Mon, 27 May 2019

WASHINGTON DC - The Indianapolis-based Celadon Group Inc. has agreed to a settlement including the payment of $7 million in resitution, after being charged with an accounting fraud that allowed the truckload freight company to avoid disclosing substantial losses and misrepresent its financial condition.

In a complaint filed in federal court in Indianapolis, the U.S. Securities and Exchange Commission charged that between mid-2016 and April 2017, Celadon avoided recognizing at least $20 million in impairment charges and losses – almost two-thirds of its 2016 pre-tax income – by selling and buying used trucks at inflated prices from third parties.

According to the complaint, as a result of the alleged scheme, Celadon overstated its pre-tax and net income and earnings per share in its annual report for the period ending June 30, 2016, and in its subsequent public filings for the first two fiscal quarters of 2017.

"We allege that Celadon knowingly engaged in a multi-faceted scheme to hide at least $20 million in losses from its investors, and lied to its auditors to conceal the scheme," Joel R. Levin, Director of the SEC’s Chicago Regional Office said Thursday. "We will continue to hold issuers accountable for such serious breaches of trust to the investing public."

The SEC’s complaint charges Celadon with fraud and with reporting, books and records, and internal control violations. Celadon admitted to those violations and agreed to a permanent injunction and to remediate the material weaknesses in its internal control over financial reporting. Celadon has also agreed to pay $7 million in disgorgement, which will be deemed satisfied by Celadon’s payment of restitution in an action announced on Wednesday by the Department of Justice. The settlement is subject to court approval.

"The settlements with DOJ and SEC mark an important milestone," Celadon Chief Executive Officer Paul Svindland said Thursday. "We have now settled the governmental investigations and other legal proceedings related to the events that arose under prior management. We appreciate the government's recognition of the significant changes we have made, our ongoing commitment to legal and regulatory compliance, and our significant cooperation in the investigations. With these legal issues resolved, we will focus on continuing to strengthen our corporate controls and procedures and pursuing a long-term capital structure and the operational turnaround of our core, asset-based truckload transportation business."

The SEC’s case against Celadon is the latest in a line of actions brought against companies or their executives for committing accounting fraud, by entering into sham agreements with third-parties, suppliers or customers.

The SEC’s investigation, which is continuing, is being conducted by Jaclyn Janssen, Trevor Schumacher, Jonathan Polish, Thomas E. Vincus, and Amy S. Cotter of the Chicago Regional Office.  

 

More Omaha News

Access More

Sign up for Omaha News

a daily newsletter full of things to discuss over drinks.and the great thing is that it's on the house!