Two former top executives at Indianapolis-based trucking and transportation company Celadon Group Inc. have been indicted for their roles in an alleged fraud scheme that federal prosecutors say cost the publicly traded company’s shareholders more than $60 million.
Former Chief Operating Officer William Eric Meek, 39, and Chief Financial Officer Bobby Lee Peavler, 40, were arrested Thursday morning on nine counts each that include conspiracy to commit wire and securities fraud and conspiracy to make false statements to the company’s accountants and falsify records. Peavler also is charged with two additional counts of making false statements to the company’s accountants.
Josh Minkler, U.S. Attorney for the Southern District of Indiana, said Meek and Peavler each face decades in prison in the case investigated by the FBI, Department of Justice, U.S. Postal Inspection Service and the Securities and Exchange Commission.
The indictment alleges Meek, Peavler and others at the company knew by 2016 that a substantial portion of Celadon’s fleet of trucks had declined in value by tens of millions of dollars due to a slowdown in the trucking market, mechanical problems and age.
Instead of accounting for the drop in truck values, the two men devised a scheme to conceal millions of dollars in losses from shareholders and banks, the indictment says.
Prosecutors allege they did this by:
- Inflating invoices of older used trucks that they traded for new ones.
- Selling trucks to a dealer near the end of a fiscal quarter without disclosing that one of the company’s divisions, Quality Companies, had agreed to pay the dealer back after the quarter ended.
- Making false and misleading statements to auditors about the transactions.
Peavler also directed a senior executive to delete certain emails after auditors requested relevant documents, prosecutors say.
The scheme came to a head in May 2017, when Celadon announced its financial statements for fiscal year 2016 and the following two quarters could no longer be relied on, nor could reports from its independent auditor for those time periods. After the announcement the company’s share price plummeted, causing a one-day loss of $62.3 million to Celadon’s market value.
After the stock plummeted, Celadon was de-listed by the New York Stock Exchange and many stockholders lost much of their investment, Minkler said. Celadon then parted ways with Meek and Peavler.
Celadon officials did not immediately respond to an email request for comment on the allegations or what the case could mean to the future of the company founded in 1985. Founder Stephen Russell named the company Celadon, according to its website, “after reading about celadon pottery, a green-glazed style of stoneware dating back to the Koryo dynasty in China. He hoped that the company would be as unique and beautiful as the pottery.”
“Nowhere is the commitment to the rule of law more important than in the investigation and prosecution of complex white collar fraud,” Minkler said. “What the grand jury has returned is a complex fraud indictment involving allegations of lies and deceit in the corporate suite of a publicly traded company based right here in Indianapolis.”
Minkler explained why white collar fraud investigations, such as the Celadon case, are important to the public.
“In public companies, you or I or anyone else can buy or sell their stock in the market,” he said. “We use it to fund our pensions. We use it to make investments. We use it to build nest eggs for when we retire. So what executives and companies say particularly on their financial reports is important to us. It’s important to us when we make those decisions. The financial system — our markets in this country, our pensions, our nest egg — is built on that trust.”
Minkler added: “Executives must keep accurate books that reflect the real value of their company. They must attest to the accuracy of those books that reflect the real value of their company. In other words, under our system of laws, executives must play it straight, whether it be good news or bad news … Celadon executives breached that trust and violated these laws. Simply put, they did not play it straight and did not tell the public the bad news.”
Meek and Peavler, both of Indianapolis, were released on bail after appearing Thursday afternoon before U.S. Magistrate Judge Mark J. Dinsmore of the Southern District of Indiana. The case is assigned to Chief Judge Jane E. Magnus-Stinson for U.S. District Court of the Southern District of Indiana.