Pair Of P.E. Firms Pilfered By Podlucky?

Nov 3 2006 | 12:18pm ET

By now you may have heard of beverage-maker LeNature’s’ le fraud, but we bet you haven’t heard about all the pirate booty found strewn around a hidden back room of a warehouse rented out by the company’s CEO. Add this to the paper shredding, body guards, dump trucks and a fat man named Podlucky, and we think that the creditors lining up to get their money back may just be able to stake a claim to the movie rights for this alleged cock-up.

On a conference call with creditors yesterday, Kroll Zolfo Cooper, a corporate turnaround firm that was recently assigned to be custodian of the troubled firm, which claimed to have $270 million in revenue last year (more likely it had about $30 million), said that in addition to jewelry and other luxury items filling the warehouse, there were numerous safes, which have yet to be cracked.

Taking a step back from the locked safes in the secret room, for those of you who don’t know the story, here is the skinny on Mr. Fatty.

Last month, two private equity firms that invested more than $13 million in LeNature’s, which manufactures bottled water, iced tea and other beverages, filed lawsuits claiming fraud and negligence by the company’s founder and CEO, Gregory Podlucky.

In the lawsuits, attorneys for private equity firms George K. Baum Capital Partners of Kansas City and S.W. Pelham Fund of Hartford, Conn., which own 21% and 24% of the beverage maker, respectively, asked the judge to appoint a receiver until LeNature’s’ tangled web of financials could be sorted out and the firm sold.

On Oct. 20, a judge in Delaware issued a temporary restraining order meant to keep Podlucky away from the firm’s offices in order to preserve evidence. Apparently, it didn’t work: According to an affidavit, the following day witnesses saw a dump truck arrive at LeNature’s Latrobe, Pa., headquarters, where Podlucky and his bodyguard began dumping documents into a trash compactor. According to other witnesses, over the following six days Podlucky continued to shred documents—right up until his court appearance last Friday.

In addition to allegations of burying the company in debt, cooking the books and shredding evidence, lawyers for the plaintiffs also claim that Podlucky and some of the company’s other executives—including his brother Jonathan, who serves as chief operating officer— misappropriated funds, including using company money to purchase land for a proposed non-denominational church.

As it stands now, LeNature’s, which employs 200 people, has filed for bankruptcy but continues to operate under the supervision of the receiver. Instead of the purported $270 million in revenue the executives claimed the firm posted last year, it looks like that number is closer to $30 million, according to auditors from Kroll. Lawyers for the creditors, including Wachovia Corp., which is owed about $280 million, have been busily pouring over the legal documents—and a report on the state of the firm’s finances is due out in January.

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