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Former Soft Drink CEO Pleads Guilty To Fraud

Ex-CEO of a defunct soft drink company pleaded guilty to using two sets of books to obtain $875 million in credit and equipment leases.

PITTSBURGH (AP) -- 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, North Carolina-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, 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.

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.

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.

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