Le-Nature's Inc. Officials To Be Investigated for Fraud

Federal prosecutors are seeking the forfeiture of more than $20 million in jewelry allegedly bought by former officials of bankrupt drinks maker Le-Nature's Inc.^[1] Le-Nature’s is also being investigated in an alleged money laundering and fraud scheme.^[2]Company officials are being investigated on possible counts of mail, wire and bank fraud, laundering of monetary instruments, and engaging in unlawful monetary transactions.^[3]

Le-Nature's was forced into bankruptcy in October last year amid allegations of accounting fraud.^[4] The company, which made bottled waters, teas, juices and nutritional drinks, is believed to have accumulated more than $820 million in debt.^[5]

Federal agents seized gems, diamond-encrusted watches, pearls and gold, silver and platinum jewelry worth more than $20 million from safes in a secret room at the company's Latrobe facility, the filing said. ^[6]

Authorities alleged in court documents that the company's annual revenues were substantially overstated and financial statements doctored for 2005 to show revenues of more than $287 million when it was actually about one-tenth of that amount.^[7] Prosecutors are also alleging that two sets of books were kept; one reflecting true business activity; the other fictitious but allegedly used to prepare financial statements.^[8]

Mail Fraud
Mail fraud is a crime under 18 U.S.C. § 1341. Under this section, it is illegal to devise a scheme to defraud and then use the mail to carry out the scheme. The punishment for committing mail fraud is a fine, imprisonment for up to 20 years, or both. If convicted, money laundering carries a maximum 20-year prison sentence and a $500,000 fine, and mail fraud carries a maximum 20-year sentence and a $250,000 fine.

Wire Fraud
Wire fraud is covered under 18 U.S.C. §1343 whereunder it states that whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.^[9]

Federal criminal attorney Douglas McNabb has also previously discussed mail fraud in his blog, which can be found here; he has also discussed the federal crime of wire fraud which can be found here.

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^[1] Daniel Lovering, Feds seek forfeiture of $20M in jewelry seized from Le-Nature's, Associated Press Newswire, September 26, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] 18 U.S.C. §1343 (2007).