U.S. seeks control of Le-Nature’s jewelry
Thursday, September 27, 2007
By Len Boselovic, Pittsburgh Post-Gazette
Pittsburgh Post Gazette, PA
Federal prosecutors yesterday gave their first public hint of how they intend to deal with Le-Nature’s founder Gregory Podlucky and other former employees of the fraud-riddled company when they sought court permission to take ownership of more than $20 million in jewelry seized as part of their ongoing criminal investigation.
The 27-page list of items, filed in connection with a civil complaint brought by U.S. Attorney Mary Beth Buchanan, would provide full employment to a corps of security guards. It includes gems, diamond-encrusted watches and pearls, as well as gold, silver and platinum jewelry.
The jewelry was seized from safes in a secret room at Le-Nature’s headquarters.
The complaint comes 11 months after Le-Nature’s minority investors persuaded a Delaware judge to oust Mr. Podlucky and other executives and replace them with a custodian, who quickly uncovered evidence that the company’s books were manipulated. Mr. Podlucky was implicated in the accounting fraud as well as the destruction of documents.
Creditors took Le-Nature’s into bankruptcy a short time later, setting off a legal brawl over how to pay more than $820 million of claims from the remains of a company creditors say was a house of cards.
Thus far, no criminal charges have been brought against anyone in connection with the case. But Ms. Buchanan’s complaint is based on the contention that Mr. Podlucky and others illegally purchased the jewelry with credit supplied by Wachovia Bank, S&T Bank and other federally insured institutions.
Their actions between 2001 and 2006 are being investigated for bank fraud, wire fraud, mail fraud, money laundering and other illegal monetary transactions.
Federal law allows the government to seize property obtained through criminal activity. R. Todd Neilson, the court-appointed trustee overseeing the bankrupt company, has said federal prosecutors have promised that once they have title to the jewelry, they will turn the assets over to him for distribution to creditors.
The items seized by investigators include watches from Piaget, Harry Winston, Van Cleef & Arpels and Rolex, necklaces and earrings containing diamonds, sapphires and other gems, and mounted and unmounted gems.
Ms. Buchanan accused Mr. Podlucky and/or others of maintaining two sets of books for Le-Nature’s: “one reflected true business activity; the other was based on fictitious levels of business activity.” The company’s audited financial statements contended Le-Nature’s had annual revenue of $287 million in 2005 when its actual revenue was about a tenth of that, the complaint states.
The complaint also alleges Mr. Podlucky and/or others transferred thousands of dollars from company accounts to personal accounts over the six-year period.
Le-Nature’s creditors who purchased the company’s bank debt shortly before the bankruptcy last week sued Mr. Podlucky and other former employees, Wachovia and BDO Seidman, the company’s former auditor that certified the 2005 financial statements.
Meanwhile, U.S. Bankruptcy Court Chief Judge M. Bruce McCullough, who is overseeing the Le-Nature’s case, approved a settlement on Tuesday that will allow Giant Eagle to acquire the idled Latrobe bottling plant of bankrupt Le-Nature’s.
The region’s largest supermarket chain will pay a $2.3 million penalty because Judge McCullough determined Giant Eagle had intimidated one of its suppliers, Cadbury Schweppes Bottling Group, to drop out of the bidding for the plant. In addition to the penalty, the settlement requires Giant Eagle to pay $19 million for the plant and forfeit a $2 million deposit it made with its original bid.
