Feds slap troubled trucking co. bosses with fraud, lying charges
Yesterday the Department of Justice (DOJ) announced that two former executive officers with trucking company Celadon Group Inc. would be facing serious charges related to a fraud scheme.
On December 5, the DOJ announced that Indiana residents William Eric Meek, 39, and Bobby Lee Peavler, 40, were each charged with one count of conspiracy to commit wire fraud, bank fraud, and securities fraud, five counts of wire fraud, two counts of securities fraud, one count of conspiracy to make false statements to a public company’s accountants and to falsify books, records, and accounts of a public company, and one count of making false statements to a public company’s accountants. Peavler was additionally charged with two counts of counts of making false statements to a public company’s accountants.
The DOJ described the alleged scheme conducted by the former Celadon executives in a news release:
…by approximately 2016, Meek, Peavler, and others at Celadon knew the value of a substantial portion of Celadon’s trucks declined in value in part to a slowdown in the trucking market. In addition, many of those trucks, which were owned by Quality Companies (Quality), one of Celadon’s divisions, had serious mechanical issues that made them unattractive to drivers, further depressing their value. Instead of accounting for this decline in truck values, Meek, Peavler and others allegedly devised a scheme that caused Celadon to conceal tens of millions of dollars in losses to its shareholders, banks and the investing public.
Their scheme involved Quality trading away hundreds of its older and unused trucks to a large truck dealer in exchange for newer used trucks. During the trades, they intentionally inflated the prices on invoices associated with those trades so Celadon’s books would not reflect the fact that Celadon’s trucks were worth significantly less than reported to investors, the indictment alleges. Although they were actually trades, Meek, Peavler, and others allegedly sought to portray the transactions as independent “purchases” and “sales” of trucks in order to avoid heightened scrutiny.
Meek and Peavler also allegedly structured one of the trades in an effort to artificially improve one of Celadon’s quarterly financial statements.. Quality received approximately $25 million from the truck dealer just before the end of Celadon’s fiscal quarter, which Celadon used to pay down its debt and appear to be in compliance with certain lending agreements. Meek, Peavler, and others allegedly failed to disclose, however, that as part of this deal, Quality had agreed to pay a similar amount of money back to the truck dealer three days after quarter-end. Celadon’s quarterly financial statements made no mention of this secret agreement, the indictment alleges.
In late 2016 and early 2017, Celadon’s independent auditors began to ask questions about the truck trades that Meek, Peavler, and others had used to hide the drop in truck values. In response, Meek, Peavler and others allegedly made false and misleading statements to the auditors about the nature of the trade transactions, falsely denying they were trades and concealing the terms of these trades, including Quality’s agreement to pay money back to the truck dealer shortly after quarter-end. Peavler also directed a senior executive and co-conspirator to delete certain emails after the auditor had make a request for relevant documents.
In May 2017, Celadon announced that its financial statements issued for fiscal year 2016, which ended June 30, 2016, as well as the quarters ending in September and December 2016 could no longer be relied on, not could the related reports of the independent auditor for those three time periods. Following this announcement, Celadon’s share price dropped significantly, causing a one-day loss in Celadon’s market value of approximately $62.3 million.
Both Meek and Peavler were arrested on Thursday and released on bail after appearing in court.
Earlier this year, Celadon agreed to pay $42.2 million in restitution to shareholders for “filing materially false and misleading statements to investors and falsifying books, records and accounts.”
Former President of Celadon subsidiary Quality Companies LLC — a company that leased trucks to owner-operators — Danny Williams pled guilty in April 2019 to charges of conspiracy to commit securities fraud, make false statements to a public company’s accountants, and falsify books, records, and accounts of a public company.