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Ethics- Fraud

In: Business and Management

Submitted By cmortonnb
Words 869
Pages 4
Chris Morton
Ethics – Monday 6-9

Le-Nature, Inc. Case Study

Gregory Podlcuky, Chief Executive Officer and Founder of Le-Nature, a Pennsylvania soft drink company, was accused of fraudulent activity costing investors, venders, and lenders around $684 million between 2000 and 2006. Podlucky received over $800 million in financing by falsely overstating the company’s revenues. This cooking of the books made Le-Nature seem more successful than it truly was, prompting outsiders to invest in its growth. Podlucky spent most of this investment money on his lavish lifestyle though, instead of on his company.

Founded in 1992, and originally named Genesis Inc., Le-Nature was re-named in 2002 and considered itself an innovator in the bottling industry. Problems came to light in 2003, when the chief financial officer as well as to other highly ranked financial managers resigned unexpectedly.

The fraudulent activity was difficult to figure out because it had many layers of fraudulent loan agreements. These loans created a false perception of a successful company. Characterized as a Ponzi scheme, the fraud was using newly invested money to pay off earlier debt obligations. Le-nature falsified invoices, checks, account statements, and other financial documents to verify business transactions and activity that never actually occurred. This falsely inflated the value of the company to banks and investors, who saw the business as a successful company that needed additional capital to expand its productions. According to one of the lawsuits, Le-Nature falsely reported $135 million in sales in 2002, when actual net sales were less than $2 million.

Tammy Andreycak, Le-Nature’s accounting director, cooperated with prosecutors in hopes of getting only probation or house arrest for her involvement in the fraud. In 2008, Tammy pleaded guilty to wire fraud, bank fraud,

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