014 5:44:00 AM,
SACRAMENTO (CN) - A slick six-year campaign of fraud and deception cost a California nonprofit more than $7.1 million, leaving it hard-pressed to meet its obligations to community healthcare and cultural institutions, the charity claims in court.
Plaintiff Sammy Cemo is a well-known commercial developer Sacramento, having built several office and business parks in and around the city since the early 1980s.
Cemo is a self-made success, having formed his first business while still in high school - buying clunkers, fixing them up and selling them at a profit - according to the Sacramento Business Journal.
Later in life he formed the co-plaintiff Cemo Family Charitable Foundation, dedicated to community philanthropy, including providing support to Mercy Hospital of Folsom and the Sacramento Crocker Art Museum.
For all his business savvy, however, Cemo claims in the lawsuit, he was duped into investing in a Ponzi scheme run by Deepal Wannakuwatte, the owner of the now-defunct Sacramento Capitals tennis team.
Cemo claims that his and Wannakuwatte's association, which he grew to think of as a true friendship, began in 2007 after they were introduced by a commercial real estate broker.
Wannakuwatte had told the broker that he was seeking investors to help realize the $100 million in contracts he'd allegedly secured to supply medical supplies to veteran's hospitals, Cemo says.
"The broker, a longtime acquaintance of Cemo, told Wannakuwatte about Cemo and that Cemo was a successful and well-respected business person with an excellent reputation within both the business and philanthropic communities," according to the complaint.
Cemo says his trust invested $325,000 in 2007, after Wannakuwatte invited him to tour his 60,000 square-foot warehouse in West Sacramento, and guaranteed 19 percent return on investment.
"Wannakuwatte used what Cemo now understands to be doctored financials, fraudulent comprehensive and polished marketing and business plan materials, dummy product samples, fabricated performance histories and investor references, and copies of misrepresented government contracts, as well as staged offices and warehouse space to convince Cemo of the legitimacy of the investment opportunities," Cemo says in the complaint.
"Wannakuwatte went so far as to offer to connect investors with his direct contacts at governmental agencies. The likes and depths of Wannakuwatte's fraud and scheme may be unprecedented. Cemo had no reason whatsoever to believe that the investment opportunities or IMG's business platform and operations were anything other than exactly as Wannakuwatte represented."
"[N]ear-overwhelmed" by Wannakuwatte, after that initial investment appeared to pan out, Cemo says he and Wannakuwatte formed an entity called Cemo Deepal Holdings to secure investments from others.
From that point forward, Cemo says, Wannakuwatte traded off Cemo's good name and reputation "to reel in new lender and investor victims."
All the while, he says, the alleged conman "ingratiated himself with Cemo and those around Cemo, including Cemo's family. Eventually, Wannakuwatte was actually attending Cemo's family sporting events."
Cemo says that after January 2009, "some interest was paid and some of the investment amounts repaid or returned, but the bulk of the monies have not been returned or recovered and there are substantial losses to plaintiffs and Cemo's family, friends and business partners."
Cemo claims that Wannakuwatte offered a "seemingly plausible and credible explanation or excuse" for the sluggish interest payments, mainly saying he required increased cash flow to build a new manufacturing plant.
Then, "in February 2014, apparently and likely because his scheme was collapsing and law enforcement closing in on him, Wannakuwatte again turned to Cemo, played off what Cemo thought was a legitimate close friendship, and ... asked Cemo for a personal loan of $100,000, and Cemo agreed," according to the complaint.
"Wannakuwatte later purported to repay the loan, but of course Wannakuwatte's check was returned for insufficient funds," Cemo says.
Eventually, federal prosecutors got wise to Wannakuwatte, and executed a search warrant and searched multiple residential and commercial properties owned by Wannakuwatte and his various entities, Cemo says in the complaint.
The FBI arrested Wannakuwatte on Feb. 20 and charged him with a host of crimes including bank fraud, money laundering, wire fraud and conspiracy, according to the complaint.
In a criminal complaint filed in Federal Court that night, prosecutors claimed Wannakuwatte may have conned scores of investors out of a total $150 million. They noted that the alleged $100 million contract with the Veterans Administration amounted in reality to contracts totaling just $25,000 a year, Cemo says.
Cemo claims he had "no knowledge of Wannakuwatte's alleged criminal activities or the true nature of the investment scheme and is shocked and stunned."
"Because of the monies stolen by Wannakuwatte, the Cemo Charitable Trust is now having difficulties meeting its charitable pledges. For Cemo, far worse than his personal losses are the losses to the community and of his family, close friends and business partners, all of whom were defrauded by Wannakuwatte and who have sustained substantial financial losses and damages, and for which through personal guarantees Cemo is now personally responsible," he says.
Cemo seeks actual, special, consequential, and punitive damages for fraud, breach of fiduciary duty, unlawful and unfair business practices, unjust enrichment, and violations of state law.
He is represented by Kevin Hughey with Hughey Moenig.