PEORIA, Ill. (WMBD) — City Hall was looking at the redevelopment of the Hotel Pere Marquette in Downtown Peoria as a better investment than what it had at the time for its employee pension money.

Former Mayor Jim Ardis testified early Wednesday morning that at the time, the city of Peoria was getting 2% on its money in that fund. Under a redevelopment agreement, they were to get completely repaid for a $7 million loan that would earn 7% interest.

The statements gave a federal jury a primer on what happened in the early phases of the hotel’s redevelopment and what city leaders wanted out of the deal.

On trial are Gary Matthews and Monte Brannan, who face charges of money laundering and mail fraud. They’re accused of taking more than $800,000 from the hotel and diverting it to themselves after the hotel went into foreclosure. They are also accused of taking $1.6 million from the hotel bank account.

Ardis told jurors that he and others on the city council were always looking for a way to reinvest and revitalize the Downtown area, which had fallen on hard times.

Retail had moved out over the years. So had office space and the hope was a redone Pere Marquette, accompanied by another “high-end” hotel and new retail space, would give the area a shot in the arm. 

Instead, it became an albatross around the city’s neck as the hotel went into foreclosure, the developers filed for bankruptcy and taxpayers were left on the hook for a $7 million loan that hasn’t been repaid.

The city did take out bonds worth $29 million as it believed, due to its own checking and the information from Matthews and Brannan, that over a 25-year time frame, the hotel would make enough money to pay for that.

Those bonds are still being repaid as the hotel is still in operation.

Federal prosecutors point to Matthews and Brannan for defrauding the city as well as other investors and for using hotel funds for their own personal use.

Assistant U.S. Attorney Ron Hanna, Jr., had Ardis explain a “side letter agreement’ to the initial redevelopment plan barred Matthews or Brannan from getting any compensation from the hotel’s dollars unless they had prior approval from the city.

The former mayor testified that was done to add an added layer of security for the taxpayers and was done as the city “had a significant investment.” The indictment, filed in 2020, alleges the two took money regardless and didn’t inform the city.

The duo, who sat apart at two different tables in the first-floor courtroom in the federal building, denies that and point to City Hall as the ones who wanted too much in return, didn’t give them enough money to complete the deal and who conspired against them. 

Matthews’ attorney, Sharbel A. Rantisi, grilled the former mayor during his cross-examination.

Ironically, the fraud trial is taking place mere feet away from the building’s bankruptcy courtroom where the two had appeared several years ago.

The former mayor spent the entire morning on the stand, but his testimony was delayed about 30 minutes by a late juror. And technology issues confounded attorneys as well. Darrow made a point of telling jurors it was on their end and not to fault the attorneys.

She quipped, “It’s like being at home. When the computer locks up, you have to restart it.”

A light moment during the 2 1/2 hours that Ardis was on the stand came relatively early when he was asked to point out both Matthews who wore a red sweater with a brown colored jacket and Brannan.

Ardis admitted he didn’t really know Brannan that well, having met him only a few times. Then Brannan, from the back of the room, waved at the former mayor, who quipped, “I see you now. Your hair has gotten gray like mine.”

The trial is expected to last through Nov. 9. If convicted, the two face up to 20 years behind bars, though such a stiff sentence is highly unlikely for the two men who are in their 70s and 80s.