Krones Aktiengesellschaft, a company based in Neutraubling, Germany, and its American subsidiary, Krones Inc., of Franklin, Wisconsin, have entered into a non-prosecution agreement with the U.S. Attorney’s Office in Pittsburgh, Pennsylvania.
The agreement resolves allegations arising from Krones’ involvement in a fraudulent scheme perpetrated by Gregory Podlucky and others, which resulted in the failure in 2006 of Le-Nature’s Inc.
Under the terms of the agreement, Krones will pay a $15 million penalty.
In addition, Krones will pay restitution to entities that suffered losses as a result of Krones conduct with Le-Natures.
Krones was represented by James R. Clark of Foley & Lardner in Milwaukee, Wisconsin.
Federal officials alleged that Krones cooperated with Gregory Podlucky and Le-Nature’s in deceiving lenders over the cost of bottling equipment being manufactured for use at Le-Nature’s plants.
Lenders financing the equipment were told cost amounts by Podlucky, confirmed by Krones, approximately twice as much as the actual cost.
Krones then received the excessive payments as the manufacturing process progressed, kept funds to cover the equipment, and forwarded the additional approximately $118 million to Le-Nature’s.
“Fifteen million dollars is the largest financial penalty ever imposed in this district,” said U.S. Attorney David Hickton. “We entered into this agreement with Krones because we are satisfied the penalty is of a magnitude adequate to deter Krones from becoming an instrument of a criminal scheme in the future, as well as to deter others from transacting business by deceitful means. The financial marketplace operates on a bedrock principle of good faith. Those who do not meet that standard should understand the United States will hold them to account.”
In addition to the penalty to be paid to the United States, as a condition precedent to the agreement, Krones has resolved civil litigation arising from the same transactions, and will make payments which essentially provide for the victims of the scheme to recover restitution for their losses.
In total, the cost to Krones for its conduct will be approximately $125 million.