News and Press Releases

United States Announces $15 Million Penalty and Non-Prosecution Agreement with Krones

November 8, 2012

PITTSBURGH, Pa. - Krones Aktiengesellschaft, a company based in Neutraubling, Germany, and its American subsidiary, Krones, Inc., of Franklin, Wisconsin (hereinafter collectively Krones), have entered into a non-prosecution agreement (NPA) with the U.S. Attorney's Office for the Western District of Pennsylvania, which resolves allegations arising from Krones' involvement in the fraudulent scheme perpetrated by Gregory Podlucky and others, which resulted in the failure in 2006 of Le-Nature's Inc., U.S. Attorney David J. Hickton announced today.

Under the terms of the NPA Krones will pay a $15 million monetary penalty to the United States. In addition, Krones will pay restitution to entities the U.S. Attorney's Office asserts suffered losses as a result of Krones conduct with Le-Natures.

According to the U.S. Attorney's Office, during 2004-2006, 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.

U.S. Attorney Hickton said, "Fifteen million dollars is the largest financial penalty ever imposed in this District. 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. Also entering into the balance in making this agreement was Krones' cooperation with our investigation, and its own internal management changes which we believe help make unlikely any similar conduct by the company in the future.

"In addition to the penalty to be paid to the United States, as a condition precedent to the NPA, 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.

"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.

"I want to acknowledge the skill and diligence of the investigators from the United States Postal Inspection Service and the Internal Revenue Service/Criminal Investigation, whose efforts over several years have served the public interest so well, and enabled us to achieve this significant result today, as well as in previous prosecutions related to the Le-Nature's scandal."

Assistant U.S. Attorneys James Y. Garrett and Robert S. Cessar are handling the case for the U.S. Attorney's Office for the Western District of Pennsylvania.

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