Trial begins for Pere Marquette developers accused of money laundering, mail fraud
The jury trial of two Peoria-area developers is underway. Gary Matthews and Monte Brannan appeared in court Monday, charged with 18 counts of mail fraud, money laundering and conspiracy to commit money laundering.
Brannan also is charged with three counts of bankruptcy fraud.
A federal indictment filed in December 2020 claims the pair misused millions of dollars of invested funds and revenue from the redevelopment of the Pere Marquette Hotel and the construction of the Courtyard Marriott in downtown Peoria.
The creation of the development agreement started in 2008, between Matthews and the City of Peoria. Ultimately, the city offered a $7 million loan for the project from employee pension funds. The city also issued $29 million in grants.
Morton Community Bank, Southside Community Bank, Caterpillar, CORE Construction and the International Brotherhood of Electrical Workers’ investment firm Indure Build-to-Core also invested in the project to some extent. There also were a number of private investors allegedly solicited by Matthews early on in project development. Those investments were in Matthews’ development company GEM.
The mail fraud charges come mostly from these private investors. The indictment claims Matthews sent them statements misrepresenting the financial issues facing the hotel project.
After opening for operation in 2013 and 2014, the hotels eventually defaulted on debts after falling behind on payments to hotel managers Marriott and other vendors.
A federal judge approved the sale of the hotels to their largest investor, Indure Build-to-Core, for $39 million in 2018. They continue to operate under new ownership. The City of Peoria lost the $7 million of taxpayer money sunk into the project.
After a long jury selection process, prosecutors made their opening statements Monday to Judge Sara Darrow.
Assistant U.S. Attorney Douglas McMeyer told the jury, though the financing of commercial projects and historic tax credits is complicated, this case itself is “simple.”
“The money was not theirs,” said McMeyer. “They took it anyway, hid the fact they took it and lied that they took it.”
The prosecution alleges that, after changing the hotels’ management company from Marriott to First Hospitality Group, Matthews and Brannan directed the company to send a series of payments to a bank account under their control. The indictment claims these transfers totaled more than $13 million.
McMeyer went on to explain Matthews had signed an amendment to his loan with the City of Peoria, stipulating he and Brannan could not receive any sort of management or developers’ fee from the hotels’ accounts until their loan was paid back in full. The prosecution claims the pair falsified three certificates confirming they were not receiving payments, before stopping the creation of the certificates entirely.
Finally, McMeyer addressed Brannan’s bankruptcy charges. The indictment claims Brannan hid assets during bankruptcy proceedings, including a Dodge convertible, $80,000 in cash and multiple bank accounts.
Matthews and Brannan are each represented by their own team, who both delivered opening statements. Matthews’ attorney, Sharbel Rantisi, argued the pair never intended to commit fraud or money laundering.
“Their sole purpose was to get it done,” he said. “By the way, the hotels are done, functional, they did what they were asked to do.”
Rantisi claimed the City of Peoria put undue strain on the project by changing the terms of the loan agreement during the negotiation period between 2008 and 2011. He said the original offer of $37 million in grants and a $9 million developers fee became $29 million with a $7 seven million loan and no developer’s fee.
“That right there is where Mr. Matthews probably should have said no,” Rantisi said.
Brannan’s attorney ,Peter Lynch, made a similar argument in his opening statement, claiming the pair had done nothing but attempt to make the development project sustainable.
“You may not like the way they ran their business, but they did not commit a crime,” Lynch said. “They paid themselves for their incredible effort. There’s no scheme to fraud, there’s no artifice to fraud, so how can they prove fraud?”
Lynch also addressed the bankruptcy fraud charges, saying the car and cash payment were gifts to Brannan’s ex-wife. He also claimed Brannan updated his disclosures to reflect the additional assets shortly after realizing the error in his filing.
The court also heard from two witnesses Monday.
Both were investors in multiple GEM projects. They said they had no reason to believe Matthews would mishandle their money at the time of their investment. They both said Matthews seemed to know what he was doing and have a keen business sense for the Peoria hospitality industry.They also both said Matthews approached them later on in the Pere Marquette project to request additional $100,000 in loans that were never paid back.
The second witness, a sales director for a medical company in Edwards, had a ledger of transactions related to the hotel project. He told the court the ledger showed payments from the investments ended after three checks and never restarted.
The trial ended for the day during initial examination of the second witness by the prosecution. It will resume at 8 a.m. Tuesday.
The trial is expected to last through Nov. 9.