The former CEO of a defunct Pennsylvania soft drink company pleaded guilty to using two sets of books to obtain $875 million in credit and equipment leases for the failing company, including more than $27 million he spent on a mansion, collectible toy trains and rare jewels.
The scheme orchestrated by Gregory Podlucky resulted in $628 million in losses to various lenders and equipment companies that did business with Latrobe-based Le-Nature's Inc., Assistant U.S. Attorney James Garrett told a judge Monday. Charlotte, N.C.-based Wachovia Corp. lent $285 million just before the fraud was uncovered in late 2006.
Most of the lost money was poured into the business, which reported about $300 million per year in revenues in the early 2000s, when its actual sales were about one-tenth as much, Garrett said. The prosecutor described Le-Nature's as "a failed enterprise (that) lost huge amounts of money every year."
Podlucky, 51, of Ligonier, pleaded guilty to one count each of tax evasion, mail fraud and money laundering.
Under a plea agreement, Podlucky faces a likely 20-year prison sentence when he returns to court Oct. 20, though his attorney, Alexander Lindsay Jr., reserves the right to argue for a lesser term. Podlucky and Lindsay declined to comment as they left the courtroom.
Among other things, Podlucky had the drink-maker's graphics department create phony checks and other banking documents that were used to fool auditors into believing the inflated sales figures, Garrett said.
"The defendant procured extensions of credit on the basis of false financial statements, that was the nature of the scheme," Garrett told reporters.
Not all of the money lent to Le-Nature's was lost because equipment used as collateral for some financing was recovered after the company went belly-up and because some of the $875 million involved refinancing of older debt, Garrett said.
Garrett said Podlucky directed the scheme with the help of the company's former accounting director, Tammy Jo Andreycak, of Latrobe, who pleaded guilty to bank fraud, conspiracy and other charges in April 2008. She has yet to be sentenced because the extent of her cooperation is a factor in her sentence.
Podlucky's 37-year-old brother, Jonathan, and Donald K. Pollinger, the owner of a Charlotte, N.C.-based equipment company, pleaded guilty last week to charges related to the scheme. They agreed to serve five-year prison sentences. Former company director Andrew Murin Jr., 53, of McMurray, is scheduled to change his not guilty plea on Tuesday.
Latrobe-based Le-Nature's made bottled waters, teas, juices and nutritional drinks before it was forced into bankruptcy in October 2006 after a Delaware judge found company officials may have engaged in financial fraud. Garrett said that happened after a group of minority investors tried to get money out of the company, a claim that led to a court-appointed custodian who uncovered much of the fraud.
Federal agents who searched the company's headquarters reported finding a secret room containing millions of dollars' worth of valuables, including gold, silver and platinum jewelry and diamond-rich watches. They also seized an 8,000-piece model train collection.
Podlucky and other company officials were indicted in the fraud scheme in 2008. Earlier this year, Podlucky; his wife, Karla, 49; and their son G. Jesse Podlucky, 30, were indicted on money laundering charges for allegedly selling or trying to sell millions of dollars' worth of gold, jewels and other valuables allegedly bought with the stolen money.
In pleading guilty Monday, Podlucky told the judge, "I did it all in my sole capacity."
But Garrett said Podlucky's statement doesn't affect the ongoing prosecution against his wife and son, whose defense attorneys didn't return calls.
Podlucky allegedly spent $1.14 million on collectible toy trains, $15.84 million on jewels and nearly $11 million on the family's Ligonier mansion, though the home is in such poor shape the government isn't attempting to seize it.
As part of the plea agreement, Senior U.S. District Judge Alan Bloch will require Podlucky to pay restitution yet to be determined. Podlucky is also forfeiting more than $1.3 million in an investment account.
The tax evasion charge stems from a 2005 joint return Podlucky filed claiming $495,000 in income and $147,000 in tax owed. In reality, Podlucky diverted more than $7.1 million to himself that year and should have paid more than $1 million in taxes, Garrett said.