Laywer unqualified to handle former Latrobe tea company's probe, trustee says
LeNature's liquidating trustee said prominent Pittsburgh attorney Sanford Ferguson was unqualified to investigate corporate fraud at the defunct Latrobe tea maker because he had not practiced law for two years before rejoining K & L Gates and had left the task to a “junior inexperienced lawyer,” according to a court filing.
Marc Kirschner of New York, who is charged with recouping money for creditors in the $800 million fraud that forced the company into bankruptcy in 2006, accused Ferguson of walking out of or not attending interviews, delegating the task to a less-experienced attorney.
Kirschner's accusations, in a response filed on Thursday, are in response to Ferguson and the law firm's answer last summer to Kirschner's original complaint.
To support his contention, Kirschner said Ferguson's investigation “was so deficient” that he missed or ignored “numerous red flags” and “accepted implausible explanations” from LeNature CEO Gregory Podlucky of Ligonier Township.
LeNature's produced flavored teas and fruit juices, bottled water and bulk tea sales. The company's move into bankruptcy triggered a federal investigation that led to allegations that Podlucky stole more than $800 million from banks and other financial institutions.
Once three of LeNature's financial executives resigned in 2006 because of suspicions that Podlucky was stealing money, three members of the board of directors formed a special committee and hired Ferguson to conduct a fraud investigation.
Ferguson joined K & L Gates in 1981 but left in 2000 to become CEO of Seven Springs Farm. He rejoined the firm in 2002 and was tasked the next year with heading the LeNature's investigation. K & L Gates is one of the largest law firms in Pittsburgh and has 48 offices around the world, according to its website.
The law firm had no comment on Thursday's filing, spokesman Michael J. Rick said.
Podlucky, his wife, son, brother and three associates were found guilty of helping to steal more than $800 million from banks and other financial institutions. All are serving federal prison terms. Podlucky was ordered to pay $661 million in restitution.
Ferguson, however, concluded that there were no irregularities in the way Podlucky was handling the company's finances and gave him “a clean bill of health,” which permitted him to continue bilking the company, Kirschner alleges.
He sued K & L Gates and Ferguson in 2010 for professional malpractice, negligence, breach of contract and fiduciary duty and negligent misrepresentation.
Kirschner said that if Ferguson had conducted a proper investigation, he “would have exposed the fraud in a matter of hours.”
The case was dismissed by an Allegheny County judge in 2010 but reinstated by state Superior Court two years later.
Kirschner has accused Ferguson of “improperly permitting” Podlucky, the target of the investigation, “to get a heads-up as to the direction and status of the investigation while it was occurring, to give input regarding the accuracy of the report before it came final.”
Richard Gazartik is a staff writer for Trib Total Media. He can be reached at 724-830-6292 or at firstname.lastname@example.org.