The fallout from Celadon’s legal catastrophe continues to roil the world of freight.
FreightRover, the Indianapolis-based freight financing firm providing factoring, insurance, load board and fleet management tools, has removed two key executives, CEO Eric Meek and COO Danny Williams, from its leadership team page. FreightRover is not a bank or similarly regulated financial institution.
Scott Prince, president of FreightRover, responding to an email request for a comment on the departure of Williams and Meek, wrote “it’s FreightRover’s policy not to comment on the status of current or former employees.”
Meek was previously the president and chief operating officer of Celadon Group and Williams was president of Quality Companies, a Celadon subsidiary, during a nearly year-long period of accounting irregularities and securities fraud that lasted from June 2016 to April 2017. Celadon ultimately had to re-state several years of financial results and the stock crashed and was de-listed.
FreightWaves reported on recent divestments Celadon made in order to deleverage its balance sheet. In the past month, A&S Kinard and Buckler Transport were sold to Day & Ross; the intermodal business was sold to Bison Transport; and the truckload brokerage operation was snapped up by PS Logistics.
Last week, Williams pleaded guilty to 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. Williams’ plea agreement indicated that he is aware of the maximum penalty carried by the charge – five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense, whichever is greater, and three years of supervised release after imprisonment.
The charge concerned a fraudulent scheme while he was president of Quality Companies. Quality was a truck-leasing business that owned trucks and leased them to owner-operators and independent contractors. Quality Companies had several hundred sub-par trucks that it was having trouble leasing; and Celadon’s books said they were worth approximately $70 million, when in fact they were worth far less.
Williams admitted to working out a scheme with an Indianapolis-based truck dealer – known as “Truck Dealer A” in the filing – by which Quality could offload its old trucks at inflated prices and buy new ones, also at inflated prices, in such a way as to hide millions of dollars of Celadon’s losses. Williams said he then lied to Celadon’s auditors, an independent accounting firm, about the true value of the trucks on Celadon’s books.
Meek has not been indicted, although the U.S. Attorney’s office made it clear that its criminal investigation is ongoing.
There are references in the plea agreement to “high-ranking Celadon executive[s]” whom the document refers to as “Executive A,” “Executive B,” and “Executive C.”
In the document it states, “For example, in or around June 2016, the Defendant was told by a high-ranking Celadon Executive (“Executive A”) that Celadon ‘really need[ed] to sell the $70 million or so of excess,’ referring to unleased and unused trucks that Celadon had listed on its own books as being worth $70 million. The Defendant responded by telling Executive A, ‘We aren’t in the money on hardly any of the $70 million,’ meaning they had overvalued the Quality trucks and would suffer losses if the trucks were sold for their fair market value,” wrote Josh J. Minckler, U.S. Attorney for the Southern District of Indiana.
Later, Celadon executives lied to their accountants about the nature of the transactions with Truck Dealer A, misrepresenting the trades of inflated assets as unrelated sales and purchases. Meanwhile “Executive B” was writing emails to Williams characterizing the transactions as trades, while “Executive C” told Williams to delete emails involving Truck Dealer A. Those parties have not been named by the U.S. Attorney’s Office.
Like at Celadon, there is some evidence that FreightRover has not been entirely transparent with its stakeholders.
We spoke to one former customer, AM Transportation, about their failed integration of FreightRover’s PayEngine solution.
“We tried to implement their carrier pay solution into our TMS [transportation management system] and failures started to occur very quickly. What they were saying they could do and pull off was not accurate,” said Jason Doris, head of business development and operations at AM Transportation.
“We only had a few transactions with them and we shut it down pretty quickly,” Doris said. “Amounts and payment dates weren’t matching up and payments were up to three weeks late. FreightRover showed that they paid a carrier, and it looked like they had, but the carrier wasn’t actually paid.”
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