La Trobe, Pennsylvania's Le Nature's water company, run by Republican and aspiring evangelical leader Gregory Podlucky, was forced into Chapter 7 bankruptcy by creditors after it's turned out the CEO was engaged in major fraud. Le Nature's reported $275 million in revenue when it only had $35 million in revenue. The company kept two sets of books, and has less than $1 million in cash and over $750 million in bank and bond debt, lease obligations, and other liabilities. Two safes at the company headquarters were found to contain about $1 million in gold watches and jewelry.
Podlucky is accused of falsifying board minutes and defrauding a lender in a lawsuit filed against him by two private equity firms that are minority shareholders. Podlucky was being defended by Albert Manwaring of Pepper Hamilton's Wilmington, Delaware office, but he withdrew from the case on November 1.
$440,000 of the company's money was donated to the Missy's Place Foundation, named after Podlucky's deceased daughter Melissa, and that Foundation purchased land for Podlucky's proposed Grace Community Church of the Valley in Ligonier, Pennsylvania.
More details at the Wall Street Journal's Law Blog, Long or Short Capital, and at MIT student Jay Silver's website, who reviewed Le Nature's water only to be harassed by someone apparently associated with the company.
Le Nature's is closing its Phoenix plant and laying off 85 workers.
willwin2008What really happened at the small beverage producer located in the small, rural community of Latrobe, Pennsylvania? Aside from the chatter of understandably disgruntled (yet misinformed) employees and wannabe rebels against Corporate America who have very little knowledge of what they are getting involved in (hello, Jay Silver) through various weblogs, I believe a greater truth must be realized. At the root of the deception being concocted in the media and other struggling entities we find the Pittsburgh Tribune-Review. The massive assault against Le-Nature's—actually more so against Chairman and CEO Gregory J. Podlucky—began with an article titled Naughty by LeNature's. The article, circulated in the Sunday edition on August 20, 2006, would set the stage for a great production of false allegations, greed, and jealousy. Since that article, many other fine works—all authored by a questionable character in his own right (Richard Gazarik)—have been published. However, no matter how poor his journalism skills may be, Gazarik does make a few key discoveries that piece together this mess.
ReplyDelete1. Preferred Shareholders—The group of people responsible for triggering the implosion of the Company. Originally, the lawsuits filed in Delaware claimed “breach of contract, wasting corporate assets, fraud and negligence.” Such claims stem from an alleged document that “proves” all of this. I would really like to see such a document. One document (supposedly containing a forged signature) that proves all of the aforementioned allegations? I find it insulting they would have us believe such nonsense!
What really happened? Any person who has ever built a business from scratch understands that growth requires some form of debt. Le-Nature's obtained such funding from private entities who would in turn receive a return on investment. In this case, Le-Nature's received approximately $25 million in funding (the real number remains a mystery due to the varying numbers published by Gazarik). At the time of the August 20th article, Le-Nature's had offered close to $300 million to buy the shareholder's equity of the Company. We ran a series of complex calculations and determined that the shareholders would have received a measly (gasp) 12 times return on investment—all in a matter of a few years. Now I do not spend a whole lot of time researching the stock market, nor do I claim to be an expert, but I would fare to say that no stock or investment option would yield that kind of return. For the sake of simple comparison, you would be fortunate to find an investment fund that offered a 12 percent return. The kind of return we are talking about here is 1,200 percent. Where am I going with all of these facts? I will tell you simply: greed. The preferred shareholders saw an opportunity to exploit what they viewed as a “small player” in the beverage community that was growing rapidly; seemingly under the radar of “big players” such as Coca-Cola and Pepsi. They figured they could use loopholes in the legal system to steal the shares of the Company they did not already own, turn around and sell to somebody who was offering even more money (remember hearing about that magical $1.2 billion). Eyes got bigger than stomachs! In closing, let's just say the preferred shareholders lost—big time. Not only did they forfeit the $300 million they could have had free and clear, they basically threw $25 million out the window because they will never see a dime of the initial investment. I’ll bet whoever ends up with the Latrobe bottling facility (shout out to Giant Eagle) at bargain basement pricing will be thankful! Lesson number one: greed is a blinding evil that kills those who become entrapped in its grasp.
