The $800 Million Bottled-Water Bank Fraud

Gregory Podlucky le nature

For a small, bankrupt drink-maker, Le-Nature has created quite a mess.

Lenders and investors, including Wells Fargo (WFC) and BlackRock (BLK), were defrauded of some $806 million between 2000 and 2006, when the company filed for bankruptcy, according to a lawsuit unsealed today.

Bloomberg: Ex-Le-Nature’s Inc. Chief Executive Officer Gregory Podlucky was indicted on charges he and other officers at the defunct beverage maker duped creditors of more than $800 million.

Podlucky, the company founder, and four other defendants falsified financial data to overstate company revenue, according to a Sept. 17 indictment unsealed today. Members of the group were charged with conspiracy, bank fraud, wire fraud and mail fraud. Podlucky faces additional charges of money laundering.

“Greg Podlucky and his co-defendants are alleged to have perpetrated a fraud against lenders and investors by dramatically overstating Le-Nature’s financial statements,” said Mary Beth Buchanan, the U.S. attorney in Pittsburgh in a statement, noting the loss to the lenders and investors continues to exceed $700 million. “This fraud is believed to be the largest in the history of the Western District of Pennsylvania.”

As Bloomberg notes, Wells Fargo’s Wachovia unit relied on the false financial statements when it arranged a $285 million loan for the company in September 2006. A group of hedge funds, including units of BlackRock, accused Wachovia of ignoring signs of fraud. The bank argued it was a victim in the case, and a federal judge in New York dismissed a lawsuit filed against Wachovia in 2007. 

Podlucky, 48, plead not guilty; he’s asked to forfeit more than $7 million. AP reports that investigators have already seized tens of millions of dollars in jewelry and an 8,000-piece model train collection worth about $1 million; Podlucky once drove a Hummer and a high-end Mercedes, and was building a mansion near Pittsburgh.

Le-Nature Indictment

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