U.S. Markets closed

Celadon Group files for Chapter 11 bankruptcy, will go out of business

Justin L. Mack, Indianapolis Star
Celadon Group files for Chapter 11 bankruptcy, will go out of business

INDIANAPOLIS — In a span of just five days, Celadon Group Inc. has been thrust into the national spotlight because of a federal case targeting former executives, and a bankruptcy filing that will put nearly 4,000 people out of work.

The whirlwind weekend for the Indianapolis-based trucking and transportation company began with local federal authorities announcing that the company's chief operating officer and chief financial officer had been arrested in connection to a fraud scheme that cost the company's shareholders more than $60 million.

It ended Monday morning when the company confirmed reports that it was filing for Chapter 11 bankruptcy and immediately going out of business.

Immediately before the bankruptcy filing, Celadon was operating a fleet of approximately 3,300 tractors and 10,000 trailers with nearly 4,000 employees. 

Here's what you need to know about everything happening with Celadon. 

Why were Bobby Peavler and Eric Meek indicted? 

On Thursday, Dec. 5, former Celadon COO William Eric Meek, 39, and CFO Bobby Lee Peavler, 40, were arrested on nine counts each that include conspiracy to commit wire and securities fraud and conspiracy to make false statements to the company's accountants and falsify records.

Peavler also is facing two additional counts of making false statements to the company's accountants.

The indictment alleges Meek, Peavler and others at the company knew by 2016 that a substantial portion of Celadon's fleet had declined in value by tens of millions of dollars due to a slowdown in the trucking market, mechanical problems and age. 

Investigators said the two men devised a scheme to conceal millions of dollars in losses from shareholders and banks by inflating invoices of older used trucks that they traded for new ones; selling trucks to a dealer near the end of a fiscal quarter without disclosing that one of the company's divisions had agreed to pay the dealer back after the quarter ended; and making false and misleading statements to auditors about the transactions.

Peavler also accused of directing a senior executive to delete certain emails after auditors requested relevant documents, prosecutors say.

In May 2017 Celadon announced its financial statements for fiscal year 2016 and the following two quarters could no longer be relied on, nor could reports from its independent auditor for those time periods. The company's share price plummeted as a result, causing a one-day loss of $62.3 million to Celadon's market value.

Celadon then parted ways with Meek and Peavler.

Former Celadon truck driver Jack Jobes of Pensacola, Florida walks his dog Bella Monday at Celadon on East 33rd Street. Jobes rented a U-Haul van for transportation after turning in his semi truck to the company.

What happens now that Celadon Group has filed for bankruptcy?

After a weekend of unconfirmed reports that Celadon would be filing for bankruptcy in the wake of the indictment, the company announced the Chapter 11 filing in a press release issued early Monday.

The announcement also revealed that Celadon Group would shut down all of its business operations effective immediately. The shut down only spared the Taylor Express business that will continue to operate in North Carolina. 

The move puts nearly 4,000 employes out of work, and social media reports indicate that some truck drivers have been left stranded with no direction on how to dispose of their rigs, and have had their fuel cards deactivated. 

"We have diligently explored all possible options to restructure Celadon and keep business operations ongoing, however, a number of legacy and market headwinds made this impossible to achieve," Paul Svindland, CEO of Celadon, said in a statement. "Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements. When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies."

Indianapolis Metropolitan Police Department vehicles sit outside Celadon's offices on East 33rd Street Monday.

Who started Celadon Group and how big was the company?

Celadon was founded in 1985 by Steve Russell. Before leading Celadon, Russell was director of advanced product planning for Ford Motor Co., CFO for RCA Corp. and president of Hertz Truck and Equipment Corp. He earned a bachelor’s degree in mathematics and an MBA in finance and marketing from Cornell University.

Russell was very involved in the arts and served on the board of directors for the Indianapolis Museum of Art. His love of art was so deep, it even helped Russell name Celadon, meaning green-glaze pottery, once deemed the most pleasant-sounding word in the English language.

According to the company, Celadon began its operations as a small, dry van carrier with just 50 leased trucks and 100 leased trailers.

It grew to become one of the first U.S.-based trucking companies to take trailers into Mexico and is considered a pioneer of the commerce trail between the U.S. and Mexico.

With more than 150,000 border crossings annually, Celadon was the largest provider of international truckload services in North America, according to company officials. 

As he aged, Russell took a step back from the company.

He died in April 2016 at the age of 76.

Follow Indianapolis Star reporter Justin L. Mack on Twitter @justinlmack.

This article originally appeared on Indianapolis Star: Celadon files Chapter 11 bankruptcy amid fraud allegations