Category: default || By jt3y

Chances are your neighborhood has one of those "Bermuda Triangle" pizza shops. Usually they spring up in old storefronts, though I've seen old gas stations used, too. One week it opens as "Mama Gina's Pizza." Two months later, it's "Rocky's." Two months later it's "Tony's."

And so on, an endless cascade of faded ambitions and squandered money --- no one ever seems to question putting another pizza shop where the last seven have failed. "My frozen dough and canned tomato sauce, along with surly help and high prices, will conquer this neighborhood's pizza-related needs!" the entreprenuers tell themselves.

I've always wanted to meet the bankers who loan money for these ventures. Have they ever heard of "due diligence"? "Gross malfeasance"? "Criminal incompetence"?

A large object lesson is playing out right now in Pittsburgh and Latrobe, where lawyers are trying to untangle the mess that is Gregory Podlucky's failed LeNature's Inc. According to my former cow-orker Rich Gazarik, who's been covering this story like the dew for the Tribune-Review, LeNature's ran up $700 million in debt while generating about $20 million in revenue last year.

. . .

If I went out and borrowed 35 times my income, at some point even Visa or MasterCard would say, "Gee whiz, it may be a bad idea to keep extending credit to this jagoff." But in the world of high finance, we are pikers who don't know how to play the game.

Incidentally, this explains why your bank is giving you 2 percent interest on your savings account while charging 10 percent on your home equity line-of-credit. The 8 percent spread allows the commercial loan department to keep shoveling out piles of cash with no apparent idea where it's going.

So, how does one tank (no pun intended) a bottling company like LeNature's? Let us count the ways. Court-appointed accountants and lawyers claim that LeNature's was:

• Selling products for less than they cost



• Expanding capacity (like adding a 500,000-square-foot plant in Phoenix) far beyond demand



• Using short-term, high-interest loans to pay off long-term, low-interest loans

One court-appointed administrator "said Podlucky is a poor businessman," Rich writes in the Trib.

If all that's true? Uh, yeah.

The more serious accusations (not proven) levelled at LeNature's include what Len Boselovic of the Post-Gazette labels "monumental accounting fraud," including falsification of documents, hiding assets and destroying financial records.

. . .

I'm not sure why it took this long for people to figure out that LeNature's was a house of cards. Until fairly recently, the company was advertising on KDKA radio, so I went out several times to find some LeNature's juice or iced tea.

I couldn't, not in gas stations, convenience stores, supermarkets or the cheap dives where I usually hang out. Not in vending machines or discount stores, either. I'm sure they were for sale, but I didn't see them.

I even looked a few months ago in the BP mini-mart in downtown Latrobe --- almost in sight of the LeNature's plant. Nothing.

One might suspect that before someone invested in a product like LeNature's, they would go to the store and see if they could sample it. One would, apparently, be wrong.

. . .

To add irony to irony, Podlucky got some of his money to invest in LeNature's by selling his stake in Jones Brewing Company down in Smithton, which the Podlucky family took into bankruptcy a few years ago. They emerged from Chapter 11 after closing the historic brewery and laying off most of the employees.

Stoney's Beer is now just a trademark on merchandise, and what's still sold as "Stoney's" is actually bottled by Pittsburgh Brewing Company ... which itself seems perpetually on the verge of going out of business.

LeNature's was itself in serious legal trouble twice before --- in 2001, they improperly listed their products as "kosher" without the approval of the rabbi whose organization was being listed on their bottles.

The year before that, while operating under its old name ("Global Beverage Systems"), the state Department of Environmental Protection forced it to recall bottled water that was contaminated with e.coli bacteria. It turns out that Global didn't have a permit to bottle water.

Again, I ask: Doesn't anyone at one of these venture capital firms pick up a newspaper? Don't they ever try to use "The Google"? Didn't any warning signs pop up?

. . .

As a possible little sidelight into the corporate culture at LeNature's, read this guy's account of what happened when he posted a sarcastic, negative review of one of their products on his website.

He claims that they sicced a lawyer on him and his webhosting company, made harassing phone calls to his home and tried to crash his site. He's since set up a page on his blog where disgruntled laid-off LeNature's employees can vent grievances.

One of those employees claims Podlucky "had a paddle displayed in the main hallway" at LeNature's headquarters, inscribed with the words "The beatings will continue until morale improves," and that a bulletin board was used to shame employees by posting their mistakes for their cow-orkers to read.

None of the accusations may be true, of course, and I'll be interested to see what happens in court when Podlucky and his allies have a chance to defend themselves.

In the meantime, if any of the investment bankers and Wall Street whizzes who underwrote LeNature's should happen to read this, would they please contact me?

I want to borrow some money. You see, I have my eye on this pizza shop down the block ....