INDIANAPOLIS – An Indianapolis-based trucking company has agreed to pay $42.2 million in restitution to settle securities fraud charges stemming from falsely reporting inflated profits and assets to investors.
The Department of Justice and Celadon Group Inc. announced the settlement Thursday for “filing materially false and misleading statements to investors and falsifying books, records and accounts.”
Celadon entered into a deferred prosecution agreement in connection with a criminal information filed in the Southern District of Indiana charging the company with securities fraud. Under the agreement, Celadon will pay the restitution to shareholders over the next five years in return for having the charge dismissed.
Prosecutors said Quality Companies LLC, a subsidiary of Celadon that leased tractors and trailers to owner-operator truckers, saw its inventory grow from about 750 tractors and trucks in 2013 to more than 11,000 in 2016. However, Quality began struggling financially in 2016 due in part to a slowdown in the trucking market and it had a number of a truck models with mechanical issues, which many drivers did not want to lease.
By 2016, many of Quality's trucks were unleased and overvalued on its books by tens of millions of dollars, prosecutors said.
Instead of properly reporting Quality's financial difficulties to investors, members of Celadon's and Quality's senior management team falsely reported inflated profits and assets to investors, prosecutors said.