Unfortunately, this does not end here. The next group I will analyze is the custodian that was hired as a crisis management team.
2. Kroll Zolfo Cooper—We need to determine the function this group played in the demise of Le-Nature’s. Let’s review the facts. Kroll was appointed as the custodian and they infiltrated the facility on Friday, October 27, 2006 after business had concluded for the day. It should also be noted, contrary to Gazarik’s fine reporting that Gregory Podlucky, his brother Jonathan, Andrew Murin, Jr., and Robert Lynn were escorted out of the office, the four were not even in the building at noon—six hours before Kroll’s “crisis management team” showed up. I just wanted to point out one of the many discrepancies found in Gazarik’s work. So now we have Steve Panagos, Sal LoBiondo, and many other “professionals” in place. Le-Nature’s employees are told their jobs are secure and that its “business as usual.” Monday, October 30, 2006 rolls around and reports are already coming out of Latrobe via the Pittsburgh Tribune-Review that 2005 revenues have been overstated by $200 million. Now let me get this straight, you’ve set up shop for less than a full business day and already you conclude that revenues were overstated by 725 percent? I could have sworn there was a huge factor missing from this equation, oh yeah, the 2005 financial statements were audited by BDO Seidman! Now you’re saying “wait a minute, Layne, they could have been fooled by Le-Nature’s.” Yes, they could have been fooled by Le-Nature’s, it’s been done before (i.e. Enron) However, don’t you think it would take a little bit longer for Kroll, who is NOT an auditing firm, to realize such a gross overstatement if a large accounting firm scrutinized the financial statements using strict accounting guidelines for several weeks? Common sense tells me ‘yes.’ Okay, so a few days go by and now a witch hunt has begun by the United States Federal Government to track down “missing assets” and what do you know, a secret room is found within the building containing two safes filled with precious gems and large quantities of fine jewelry. Now we have fraud. Wrong! First, let’s keep in mind that Le-Nature’s, while it does have outside investors and outside board members, is NOT a publicly traded company. It is a private organization whose majority shareholder is Gregory J. Podlucky. If he decides he has some assets that he wants to store in a building that he owns a majority of, where is the crime? I hear all this nonsense that “if it were legitimate, why the need for a secret room?” Hmm, let’s see, I have a large collection that is very high in value, maybe I should keep it out in the open so it is a target for thieves. Or better yet, why do banks “hide” their money in safes that cannot be seen by account holders who go to the counter to cash their paycheck on Friday? Open your eyes, people! If you want to trash talk people because they have and you do not have, that is your freedom as an American, but do not slander people by saying that they are criminals when they do things any intelligent person would also do. Let’s continue to assess Kroll. So now we have overstated revenues and secret rooms filled with gems (oh yeah, I forgot to mention sex toys were found too, way to make the story believable Rich). It is hard to believe that so much has happened in one week. I wonder what happened the other 15 weeks Kroll was at Le-Nature’s? Well that’s a good question. The Company was forced into bankruptcy so they were obviously pretty busy with that. Then there was that little issue of money (they demanded $5 million to render such “professional” services) which is odd considering the Company could not even pay the creditors who legitimately had a right to be paid. And my personal favorite is the holiday shindig at Arnold Palmer Regional Airport. According to an employee of the airport, employees of both Kroll and Le-Nature’s drove two leased Mercedes-Benz SUVs to the restaurant and were drinking merlot, vodka martinis, and White Russians. Their tab was in excess of $1,000 before they drove the vehicles back to Le-Nature’s. How do I know all of this? Let’s just say Layne knows a lot of people and leave it at that! Funny fact concerning the Mercedes-Benz SUVs used that night—Kroll had been using the vehicles as personal accommodations during the entire time they were in Latrobe even though the lease payments were long past due (sixth one down).
More to come…
What is your involvement in this? Are you Mr. Podlucky or a senior executive of Le-Nature's?
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