INDIANAPOLIS – United States Attorney Josh J. Minkler and the Department of Justice announced today that 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 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 Benczkowski. "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.

In October 2017, United States Attorney Josh J. Minkler announced a Strategic Plan designed to shape and strengthen the District’s response to its most significant public safety challenges. This prosecution demonstrates the Office’s firm commitment to prosecuting complex, large-scale fraud schemes, particularly those that exploit positions of trust. See United States Attorney’s Office, Southern District of Indiana Strategic Plan 5.1.

     Celadon Group, Inc. (Celadon) has agreed to pay total restitution of $42.2 million for filing materially false and misleading statements to investors and falsifying books, records and accounts.

     Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Josh Minkler of the Southern District of Indiana, Special Agent in Charge Grant Mendenhall of the FBI’s Indianapolis Field Office and Inspector in Charge Delany De Leon-Colon of the U.S. Postal Inspection Service (USPIS) made the announcement.

     Celadon, a transportation company headquartered in Indianapolis, Indiana, that was listed on the New York Stock Exchange (NYSE), entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the Southern District of Indiana charging the company with securities fraud.  The case was primarily focused on the fact that Celadon knowingly filed materially false and misleading statements to investors and falsified books, records and accounts with regard to the values of assets involved in four trade transactions that were recorded at inflated values and not fair market value.

     “Celadon executives misled the investing public for a simple reason: profit,” said Assistant Attorney General Benczkowski.  “Securities fraud harms all investors — from the most sophisticated to those everyday Americans saving for retirement, and the Criminal Division remains committed to investigating and prosecuting these complex crimes.”

     “The fabric of American industry is woven together through innovation, work ethic and integrity,” said U.S. Attorney Josh J. Minkler.  “The government is charged with ferreting out misdeeds in corporate America, particularly when these violations of public trust result in financial harm to our citizens as is set forth in this matter.  I would like to personally thank and recognize the Justice Department’s Fraud Section, SEC, FBI and USPIS partners whose collaborative work unearthed this criminal activity.”

     “The message here is clear, 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.  “The FBI and our agency partners will continue to identify, investigate and pursue violations such as this.”

     “The Postal Inspection Service has been protecting investors and defending the integrity of the marketplace for many years,” said Inspector in Charge Delany DeLeon-Colon.  “Anyone who engages in these deceptive securities practices should know they will not go undetected and they will be held accountable.”

     According to court documents filed as part of the DPA, Celadon provided trucking and transportation services in the United States, Mexico and Canada.  Quality Companies, LLC (Quality) was a wholly owned subsidiary of Celadon that leased tractors and trailers to owner-operator truck drivers.  Between 2013 and 2016, Quality’s inventory grew rapidly, from approximately 750 tractors and trucks to more than 11,000. 

     Quality’s financial performance began to struggle in 2016 due in part to a slowdown in the trucking market.  In addition, Quality owned a significant number of a truck models with mechanical issues, which many drivers did not want to lease.  By 2016, many of Quality’s trucks were idle, unleased and overvalued on Quality’s books by tens of millions of dollars. 

     Instead of properly reporting Quality’s financial difficulties to investors, members of Celadon’s and Quality’s senior management team, all acting within the scope of their employment, participated in a scheme that resulted in Celadon falsely reporting inflated profits and inflated assets to the investing public through Celadon’s financial statements.  Between approximately June 2016 and October 2016, Quality engaged in a series of trades as a means to dispose of its aging and unused trucks.  In order to avoid disclosing the losses connected to these trucks, executives executed the trades using invoices purposely inflated well above market value.  Celadon ultimately used these invoices and inflated truck values to hide millions of dollars of losses from investors.    

     In December 2016, after allegations of misconduct had arisen publicly, Celadon’s management approved a memorandum that falsely stated the trucks involved in the above-described transactions were purchased and sold at fair market value, and were accounted for properly on Celadon’s books.  Further, beginning in approximately January 2017, Celadon’s independent auditors conducted an investigation into the allegations of misconduct.  In response, multiple members of Celadon’s and Quality’s management falsely represented to independent auditors that the transactions were done at fair market value and that they were not trades.  Celadon’s auditor ultimately withdrew its audit opinion for certain Celadon financial statements.  The resulting disclosure by Celadon of the auditor’s withdrawal caused a significant drop in the price of Celadon’s stock, which resulted in investors losing tens of millions of dollars. 

     Under the terms of the DPA, Celadon is required to pay full restitution of $42.2 million to shareholder victims directly and proximately harmed as a result of the commission of the offense. Celadon also agreed to implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals.  Under the DPA, prosecution of the company for securities fraud will be deferred for an initial period of approximately five years, subject to approval by the court, to allow Celadon to demonstrate good conduct.

     The Department reached this resolution based on a number of factors, including Celadon’s ongoing cooperation with the United States and the company’s extensive efforts at remediation.  Among other remedial efforts, the company no longer employs the executives involved in wrongdoing, and the company replaced its executive management team with experienced executives who display a commitment to building an ethical corporate culture.  Furthermore, Celadon created the new position of Chief Accounting Officer and hired an experienced Internal Audit staff member reporting directly to the Company’s Internal Audit Manager.

     In addition, the United States filed an Information and plea agreement against Danny Williams, the former President of Quality, who was charged with one count of conspiracy to commit securities fraud, to make false statements to a public company’s accountants, and to falsify books, records and accounts of a public company in connection with Celadon’s crimes.

     Trial Attorneys Kyle W. Maurer and L. Rush Atkinson of the Criminal Division’s Fraud Section, Deputy Chief Steven D. DeBrota and Assistant U.S. Attorney Nicholas J. Linder of the Southern District of Indiana prosecuted the case with assistance from the FBI’s Indianapolis Field Office and the USPIS.

     This investigation is ongoing.

     If you believe you are a victim of this offense, please visit https://www.justice.gov/criminal-vns/case/celadon or call (888) 549-3945. 

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