Former Peoria Mayor Jim Ardis testified for almost three hours Wednesday on the third day of the trial of Pere Marquette developers Gary Matthews and Monte Brannan.
Matthews and Brannan are accused of 18 counts of money laundering, money laundering conspiracy and mail fraud. Brannan also faces three charges of bankruptcy fraud. Prosecutors allege the pair misused millions of dollars in investor and hotel funds during the development, construction and operation of the Hotel Pere Marquette and Courtyard Marriott in downtown Peoria.
Prosecutor Ronald Hanna started the day by walking through each step of the creation of a development agreement with Ardis. After negotiating the exact details of the contract between 2008 and 2011, the city settled on $29 million in bonds and a $7 million loan from the city’s pension fund.
Early on in the contract negotiations, the city had offered almost $40 million in bonds. Ardis said the economic climate of the time, growing project costs and financial department projections all factored into the bond reduction. The $7 million loan also presented an opportunity for the city. Ardis said, to his recollection, the loan offered a seven percent interest rate. The money collected a roughly two percent interest rate in the pension account.
Matthews eventually agreed to the contract, but Ardis said it was a sticking point and there were moments Matthews may have backed out.
“Did it feel like this project was not going to come to fruition?” asked Hanna at one point.
“Definitely,” Ardis answered.
Ardis and Hanna also discussed the eventual switch of the hotels’ management company from Marriott International to First Hospitality Group. The change included a side amendment to the original loan: Matthews and Brannan could not collect any sort of fees from hotel revenues until the city of Peoria was paid back in full.
“We had a significant amount of taxpayer money invested in this project,” Ardis said. “And we wanted to show, to the best of our ability, efforts to protect that.”
Prosecutors argue Matthews and Brannan ignored this stipulation and diverted millions of dollars of hotel funds to their own business and personal interests anyway. During cross-examination, defense attorney Sharbel Rantisi questioned the side amendment.
Ardis said the city looked for this additional protection because he felt, when working with taxpayer money, they had the most to lose.
“Did anyone ask you to pause your salary until this project ended?” asked Rantisi at one point.
In opening statements, the defense had argued Brannan and Matthews were rightfully paying themselves from the hotel accounts for their “incredible efforts.” Matthews' work ethic was a recurring theme in Rantisi’s cross-examination of Ardis. They discussed the scope of a hotel project, gathering investors, meeting with contractors and acquiring the land for the project. The Courtyard Marriott stands in the former location of a number of bars, nightclubs and Big Al’s. Rantisi contends concerns about land acquisition drove away a number of other potential developers, but not Matthews.
Ardis told the court the hotel project seemed promising. He had a positive impression of Matthews’ development track record and the city council had ongoing conversations about attempting to revive the downtown through years. Additional hotel rooms and more direct connections to attract conventions to the Civic Center were identified as ways to do that.
“I felt the overall project was going to be a benefit to Peoria,” Ardis said.
He repeated the sentiment multiple times throughout his testimony.
Ultimately, the hotels faced financial decline and difficulty meeting projections, leading to a foreclosure auction in 2018 and new ownership which continues to operate the hotels today. They are still paying off the city’s grants and bonds, but Ardis notes they will not recover the $7 million loan.
The trial is expected to last until Nov. 9. Upcoming witnesses include testimony from city manager Patrick Urich, former assistant city manager Chris Setti and former Caterpillar CEO Doug Oberhelman.
