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Attorney, firm seek lawsuit dismissal

| Thursday, Dec. 10, 2009

Attorneys for a well-known Pittsburgh lawyer say he and his firm stand wrongly accused of failing to uncover the extensive fraud that triggered the collapse of LeNature's Inc. and led to the largest fraud indictment in the history of the region.

Attorney Sanford Ferguson and his firm, K&L Gates of Pittsburgh, were sued in September by LeNature's bankruptcy trustee Marc Kirschner for negligent misrepresentation, breach of fiduciary duty and breach of contract in connection with an internal investigation that revealed "no evidence of fraud or malfeasance" on the part of LeNature's then-CEO Gregory Podlucky of Ligonier.

Ferguson's attorneys and attorneys representing K&L Gates have filed a motion in Allegheny County to have the lawsuit dismissed.

Earlier this year, Podlucky was indicted by a federal grand jury on charges of tax evasion, money laundering, and bank, wire and mail fraud. The indictment alleges that Podlucky operated an elaborate $806 million "corporate Ponzi scheme" in which he bilked banks and investors by creating phony financial records. The troubled company was forced into bankruptcy in 2006 and Kirschner is liquidating the company's assets and trying to recoup losses suffered by creditors.

Ferguson's lawyers argue that Kirschner can't sue on behalf of LeNature's because LeNature's was not the client when Ferguson and others conducted the investigation in 2003.

Instead, he was retained by three members of the company's board of directors to investigate "suspicious business dealings" by Podlucky. In Pennsylvania, only a client can sue his or her lawyer for legal malpractice and Kirschner is not the client in this case, according to the filing.

Kirschner's lawsuit also cites three allegedly fraudulent financings undertaken by LeNature's in 2004, 2005 and 2006 that plunged the company into even deeper debt.

"Not only are these events far removed in time from anything K&L Gates allegedly did, but they were perpetrated by independent actors, are not alleged to be directly connected to the issues K&L investigated," according to the filing.

The motion also states that Kirschner already has "blamed many other parties" for alleged wrongdoing in connection with the financings which "was the work of independent fraudsters."

Ferguson and his firm were hired to investigate suspicions about Podlucky's business dealings with certain customers, equipment makers and suppliers who sold LeNature's tea for its line of beverages, according to court documents. K&L Gates subsequently hired Pittsburgh certified public accountant Carl Wiker to perform a financial analysis, according to the recent filing.

Wiker of Pittsburgh was also sued for negligent misrepresentation and breach of contract. His attorneys argued that their client never signed or endorsed the final report about the internal investigation that was prepared by Ferguson and have also asked that the lawsuit against him be dismissed.

Kirschner alleges that Ferguson, his firm and Wiker should have discovered that Podlucky and other officials were committing fraud. He also criticizes Ferguson for allowing Podlucky to edit the final report even though Podlucky was the subject of the investigation.

Ferguson gave Podlucky a clean bill of health finding "no evidence of fraud or malfeasance with respect to any of the transactions."

Kirschner did not respond to a request for comment.

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