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Updated: Swim Center developers expected to plead guilty in unrelated federal fraud case

By Staff | Jul 12, 2012

Two developers tied to the swim center proposals rejected by the Cape Coral City Council and Lee County Commission are facing federal charges in Texas.

On June 27, the U.S. Attorney’s Office in the Northern District of Texas charged Anirudh “Andy” Sarwal and Fred Alden Yeo each with one count of conspiracy to commit bank fraud, according to official court documents.

“They have agreed to plead guilty, but have not yet done so,” Allison Sands, with the U.S. Attorney’s Office in the Northern District, said Wednesday via e-mail. “They haven’t officially pleaded guilty until they go before the judge.”

Arraignments for the two men had not been set as of Wednesday.

Sands noted that Sarwal had one Tuesday, but it was canceled.

The federal charge carries a maximum sentence of 30 years in prison.

According to the documents, Sarwal and Yeo entered into negotiations with U.S. Bank and Texas Capital Bank in 2008 to obtain a $39 million construction loan for the development of an eight-story office building in Austin, Texas.

The men reportedly submitted a fabricated bank statement to show that Sarwal had more than $7 million in a Wells Fargo Bank investment account. It served as proof that they had at least $5 million in disposal liquid assets.

“No such Wells Fargo Bank investment account existed,” the documents state.

U.S. Bank and Texas Capital Bank approved the loan about December 2008.

The two banks foreclosed on the loan in June 2010. By that time, Sarwal and Yeo had reportedly made more than $33 million in draws on the total funds.

Neither man could be reached for comment on the allegations.

Messages left for attorney Russell Soloway, who is representing Sarwal, and attorney Christopher Gunter, who is representing Yeo, were not returned.

Representing the National Swimming Center Corporation, Sarwal and Yeo were involved in the proposals brought before the local municipalities.

The Cape Coral City Council was first approached with a proposal for a swimming facility with an indoor Olympic-sized swimming pool, a hotel and a convention center. The projected cost for the project was $84.9 million.

When the project did not get past a viability study, and the council determined that it was not getting the answers that it needed from the corporation to proceed, council members rejected the plan in 2010.

“I do not believe there was any legitimacy to their proposal,” Cape Coral Councilmember Chris Chulakes-Leetz said Thursday.

“It’s clear the $5 million Cape Coral would have immediately turned over would have been used to perpetuate their banking fraud,” he said.

Chulakes-Leetz added that he is pleased justice will be served.

“Although, the citizens of Cape Coral are still out $25,000 and hundreds of hours of staff time, as we were chess pieces in a Ponzi game,” he said.

Councilmember Marty McClain explained that he did not know Sarwal, but he did get to know Yeo while the city was in discussions with the corporation.

“It was very disappointing. It was very disheartening to hear this,” he said Thursday. “I don’t think there was ever any intent to defraud anybody.”

“It’s difficult to sit here today and be judgmental,” McClain added. “I think the economy became their enemy.”

As for the rejected proposal, he and others on the dais wanted to move forward in the talks to get into the specifics and determine the feasibility of the swim center. He noted that the project garnered attention nationwide.

“The intentions that existed two years ago, when the project was being entertained,” he said. “There was a lot of national attention for this.”

Last year, the corporation approached the Lee County Board of County Commissioners with a similar plan for the vacant City of Palms Park.

Initially, the proposal had involved the county putting up a $40 million bond. After county staff recommended against moving forward with negotiations, the National Swimming Center removed the county’s financial contribution.

The corporation then proposed that the complex would be completed in phases. Phase I would cost $18.2 million and the National Swimming Center would cover the cost. The project reportedly involved no county dollars.

Commissioners rejected the plan when the corporation failed to prove to them and staffers that it had the financial backing to support the project.

A second proposal was later offered up, which was also rejected.

“It was a range of emotions for me,” Lee County Commissioner Ray Judah said of when he learned of the federal charges against Sarwal and Yeo.

He explained that he was surprised but relieved that the county had done its due diligence when it came to their creditability. He was also disappointed.

“The concept was such a good one,” Judah said of the proposal brought forward. “There’s no question the entire community would have benefitted.”

He noted that a hired independent consultant reviewed the proposal.

“It could, in fact, make a profit and provide an amenity to the community,” Judah said of what the consultant determined of the proposed center.

He added that the problem though was the financing needed to convert the stadium, and the question of if the corporation had the financial backing.