Cooked books, dump trucks and a whole lot of shredding.
Those are the highlights – or lowlights — of a report to a Delaware business court from the just-appointed custodian of bottled water company LeNature’s, which recently saw its founder and CEO, Gregory J. Podlucky, locked out of his company’s offices to keep him from tampering with its records as part of an investor-related lawsuit.
But it didn’t happen quickly enough, according to Steven Panagos, an executive with crisis management consultancy Kroll Zolfo Cooper LLC.
Panagos, who was brought in by the court last week to manage LeNature’s as part of the lawsuit, filed an affidavit yesterday attesting to the destruction and removal of “large volumes of company documents” – the same documents that Podlucky and his fellow executives – all of whom were similarly ousted — had been ordered to preserve as evidence relevant to their ongoing legal siege.
Panagos also notified the court that it is likely LeNature’s will file for bankruptcy in the near future. Whether the company will be sold off or revived under different ownership remains to be seen. It had been seeking buyers and investors in recent weeks, according to Wall Street sources, but could not find anyone to make a deal.
Investors had sued Podlucky over his use of more than $13 million they had invested as part of their expansion plans. On Oct. 20, Judge Leo E. Strine of the Delaware Court of Chancery (like many corporations, LeNature’s is registered in Delaware) issued a temporary restraining order meant to preserve documents that might be part of the case.
One day later, on Oct. 21, employee witnesses told Panagos, a dump truck arrived at LeNature’s Latrobe, Penn. headquarters and began unloading “a large volume of documents into the trash compactor.”
The shredding apparently continued all week. During a fact-finding tour of the LeNature’s headquarters and bottling plant in Latrobe on Friday, Oct. 27, company employees told Panagos that they had “witnessed individuals, most notably the Company’s chief executive officer, Gregory Podlucky, shredding documents,” according to the affidavit.
There was a mad rush to destroy documents on Friday afternoon before Panagos’ arrival, according to the affidavit, which says that employees watched Podlucky’s bodyguard shred between 20 and 25 boxes of documents between 1 and 5 that day. Panagos entered the facility at 5:30.
The shredding didn’t prevent Panagos’ firm from discovering what he called “significant discrepancies between customer shipment and accounts receivable information” at LeNature’s.
Just how significant were the discrepancies? According to Panagos, the LeNature’s audited financial statements showed revenues of $275 million in fiscal year 2005. The unaudited financial statements for the same period suggest the LeNature’s actual revenue may have been closer to $32 million.
With the company swimming in debt – vendors had requests for past due payments of more than $10 million, while other outstanding checks totaled almost $3 million more – Panagos is still trying to keep it afloat a little while longer. With a bankruptcy filing looming, he has requested permission to borrow up to $10 million so that the company can keep functioning for the time being.
But the sharks are circling. Investment banks have begun trying to determine the value of LeNature’s assets, including its Latrobe bottling plant and a new, $200 million plant recently constructed for the company in Phoenix, Ariz.
Podlucky could not be reached for comment.