Dive Brief:
- The U.S. Securities and Exchange Commission (SEC) charged two former top executives of Indiana-based trucking company Celadon Group Inc. for their participation in an accounting fraud that inflated the company's income and earnings per share.
- Former CFO Bobby Peavler and former CEO William Eric Meek sought to conceal losses by engaging in a scheme to buy and sell trucks at inflated prices, in some cases double or triple their fair market value, the SEC alleges.
- Celadon previously agreed to settle accounting fraud charges brought by the SEC in April.
Dive Insight:
The complaint alleges, as a result of the transactions with third-party dealers, Celadon materially overstated its pre-tax income, net income, and earnings per share in its annual report for the period ending June 30, 2016, and in its subsequent public filings through the period ending Dec. 31, 2016.
Peavler, the SEC said, "oversaw the improper accounting that falsely recorded the swaps as independent transactions and valued the trucks on Celadon’s books at the inflated amounts. This rendered inaccurate the financial information in Celadon’s public filings."
The complaint also alleges that Meek and Peavler lied to Celadon's auditor by claiming that the pricing in the transactions was "determined and evaluated independently," and by concealing their roles in negotiating and approving the transactions.
"Peavler encouraged [the company's controller] to delete emails in order to conceal the scheme from Celadon’s auditor," the SEC said.
Meek resigned from Celadon in 2017 and Peavler resigned in 2018.
"These members of Celadon's C-suite lied to its auditor and investors to try to conceal millions of dollars of overvalued trucks," said Joel Levin, director of the SEC's Chicago Regional Office.
The SEC's complaint, filed in federal court in Indianapolis, charges the defendants with violating anti-fraud provisions of federal securities laws, lying to auditors, and aiding and abetting Celadon's books and records and reporting violations.
The SEC seeks permanent injunctions, monetary penalties, and officer-and-director bars against both Meek and Peavler.
Separately, the U.S. Attorney's Office for the Southern District of Indiana and the Department of Justice, Fraud Section, Criminal Division, filed criminal charges against the defendants for related misconduct.
