A federal grand jury has indicted Gregory Podlucky and four other men for allegedly defrauding lenders and investors of about $806 million by dramatically overstating financial records at Le-Nature's Inc., a now-defunct Latrobe, Pa.-based maker of flavored water, fruit juices and teas.
The grand jury returned the indictments Sept. 17 in U.S. District Court in Pittsburgh. Authorities unsealed the charges after four of the five men were arrested Sept. 28.
Podlucky was founder and CEO of Le-Nature's. The company ran plants in Latrobe and Phoenix that used Krones Contiform PET blow molding machines and Husky injection presses to mold preforms.
According to the indictment, the defendants used phony financial documents to mislead external auditors. Lenders and investors relied on the false information. The indictment says Le-Nature's used those documents to obtain loans, equipment, leases, debt investment and equity investments.
The scheme ended in late October 2006, when officials of a turnaround firm replaced Podlucky, acting under court order as part of a civil case filed by two investors. Le-Nature's filed for bankruptcy Nov. 1, reporting debts of more than $700 million. An investigation during the bankruptcy found that Le-Nature's audited 2005 results showed annual sales of $275 million, but the actual revenue was as low as $32 million.
Podlucky and others allegedly shredded documents.
This fraud is believed to be the largest in the history of the Western District of Pennsylvania, said U.S. Attorney Mary Beth Buchanan. The U.S. Postal Inspection Service and the Internal Revenue Service conducted the investigation.
Buchanan described the case as a loan Ponzi scheme where new loans were used to pay back earlier loans.
The indictments include charges of bank fraud, wire fraud, mail fraud and conspiracy against:
* Podlucky of Ligonier, Pa. As CEO and chairman of the board, he controlled day-to-day operations.
* His brother, Jonathan Podlucky of Greensburg, Pa., who was responsible for production and was a member of the board.
* Andrew J. Murin Jr. of McMurray, Pa., a consultant and close adviser to Podlucky. Murin was also a director.
* Robert Lynn of Ligonier, responsible for sales of the company's beverage products, and a director.
* Donald Pollinger, a Charlotte, N.C., equipment broker who helped Le-Nature's acquire and finance its equipment.
Gregory Podlucky faces additional charges of money laundering, and four counts of income tax evasion for 2003 through 2006. He could be sentenced to a maximum of 225 years in prison and a fine of $8.5 million. His lawyer, Alexander Lindsey, could not be reached for comment.
Each of the four other men could face up to 205 years in prison and fines of $6.5 million.
Both Podluckys and Lynn pleaded not guilty. Murin was expected to enter a plea Oct. 5.
Last year, Tammy Andreycak, former director of accounting for Le-Nature's, pleaded guilty in federal court in Pittsburgh to bank fraud, wire fraud, conspiracy and aiding in the preparation of false income tax returns. She has not been sentenced yet.
Gregory Podlucky was freed on a $100,000 bond. Jonathan Podlucky, Murin and Lynn each were released on bonds of $50,000. The court ordered the men to surrender their passports.
A warrant was issued for Pollinger's arrest, and he was expected to surrender to federal authorities at a later date, a spokeswoman for the U.S. Attorney's office said Sept. 30.
Based on its financial statements and formal presentations by executives, Le-Nature's was portrayed to third parties such as ratings agencies, banks, investors and commercial financiers as a successful, growing business that needed financing to expand, according to the indictment. But company officials greatly overstated business activity and financial strength, the charges said.
Wachovia Bank NA was a major lender, granting a $285 million extension of credit in 2006, the last of a series of refinancings approved by the bank starting in 2003. Gregory Podlucky and the others allegedly presented Wachovia with a series of fraudulent monthly financial statements.
Because of the alleged fraud by Le-Nature's officials, Krones AG, a Neutraubling, Germany, maker of blow molding machines and beverage filling lines, wired about $47.5 million to Le-Nature's bank account during 2005 and 2006, according to the indictment.
Copyright 2009 Crain Communications Inc. All Rights Reserved.