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$1.5 billion sought from Wachovia over LeNature's bankruptcy

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By Richard Gazarik
Wednesday, May 12, 2010
 

The trustee overseeing liquidation of defunct LeNature's Inc. is seeking more than $1.5 billion in damages from Wachovia Bank for its role in the demise of the Latrobe bottling and beverage company.

The figure, disclosed for the first time, is contained in a May 5 letter from a law firm representing accounting firm BDO Seidman to U.S. District Court Judge Donetta Ambrose.

Trustee Marc Kirschner sued Wachovia alleging the institution aided in an $806 million scheme that forced LeNature's into bankruptcy and led to parallel civil and criminal investigations. Wachovia helped LeNature's with $600 million in loans and junk-bond financing. Wachovia later ran into its own financial problems and was acquired by Wells Fargo & Co.

BDO was added last month as a defendant in the complex civil litigation now under way in federal court in Pittsburgh. Also added as defendants were the Pittsburgh law firm of K&L Gates and the accounting firms of Ernest & Young and Pascarella & Wiker of Pittsburgh.

A spokesman for K&L Gates did not respond to a request for comment, and an attorney for Pascarella & Wiker declined to comment.

At issue is whether BDO was "fraudulently induced" to enter into a contract to audit LeNature's books and failed to uncover fraud allegedly company executives.

K&L Gates hired Pascarella & Wiker to conduct an audit after several members of LeNature's board of directors, suspecting fraud, hired the law firm to conduct an internal investigation into their suspicions. This audit occurred after BDO completed its task.

The firm gave the company a clean financial bill of health even though Gregory Podlucky and the other former executives were indicted last fall by a federal grand jury on charges of conspiracy, mail, wire and bank fraud.

More than 100 depositions have been served for current and former executives of various companies that had business or financial connections to LeNature's.

Among the companies that the trustee wants to question are Wachovia; Krones Inc., a maker of bottling equipment; AIG, the insurance firm; Kraft Foods, which considered purchasing LeNature's; and Kroll Zolfo Cooper, a forensic accounting firm that spearheaded the early investigation.

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