Le-Nature's suit close to $23.8 million settlement

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The trustee representing creditors of bankrupt Le-Nature's is asking a federal judge to approve a proposed $23.8 million settlement with the law firm of K&L Gates, a settlement that would cap a more than seven-year saga involving one of the largest financial frauds in Western Pennsylvania history.

Attorneys for trustee Marc S. Kirschner said in court documents that the settlement is fair and would avoid creditors spending an additional $5 million or more trying to recover from the law firm. The trustee already has spent about $37 million in pursuing creditor claims against K&L Gates and other firms accused of failing to detect fraud perpetrated by Le-Nature's founder Gregory J. Podlucky and other executives of the Latrobe bottler.

K&L Gates and Pascarella & Wiker, a Pittsburgh accounting firm, were hired to investigate allegations of misconduct made by a former Le-Nature's executive in 2003. They were accused of negligence after creditors dragged the Latrobe bottling company into bankruptcy and discovered it was an elaborate Ponzi scheme orchestrated by Mr. Podlucky.

The law firm denied any misconduct. It disputed Mr. Kirschner's claims and, in 2010, got Allegheny County Common Please Judge R. Stanton Wettick to throw out the trustee's $500 million lawsuit against K&L Gates and Pascarella & Wiker. Mr. Kirschner appealed that verdict and won, setting the stage for a lengthy, expensive trial.

U.S. Bankruptcy Judge Thomas P. Agresti has scheduled a hearing for Feb. 27 on whether to approve the settlement. Court documents indicate the settlement was negotiated during a Jan. 8 conference in Miami that lasted more than 10 hours.

The settlement would not resolve the trustee's claims against Pascarella & Wiker. Charles Pascarella and Carl Wiker could not be reached for comment.

Mr. Kirschner pursued others who failed to detect the fraud, including Wachovia Capital Markets, which provided $285 million in financing to Le-Nature's just weeks before it collapsed. He also targeted Le-Nature's auditors, who certified in 2005 that the company had revenue of $287 million. A closer look at the two sets of books the company kept indicated actual sales were about $32 million.

Settlements in those cases, along with the proposed settlement with K&L Gates, would make more than $125.3 million available to creditors, according to court documents.

Gregory Podlucky pleaded guilty to bank fraud, money laundering and income tax evasion in 2011, and is serving a 20-year federal prison sentence. His wife, Karla, was sentenced to 51 months in prison, and their son, G. Jesse Podlucky, got nine years. Gregory Podlucky's brother, Jonathan, received a five-year sentence.


Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.

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