Thursday, May 1, 2008
Something in the Water in Latrobe, PA
Tammy Andreycak, 40, former Director of Accounting for Le-Nature's Inc., the bankrupt Latrobe, PA bottling company, plead guilty last Thursday to bank fraud, wire fraud, conspiracy and aiding in the preparation of false income tax returns. U.S. Attorney for the Western District of PA, Mary Beth Buchanan, said that Le-Nature's falsely portayed its financial condition to banks causing creditors' losses of more than $500 million. Le-Nature's lied big. According to Buchanan, it reported gross sales in 2005 of $287 million when its real sales were $40 million. Andreycak cooked up fake invoices and deposit records to pull off the scam.
Andreycak was released on a $100,000 bond. She faces a federal sentence of 58 years in prison, $1.75 million fine or both. Buchanan expects Andreycak to cooperate to reveal what lies beneath the tip of the iceberg. Former Le-Nature's CEO Gregory J. Podlucky remains under investigation for his alleged involvement.
Le-Nature's filed for bankruptcy in 2006. In September 2007, Pittsburgh-based Giant Eagle bought the bottling plant out of bankruptcy for $20 million. It renamed the operation Chestnut Ridge Beverage Co. (Sidebar: U.S. Bankruptcy Judge M. Bruce McCullough approved Giant Eagle's bid to acquire Le-Nature's a month after stopping the proposed sale, ruling that it had intimidated another bidder, Cadbury Schweppes, into revoking its bid for the plant by threatening to remove Cadbury's beverages from Giant Eagle stores.)
On Monday, a group of 74 investors including the California Public Employee's Retirement System (CalPERS) filed a suit in in Los Angeles County Superior Court alleging fraud and negligent misrepresentation against Wachovia Capital Markets, Wachovia Securities and two accounting firms, Ernst & Young and BDO Seidman. The complaint alleges that the Wachovias underwrote the $150 million bond issue for LeNature's and knew that that the books were cooked when it pitched Le-Nature's bonds to investors. The accounting firms served at different times as Le-Nature's auditors. The suit alleges that they "ignored numerous glaring red flags" and issued false reports on which they knew creditors would rely.
Now, who says nothing interesting happens in Central PA?