Two former Caledon executives charged with bank and securities fraud
According to a press release press release from U.S. Department of Justice;
Former COO and CFO of Publicly Traded Transportation Company Charged with Securities Fraud, Bank Fraud and Lying to Auditors
The former chief operating officer (COO) and chief financial officer (CFO) of Celadon Group Inc. (Celadon), a publicly-traded transportation and trucking company headquartered in Indianapolis, Indiana, were charged in an indictment unsealed today for their alleged role in a complex securities and accounting fraud scheme that resulted in a loss of more than $60 million in shareholder value.
William Eric Meek, 39, and Bobby Lee Peavler, 40, both of Indianapolis were each charged in an indictment filed in the Southern District of Indiana 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 charged with two additional counts of making false statements to a public company’s accountants.
Meek and Peavler were arrested this morning and appeared before U.S. Magistrate Judge Mark J. Dinsmore of the Southern District of Indiana. Both Meek and Peavler were released on bail. The case is assigned to Chief Judge Jane E. Magnus-Stinson for the U.S. District Court of the Southern District of Indiana.
“These senior corporate executives at Celadon allegedly orchestrated a securities and accounting fraud scheme that misled shareholders, banks, accountants, and the investing public,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “The Department of Justice and our law enforcement partners will continue to safeguard market integrity by holding executives who violate the law responsible for their misconduct.”
“Through their scheme of lies, fraud and misrepresentations as alleged in the Indictment, Meek and Peavler damaged the integrity of the market, the corporation, its shareholders and public investors,” said U.S. Attorney Josh J. Minkler of the Southern District of Indiana. “The U.S. Attorney’s Office is committed to prosecuting those individuals in corporate America, who choose to commit corporate fraud, in violation of federal law, and have blatant disregard for those with a financial interest in the corporation.”
“This sends a clear message that those who commit financial fraud will be held accountable. Investors should expect nothing less than complete candor and truth from companies and their executives,” said Special Agent in Charge Grant Mendenhall of the FBI’s Indianapolis Field Office. “The FBI and our agency partners will continue to identify, investigate and pursue those who perpetrate criminal schemes for their own profit.”
“The U.S. Postal Inspection Service has an extensive history of investigating complex financial fraud schemes. A goal of the Postal Inspection Service is to protect investors, as well as the integrity of the financial marketplace from fraudulent activities by trusted insiders who abuse their positions,” said Inspector in Charge Delany De Leon-Colon of the U.S. Postal Inspection Service’s (USPIS) Criminal Investigations Group at National Headquarters. “Anyone who engages in this type of financial fraud scheme should know they will be found and held accountable for their dishonest practices.”
According to the indictment, 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.
An indictment is merely an allegation and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Previously, Danny Williams, 36, of New Palestine, Indiana, the former head of a Celadon subsidiary, pled guilty in April 2019 to conspiracy to commit securities fraud, make false statements to a public company’s accountants, and falsify books, records, and accounts of a public company. Also in April 2019, Celadon itself entered a Deferred Prosecution Agreement with the government, under which it is obligated to pay restitution of $42.2 million.
The FBI’s Indianapolis Field Office and USPIS are investigating the case. The U.S. Securities and Exchange Commission provided assistance and has also filed a civil complaint against the defendants for related conduct. Trial Attorney Kyle W. Maurer and Assistant Chief L. Rush Atkinson of the Criminal Division’s Fraud Section, and Deputy Chief Steven D. DeBrota and Assistant U.S. Attorney Nicholas J. Linder of the Southern District of Indiana are prosecuting the case.
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Read the original story HERE @ justice.gov
Source and credits:U.S. Department of Justice / justice.gov / freightwaves.com / Clarissa Hawes / iTrucker / Mario Pawlowski