Published January 03, 2012
An accounting-director-turned-government witness was sentenced Tuesday to five years in prison for faking the financial records of the defunct Pennsylvania soft drink maker Le-Nature's, and the only executive to maintain his innocence in the $800 million fraud scheme was given a 15-year term.
Tammy Jo Andreycak, 44, who cooperated with prosecutors before she was even charged, had hoped for probation or house arrest. She pleaded guilty in 2008 to wire fraud, bank fraud, conspiracy and filing a false tax return as part of fudging accounting records at the behest of former chief executive and company founder Gregory Podlucky.
Besides the five-year term, she was ordered to serve five years probation after her release from prison.
Podlucky pleaded guilty this year and is serving a 20-year sentence for the scheme that cost lenders, vendors and investors about $684 million. Prosecutors say Podlucky obtained $800 million in financing by fraudulently overstating the company's revenues, but spent much of the money on a lavish lifestyle while the company foundered. Prosecutors say company sales were only a fraction of what he ordered Andreycak to report.
Federal sentencing guidelines called for Andreycak to spend about 12 to 16 years in prison.
Senior U.S. District Judge Alan Bloch said he agreed with prosecutors that Andreycak deserved a break on her sentence but he disagreed with her defense attorney's request for probation only or house arrest.
"She was not a knave, low-level employee simply following orders she didn't understand," Bloch said. She was "one of only two people aware of the magnitude of the fraud," the judge said, referring to Podlucky.
After Andreycak was sentenced, Robert B. Lynn, 67, of Ligonier, who has variously been described as a vice president and chief financial officer, was sentenced to 15 years in prison and also ordered to serve five years' probation. A jury convicted Lynn in July of 10 counts of bank and wire fraud and conspiracy.
The judge agreed that sentencing guidelines suggesting at least 37 years in prison were too harsh because that would amount to a "life sentence" for Lynn because of his age. But Bloch disagreed with Lynn and his attorney Thomas Farrell that 12 1/2 years would be sufficient. Farrell declined to comment after the hearing.
"Here the magnitude of the fraud was enormous as was the magnitude of this defendant's (financial) misrepresentations," Bloch said.
Besides Andreycak and Podlucky, three other executives have pleaded guilty to helping Podlucky overstate the company's revenues so Le-Nature's could get loans and equipment leases. Lynn claimed at trial that he was fooled by Podlucky and not part of the conspiracy.
In 2005 alone, Le-Nature's reported gross sales of $287 million, about $247 million of which was fabricated using fake invoices and deposit records Andreycak prepared. Podlucky claimed on his federal income tax return that he earned $495,000 that year and owed $147,000 in taxes, when he actually diverted more than $7.1 million to himself and should have paid more than $1 million in taxes.
Federal agents searched the company's headquarters and found a secret room containing millions of dollars' worth of valuables, including gold, silver and platinum jewelry and expensive watches. They seized an 8,000-piece model train collection and determined that Podlucky spent more than $10 million on a mansion that was never finished.
The fraudulent operation collapsed when Le-Nature's was forced into bankruptcy in October 2006 after a Delaware judge said in a lawsuit brought by minority investors seeking to get money out of the company that financial fraud most likely had occurred. A court-appointed company custodian uncovered much of the fraud as Andreycak came forward and admitted her role, even before she was a criminal target.
Her attorney, Edward Bilik, said Tuesday, "We are disappointed by the sentence, and it's not what we expected. I think everybody in the courtroom was surprised."
Andreycak's son and her mother entered the courtroom to say a brief farewell to Andreycak after she was sentenced and handcuffed by U.S. marshals. They made not comments, but cried as they left the courtroom.
Assistant U.S. Attorney James Garrett didn't recommend a specific sentence, but stressed to the judge how crucial Andreycak's cooperation was to his case.
"She has worked diligently to try to set things right to the best of her ability," Garrett said.
Bilik told the judge that Andreycak was a single mother with a high school education and a secretarial certificate from a business school, with no accounting background, and as someone whom Podlucky called his "secretary" despite listing her as the company's director of accounting.