Federal prosecutors in Indiana are dropping a lawsuit against two former Celadon executives who were accused by the Securities and Exchange Commission of a multimillion-dollar fraud.
On Aug. 10, federal prosecutors filed a motion to dismiss a case against William Eric Meek and Bobby Lee Peavler. The complaint accused the two men of taking part in a complex securities and accounting fraud scheme that resulted in a loss of more than $60 million in shareholder value.
The motion provided no reason for the dismissal. It only read “the government believes that the indictment should be dismissed with prejudice, in the interests of justice.”
“With prejudice” means charges on the same claim cannot be filed again in court.
Celadon executives’ truck swap scheme
From 2016, Celadon-owned Quality Companies owned hundreds of trucks that were overvalued on its books by tens of millions of dollars. Quality Companies was unable to find drivers interested in leasing certain trucks because of prior defects. Those defects had caused a significant fall in the trucks’ value. However, Meeks, Peavler and Williams failed to disclose the millions of dollars lost as a result of the diminished market value of these assets, the indictment alleged.
The indictment said that the high-ranking executives pursued a series of transactions designed to get rid of the trucks without publicly reporting the loss.
The alleged scheme involved Quality Companies trading hundreds of its older, less desirable trucks to a dealer in exchange for the dealer’s newer, more desirable trucks. Quality Companies then engaged in simultaneous “sales” and “purchases” of trucks with the dealer at inflated prices, which avoided disclosing the fact that the trucks were worth far less.
According to the indictment, the executives provided the dealership with a list of trucks Quality wanted to sell with the company’s overinflated book value for each truck. The dealership would then calculate how much the trucks were overvalued by then inflating its invoices to Quality Companies. That resulted in trades with values on both sides inflated by millions of dollars.
In a span of three months in 2016, Quality Companies traded approximately 900 overvalued trucks for approximately 650 newer used trucks, according to court documents. Two emails reveal that the value of 862 Quality Companies trucks were inflated by more than $33 million. Two invoices from Quality Companies to the dealership totaled to approximately $43 million.
According to a Department of Justice news release, Celadon provided trucking and transportation services in the United States, Mexico and Canada. Between 2013 and 2016, Quality’s inventory grew rapidly, from approximately 750 tractors and trucks to more than 11,000. Quality began to struggle financially in 2016 as a result of a slowdown in the trucking market. LL