Freight Company Declares Bankruptcy Amid Accounting Scandal

Victor Westerkamp
By Victor Westerkamp
December 9, 2019Businessshare
Freight Company Declares Bankruptcy Amid Accounting Scandal
Trucks pass over an elevated bridge in a file photo. (Matt Cardy/Getty Images)

Freight company Celadon filed for bankruptcy today, putting nearly 4,000 employees out of work and potentially stranding many of its drivers, IndyStar reported.

The company asked for an immediate exemption from payment under the Chapter 11 bankruptcy rule, citing a lack of liquidity as its main reason for not being able to pay its lenders, Freightwaves reported.

NTD Photo
An overview of Celadon owes to its employees. (US Bankruptcy filing)

Nearly 3,000 drivers risk getting stranded since most had their fuel cards suspended, Business Insider reported. Several Facebook pages and other initiatives have been set up in order to get the trucks home. Many have no idea where to dispose of their trucks or unload their goods.

The transnational truckload carrier has 2,695 trucks, including 2,000 in the United States, 360 in Canada, and 335 in Mexico.

The inglorious end of the freight transport mogul was foreshadowed by years of mismanagement at the highest levels of the company after founder Stephen Russell stepped down as CEO in 2012 and retired due to illness in 2015, passing away the following year. At that time, the company still raked in $1 billion in gross revenue, but that would soon change.

COO Eric Meek and CFO Bobby Peavler were accused of a complex accounting scandal that involved manipulating the truck fleet’s value.

In April 2017, a short seller’s report entitled “Celadon Group: A Story That Ends At Chapter 11,” was published on Seeking Alpha, a stock exchange periodical that called the company “A House of Cards.” It mercilessly exposed Meek and Paevler’s accounting chicaneries. Stock rates plummetted and the company’s audit puled out.

Meek and Peavler were indicted and arrested last Thursday. Both were charged with nine counts including conspiracy to commit wire and securities fraud; and conspiracy to make false statements to the company’s accountants and falsify records.

The immediate cause for the bankruptcy came when Celadons’ biggest creditors, Luminis and Blue Torch, pulled the plug last Thursday.

“We have diligently explored all possible options to restructure Celadon and keep business operations ongoing, however, a number of legacy and market headwinds made this impossible to achieve,” said Paul Svindland, Chief Executive Officer of Celadon, Indy Star reported. “Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements. When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies.”

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