Judge won't quash Wachovia subpoenas

Judge won't quash Wachovia subpoenas

	Published : Wed, 10 Jan 2007 00:42 By : Agencies Print this Story

PITTSBURGH - A judge on Tuesday refused to quash subpoenas issued to Wachovia Bank to explain what it knows about bankrupt Le-Nature's Inc., but he barred their enforcement for three weeks to give a newly appointed trustee time to decide how to proceed.

'Let him make the decision as to what he wants to do,' U.S. Bankruptcy Judge M. Bruce McCullough told lawyers for Wachovia, Le-Nature's and the drinks maker's creditors.

Creditors owed millions by Le-Nature's have accused Charlotte, N.C.-based Wachovia, a lender and adviser to Le-Nature's before bankruptcy, of trying to shield itself in a case that involves allegations of massive fraud.

Wachovia itself is owed about $280 million by Le-Nature's.

The subpoenas should be quashed because, among other reasons, the ad hoc committee of secured creditors was seeking information to use in claims against Wachovia and the committee's investigation could add another level of administrative expenses to the case, said Menachem O. Zelmanovitz, an attorney for Wachovia Bank, National Association and Wachovia Capital Markets LLC, all units of Wachovia Corp.

The creditors were usurping the Chapter 11 bankruptcy trustee's authority, he said. Also, the scope of the subpoenas was 'overbroad and burdensome' and included documents that have nothing to do with Le-Nature's finances.

'We are looking for a full and fair investigation,' Zelmanovitz said. 'We are not looking for a one-sided vendetta.'

Jim McLean, attorney for the secured creditors' committee, said the subpoenas would not usurp the trustee's authority and the information would be shared by all the creditors.

'This is not simply a matter about the ad hoc lenders and Wachovia,' McLean said. 'This is the kind of information that, given the nature of this case, doesn't matter who's doing the asking.'

Wachovia, he said, was delaying the inevitable.

'We find it hard to believe ... the trustee would ask for anything less,' said Sharon L. Levine, attorney for the unsecured creditors.

The lenders say Wachovia earned millions of dollars in fees from Le-Nature's for various financial services and 'gained an intimate knowledge' of the company's affairs.

Le-Nature's also supported creditors getting information from Wachovia, which was 'the source of the most comprehensive and reliable information,' said attorney Douglas A. Campbell, representing the drinks maker.

McCullough last month signed an order authorizing the use of cash generated by Le-Nature's to shut down the company's operations. A court-appointed turnaround firm, Kroll Zolfo Cooper, had said Le-Nature's was no longer a viable business.

Some of the money was to be used to investigate allegations of accounting fraud by former Le-Nature's executives. A federal investigation is also under way.

Le-Nature's has more than $278 million in bank debt, about $150 million in bond debt, capital lease obligations of about $300 million and various other liabilities, according to court documents filed earlier by Kroll Zolfo Cooper.

The company's 2005 financial statements showed annual revenues of $275 million, but the actual amount may have been as low as $32 million, they said.

Le-Nature's was forced into bankruptcy last year after a judge ruled that founder and Chief Executive Gregory J. Podlucky and other directors may have engaged in criminal conduct by misreporting financial information.

The custodian shut down a Le-Nature's facility in Arizona and idled the company's flagship plant in Latrobe.

Le-Nature's has been a maker of bottled waters, teas, juices and nutritional drinks. It was founded in 1989 and later began marketing drinks under the Le-Nature's name.