Former Hotel Pere Marquette developers Gary Matthews and Monte Brannan were indicted Tuesday on 21 federal felony counts of money laundering, consipracy to commit money laundering, mail fraud, and concealment of bankruptcy assets. In a 26-page indictment, Assistant U.S. Attorney Darilyn Knauss said the two men defrauded their investors, the city of Peoria, lenders, and others by illegally diverting money earmarked for the hotel's renovation and revenue from the hotel project for their personal and business use.
Peoria taxpayers had significant skin in the game on the Pere Marquette deal. In 2012, the city loaned Matthews $7 million and doled out $29 million in grants to invigorate the redevelopment effort. The city subsequently had to eat those costs in 2018 when a bankruptcy court awarded ownership of the hotel to its largest investor, INDURE Build-to-Core, an union-owned real estate investment fund.
Matthews first pitched his redevelopment agreement for the historic, rundown hotel in 2008. But federal prosecutors charge the development was entangled in a web of legal woes from the start, with Matthews using $3.5 million raised from investors for the project between 2008 and 2010 for other purposes, like paying off interest, taxes, credit cards, and expenses related to other business interests.
Matthews sold 50% of his GEM Enterprises development firm to Brannan in 2011 to raise another $1 million in capital. Brannan, a Peoria businessman, became a co-managing partner as part of the deal.
Marriott managed the Pere Marquette and Courtyard by Marriott hotels downtown upon the completion of those downscaled projects in 2013 and 2014, respectively. Matthews and Brannan had no access to hotel revenues at that time. In the summer of 2014, Matthews alleged Marriott's poor management of the hotels and sought to transfer ownership to his own company.
The city of Peoria didn't agree to that, but did allow management to transfer to hotel management company First Hospitality Group. As part of the management swap, a side letter amendment to the loan terms with the city required monthly compliance certificiates noting neither Matthews nor Brannan had been paid any management or developer fees - directly or indirectly.
But federal prosecutors allege Matthews demanded First Hospitality Group transfer monthly payments of hotel revenues to a bank account he and Brannan controlled, in violation of the loan terms. These transfers added up to more than $13.8 million.
The two men spent $1.6 million of those hotel revenues on themselves and their other business ventures, the indictment stated. That includes including $750,000 transferred to the men after the hotels went into foreclosure.
Matthews and Brannan reportedly gave the city three fake compliance certificates to hide their trail, before ceasing to submit them altogether, the indictment read.
In mid-2016, Marriott threatened to pull the hotels from its reservation system when the Pere Marquette fell $1.4 million behind on payments. After the reservation system was shut off for default on the payment in January 2017, Brannan and Matthews made a payment of more than $187,000 from the fradulent hotel revenue account they controlled to keep the system on, prosectors said.
INDURE Build-to-Core filed its own loan default notice shortly after Marriott's first warning. The firm, which loaned Matthews $39 million on the project, filed for foreclosure on the hotel properties in Feb. 2017 after the developers failed to make their payments.
Brannan also reportedly hid his 2003 Dodge Viper SRT-10 convertible, $80,000 in cash, and all of the bank accounts he'd maintained over the past two years from authorities on an asset disclosure form in his 2018 bankruptcy filing, leading to additional counts.
Neither man has appeared in court yet. Both are scheduled for first appearances and arraignments on Jan. 12, 2021.
INDURE, which still owns the hotels awarded to them by the bankruptcy court more than two years ago, announced Wednesday it has hired Davidson Hotels and Resorts to manage its downtown Peoria properties. As part of the new agreement, the Pere Marquette is slated to undergo another renovation of its guest rooms and public spaces.
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