LeNature legal malpractice lawsuit settled for more than $23.7M
A prominent Pittsburgh law firm and one of its leading attorneys agreed to pay $23.7 million to settle a malpractice lawsuit involving the financial collapse of LeNature's Inc. in Latrobe, according to federal court records.
K&L Gates and attorney Sanford Ferguson reached the settlement with bankruptcy trustee Marc Kirschner of New York on Friday, according to a filing on Tuesday. Kirschner was in charge of recovering $666.1 million in creditors' claims against LeNature's.
K&L Gates did not admit any wrongdoing as part of the settlement.
Michael J. Rick, a spokesman for the law firm, said neither the firm nor Ferguson would comment on the settlement.
Kirschner told the court that he spent $5 million pursuing claims against the law firm and likely would have spent much more if the case had continued.
A trial would have been “enormously complex,” he said, according to court records.
John M. Burkoff, who teaches corporate governance and legal ethics at the University of Pittsburgh Law School, said such malpractice cases are not common.
“It's not a unique setting, but it is an unusual setting,” he said. “My sense is this is pretty unusual.”
Though the civil case has been settled, the state Disciplinary Board could investigate once it reviews the lawsuit, Burkoff said. Malpractice claims are civil matters, while disciplinary action is administrative and subject to confidentiality.
Whether Ferguson or the law firm could face disciplinary action “is a firm maybe,” Burkoff said. “Certain types of failures by lawyers may be addressed in both settings.”
Ferguson and his firm were hired by three members of LeNature's board of directors, who suspected then-CEO Gregory Podlucky of Ligonier was involved in fraud and theft of funds from the company, which produced flavored teas, fruit juices and bottled water, and sold bulk tea. Three LeNature's financial executives resigned in 2003 because of suspicions that Podlucky was stealing money.
Ferguson's job was to conduct an internal investigation. But Kirschner alleged in his lawsuit that Ferguson briefed Podlucky about the progress of the probe and allowed the former CEO to review and edit drafts of his report, according to court records.
Ferguson joined K&L Gates in 1981 but left in 2000. He rejoined the firm in 2002 and the next year led the investigation into LeNature's.
In September 2006, nearly three years after Ferguson finished his investigation, Podlucky hired him to handle the initial public stock offering for the company.
Podlucky intended to take LeNature's public in Europe. However, an injunction prevented him from having any involvement in the company, and the end was near.
By November of that year, LeNature's was in bankruptcy and federal agents began a criminal investigation. That probe led to charges that Podlucky stole more than $800 million from banks and other financial institutions.
Podlucky, his wife, son and brother, along with three business associates, are serving federal prison terms for their roles in the fraud.
Kirschner contended that Ferguson lacked experience in corporate fraud investigations and left the work to less experienced attorneys, according to court records.
Furthermore, Kirschner alleged, Ferguson overlooked evidence that would have caught Podlucky's illegal activities and prevented him from further looting the company before it was forced into bankruptcy, court records show.
Richard Gazarik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Inside the ropes: Shazier shows off speed
- Steelers notebook: Team hasn’t called on Keisel, Harrison yet
- Steelers hope new faces breathe life into team
- 1 intruder killed, other shot and wounded in Carrick home invasion
- Police say naked woman stabs three women during street fight in McKees Rocks
- Steelers’ Spence confident he can avoid injury setbacks
- Big Ten media days notebook: Commissioner discusses hot-button issues
- NFL notebook: Ex-Steeler Sanders picks Manning over Big Ben
- Pennsylvania Turnpike Southern Beltway extension gets funding
- Congressmen ask NCAA to relax PSU penalties
- Foreign influx in Allegheny County at ‘tipping point’