PEORIA, Ill. (WMBD) — A federal trial is underway for two developers accused of fraud and money laundering in connection with the Hotel Pere Marquette redevelopment in downtown Peoria.

Gary Matthews and Monte Brannan were indicted in December 2020 on charges of money laundering and mail fraud. The charges allege the two took more than $800,000 from the hotel and diverted it to themselves after the hotel went into foreclosure. They are also accused of taking $1.6 million from the hotel bank account.

“All this comes down to one simple concept. The money was not theirs, but they took it anyway and lied about it,” prosecutors said during opening statements.

Initially, the hotel project and the partnership with Matthews and Brannan was seen as a good thing. Peoria City Council approved $29 million grant and $7 million loan to the hotel as it was seen as a way to revitalize Downtown Peoria, prosecutors said. However, things quickly went south and taxpayers were left on the hook for about $7 million.

During opening statements, Matthew’s attorney Sharbel Rantisi contended the original deal with the city was a $37 million dollar grant and no loan. Rantisi said the city saw an opportunity to make an extra $3 million in interest for the city’s pension fund.

“That new loan messed up the cash flow,” he said. “They never intended to defraud. Their sole purpose was the success of the project.”

The jury also heard from two witnesses who invested hundreds of thousands of dollars into the Pere Marquette, but never recouped their investment. However, they both said they never really paid attention to financial statements or asked questions because they trusted Matthews and had invested with him before.

According to their indictment, the duo are accused of moving nearly $14 million from a hotel management account into one that they controlled.

Both have vehemently denied all charges and in 2019, the two sued City Hall, alleging it was them, not the city or taxpayers, who were harmed by the hotel’s problems. That suit has since been dismissed.

The charges allege the fraud began as early as 2008 when Matthews met with city staff about the Pere Marquette, the city’s old operating hotel, which was having financial issues. He also wanted to build a large, mostly glass hotel, next to a rehabbed Pere Marquette.

Money from the first investors, the charges allege, was not used for what he told them it would be — the development — but rather for expenses from his other businesses.

The hotels opened in 2013 to much fanfare but by then, the gleaming glass high-rise was gone and questions had arisen about the fiscal health of the hotels. City Hall, however, was still hopeful, at the time, that both the Pere and the accompanying Courtyard by Marriott, would help reinvigorate Downtown and also give city coffers a bit of a boost.

That didn’t happen and by 2016, Marriott was thinking about pulling their affiliation with the hotels due to Mathews being behind on his payments to the hotel giant.

It’s alleged around this time that both Brannan and Mathews were siphoning off money from the hotel for their personal use.

Among the long list of witnesses to be called are Patrick Urich, the city’s manager, former mayor Jim Ardis and former assistant city manager, Chris Setti.

The trial is expected to last until Nov. 9th.