Former LeNature's CEO Gregory Podlucky and four others have been indicted by a federal grand jury on charges they swindled banks and investors out of more than $800 million in what has been termed the largest fraud case in the region's history.
Podlucky, 49, of Ligonier Township was charged with tax evasion; mail, wire and bank fraud; and money laundering, according to a 29-count indictment unsealed by U.S. Attorney Mary Beth Buchanan. The indictment was delivered Sept. 17 but not made public until Monday.
The five are charged with dramatically inflating the company's financial statements to potential lenders and investors in a complex "corporate Ponzi scheme" netting $806 million, authorities said.
Podlucky founded the Latrobe-based maker of flavored water, fruit juices and tea in 1992 and presided over it until November 2006, when it collapsed under allegations of gross mismanagement and a mountain of debt.
Also indicted were:
• Podlucky's brother Jonathan, 35, of Hempfield, former chief operating officer of the now-bankrupt company;
• Robert Lynn, 65, of Ligonier Township, a former vice president.
• Andrew Murin, 53, of McDonald, Washington County, a close friend of Gregory Podlucky and a company consultant.
• Donald Pollinger, no age available, an equipment broker from Charlotte, N.C.
The four face bank, wire and mail fraud charges, according to the indictment.
Postal inspectors and IRS agents arrested the Podluckys, Murin and Lynn yesterday morning at undisclosed locations, IRS spokesman Andrew Hromoko Jr. said.
Gregory Podlucky was released on $100,000 bond. Jonathan Podlucky, Murin and Lynn were freed on $50,000 bond. Pollinger will arrange to surrender to federal authorities in Pittsburgh at a later date, Buchanan said.
All five could face up to life in prison if convicted of the charges, Buchanan said.
Gregory Podlucky's attorney, Alexander Lindsay Jr. of Butler, did not return calls seeking comment.
"In this case, like in Enron, because of the magnitude of the fraud, it is the amount of fraud that is the most significant factor that would apply ... ," Buchanan said. "This was a very complex scheme in that it involved multiple financial institutions."
"We believe the LeNature's fraud is the largest fraud that's ever occurred in the Western District of Pennsylvania," she added.
Records were falsified to portray LeNature's "as a successful, growing business" by company officials seeking financing to expand production when sales were virtually nonexistent, according to the indictment.
The defendants gave fictitious documents to company auditors, who certified that LeNature's books were accurate, paving the way for banks to grant loans, the indictment indicates.
Podlucky is accused of creating bogus checks, fraudulent money transfers and account statements "that appeared to verify the existence of business which never occurred and assets which never existed," according to the grand jury's findings.
IRS Special Agent-in-Charge Timothy Marsh said Gregory Podlucky ran a "corporate Ponzi scheme by falsely exaggerating the level of business activity."
"Their greedy ambitions not only violated federal law but negatively impacted their employees, investors, vendors and financial institutions," Marsh said.
Buchanan said the investigation is not over.
"We're going to make every effort to trace the proceeds of the fraud," she said.
The IRS charged Podlucky with filing false tax returns from 2003 through 2006. The indictment charges that Podlucky and his wife, Karla, filed joint returns for those years claiming a total income of more than $1.6 million when their income "was substantially in excess of the amount stated on the returns." Karla Podlucky has not been charged.
Pollinger operated his company out of his Charlotte house and falsely confirmed to auditors that he was holding more than $162 million in equipment deposits on behalf of LeNature's, according to the indictment.
The indictment accuses Podlucky of using some of the loans to buy gems and expensive jewelry.
Early in the three-year investigation, federal agents searching the LeNature's headquarters in Latrobe found a tunnel leading to a secret room where Podlucky had stashed an estimated $30 million worth of gems and jewelry, according to court documents.
Buchanan said if the fraud had continued, it was possible that a potential buyer would have considered purchasing LeNature's.
"If it had been sold, it would have resulted in a very large profit for the owners of LeNature's," she said.
Additional Information:Notable fraud cases
U.S. Attorney Mary Beth Buchanan said the $806 million fraud case against LeNature's Inc. is the largest in the history of the Western District of Pennsylvania, a 25-county federal court district centered in Pittsburgh.
The next closest fraud scheme involves the recent indictment of the former CEO of World Health Alternatives, a medical staffing firm in Wilkins, where the fraud could exceed $500 million, she said.
Buchanan also cited the case of John Gardner Black, who served 41 months in a federal prison for defrauding dozens of rural Pennsylvania school districts of $80 million in the late 1990s.
In addition, she pointed to the case of Michael Carlow, a former Uniontown businessman accused in the 1990s of a check-kiting scheme in which he defrauded companies out of $35 million.
