A Dec. 5 hearing in U.S. Bankruptcy Court in Pittsburgh could decide the fate of Le-Nature's Inc., a Latrobe, Pa.-based maker of flavored water, fruit juices and teas that was forced into bankruptcy Nov. 1 under allegations of fraud - including hugely inflating sales numbers, document shredding and forging financial documents.
Le-Nature's injection molded its own PET preforms and blow molded them into bottles at its headquarters plant in Latrobe and a second factory in Phoenix. The 500,000-square-foot Phoenix plant closed in early November, laying off 85 workers. Operations have been suspended at the 238-employee Latrobe factory.
Both plants have machinery from Krones AG, the German maker of PET blow molding equipment and turnkey beverage filling lines - and Krones was named in a Wall Street Journal story that detailed documents falsified by Le-Nature's.
One issue at the U.S. Bankruptcy Court hearing will be whether Le-Nature's, now run by court-approved custodian Steven Panagos, can continue as an ongoing manufacturing operation. According to court filings, Le-Nature's has debts of more than $700 million - more than $278 million of it in bank debt, about $150 million in bond debt and capital lease obligations of about $300 million.
The custodian found that Le-Nature's only had about $1.8 million in cash reserves, and $2.9 million in outstanding checks against that cash, court papers said. Vendors also are demanding more than $10 million in past-due payments.
Panagos, of the New York turnaround firm Kroll Zolfo Cooper, replaced Le-Nature's founder and chief executive officer, Gregory Podlucky, as part of a separate, civil case that two investors filed in Delaware against the beverage maker.
In an affidavit filed at U.S. Bankruptcy Court in Pittsburgh, Panagos said the company's audited 2005 financial statements show annual sales of $275 million. After investigating, he said, his firm ``found information suggesting that the actual revenue of Le-Nature's may be as low as $32 million.''
Kroll Zolfo Cooper arrived at Le-Nature's headquarters in Latrobe on Oct. 27 and took control of the company, under a court order issued earlier that day. According to court documents, Panagos said employees of Le-Nature's witnessed Podlucky and others shredding documents - after the court issued a temporary restraining order prohibiting company officials from destroying any company property. A dump truck also arrived at the company ``and unloaded a large volume of documents into the trash compactor on site.''
``Destruction of large volumes of company documents occurred,'' Panagos said in his affidavit.
Podlucky could not be reached for comment.
The U.S. Attorney's office in Pittsburgh and federal postal inspectors are investigating Le-Nature's, according to the court affidavit. U.S. Attorney Mary Beth Buchanan could not be reached for comment.
``I can confirm that we are conducting an investigation,'' said inspector Andrew Richards with the U.S. Postal Inspection Service in Pittsburgh.
Krones, of Neutraubling, Germany, was named in a Nov. 7 Wall Street Journal story about Le-Nature's. According to the newspaper, an official of AIG Commercial Equipment Finance Inc. of Plano, Texas - which had provided Le-Nature's with a $47.5 million lending facility to buy machinery from Krones - traveled to a Krones plant near Munich to inspect the equipment. Krones showed the lender AIG documents that turned out to be falsified, with forged signatures, asking the machinery maker to wire more than $20 million worth of the AIG money into Le-Nature's bank accounts, the Wall Street Journal reported.
Krones has no comment about Le-Nature's, said a spokeswoman at the U.S. operation, Krones Inc. in Franklin, Wis.
Le-Nature's was founded in 1992, and officials began seeking additional sources of capital to fund operations and expand in 1999, court documents said.
The beverage company invested in plenty of Krones equipment, according to its Web site and a trade magazine report.
Not many details were available about machinery at the Latrobe plant. Le-Nature's Web site said high-speed Krones packing equipment was added there in 2002. The following year, the firm began injection and blow molding PET bottles in Latrobe.
Le-Nature's built the huge Phoenix plant, which began operations in August 2005, to break into the western U.S. market. Packaging World magazine reported in June this year that the factory had seven Krones blow molding machines, five injection presses to make preforms, and four PET bottling lines.
Krones supplied the turnkey operation, including machinery for injection molding, blow molding, shrink-wrapping and packaging, the Packaging World story said.
Le-Nature's was planning a third factory, in Jacksonville, Fla., court documents say.
In filings from the Delaware civil case, the investors suing Le-Nature's say AIG told them the company ``fraudulently induced AIG to deposit more than $25 million'' with Krones to buy equipment for the Florida plant, ``and thereafter, using one or more forged documents, caused Krones to remit more than $20 million of those funds to the company without AIG's knowledge or consent.''
AIG declined to comment.
John Lacher, lawyer for Le-Nature's, did not return a call seeking comment.