Former Celadon drivers still bitter year after collapse

He delivered a load of pallets to a customer about 70 miles away – which was his only trip for Celadon – on the day the carrier announced its closure. Balch said he was eventually paid for his orientation time and received trip pay for that one load.

“I hope nobody else has to go through something like this,” Balch told FreightWaves. “When this happened, I thought, ‘Why did I get into this industry?’ But then I couldn’t see myself being out of trucking.”

After arriving at the bus station around 7 p.m. Dec. 9, three days after he was hired, Balch and other drivers waited about seven hours before hopping on a Greyhound bus headed for home, he said. It would take him another 36 hours to get to Oklahoma.

Twelve days after the Celadon fiasco, Balch landed a job with another carrier, Contract Freighters Inc. (CFI), a Joplin, Missouri-based carrier that has more than 2,150 trucks and over 2,310 drivers.

Balch said he still spots abandoned Celadon trailers at truck stops or rest areas on his journeys across the country as a CFI driver.

“Every time I see a Celadon trailer, I get this bad taste in my mouth,” he said. “Why did it go down this way? Why couldn’t the company have fixed things before it got that bad?”

Former Celadon drivers learn painful lesson

After arriving at Celadon headquarters in late October 2019, Michelle Sloan, who had recently gotten her CDL, lived in the dorms for nearly six weeks waiting for a trainer. 

Company officials stalled on conducting her road test before they deemed her “roadworthy” because there weren’t enough trainers, said Sloan of Waynesburg, Pennsylvania. 

Sloan said that after leaving her dorm room on the day Celedon ceased operations, she was locked out of the building without any of her belongings when she went to help another driver who was pulling into Celadon’s lot to empty out her truck.

A year later, Sloan said she still keeps in touch with some former Celadon drivers.

“I was devastated after being there for such a short time,” Sloan told FreightWaves. “I know there were drivers who were there for years that were in shock that the company was closing.”

Some drivers said they had less than an hour to clean out their trucks after the bankruptcy filing was announced.

Drivers told FreightWaves they tossed microwaves, bedding and other possessions after securing Greyhound tickets because they were limited to what they could take on the bus. Some made arrangements with other drivers to take their faithful road companions – their pets – because the truckers couldn’t take them on the bus.

On the day Celadon filed for bankruptcy, Sloan said, some Celadon recruiters received phone calls from new hires who were headed to bus stations or airports and found out their tickets were canceled or refunded.

“No one called these people back to tell them the company was closing,” Sloan said.

With her lack of road experience, Sloan said she was worried about finding a trucking job. However, JL Foster, a small bulk transportation company in Fowler, Indiana, offered to hire her after reading about her plight.

As she waited to unload her hopper trailer full of chicken meal in Memphis, Tennessee, this week, Sloan reflected on her brief time at Celadon.

“I met some great drivers there, but I am lucky that I work for an awesome small trucking company now,” she told FreightWaves. “The owner is patient and I have learned a lot from him as I travel across the country.” 

According to the Federal Motor Carrier Safety Administration SAFER website, JL Foster has six power units and four drivers.

Left out in the cold

Former drivers said there was little communication among company executives and driver managers about what to do when deactivated fuel cards left truckers in the lurch thousands of miles from home.

Drivers were instructed to fuel up, but the situation became more complicated when Comdata turned off the carrier’s fuel cards, then reactivated them briefly before shutting them off again. 

As the drivers started arriving with their trucks the day the carrier ceased operations, some Celadon employees at HQ quickly padlocked the doors, barring truckers from entering the facilities to use the restroom or access the vending machines. 

Instead, they were forced to stand outside for hours in the rain as the temperature dropped into the 40s. Many drivers had no winter clothing, food or money as they waited for vans to take them to the bus station. Some drivers could not charge their cellphones to call panicked family members who had heard the news the carrier was folding.

Some drivers cheered as the vans arrived to take them to the nearby Greyhound bus station – which meant they got a ticket home. 

However, other drivers weren’t so lucky after the company’s credit card was deactivated late Dec. 9, and former employees said Greyhound refused to extend Celadon credit to get its remaining drivers home. 

The stranded drivers were left to fend for themselves. Some relied on the kindness of other carriers that offered to pay their expenses home or hire them after FreightWaves set up a free online job board.

‘A selfish few screwed over thousands’

Celadon and its subsidiaries had been trying to dig out from a financial scandal that broke in May 2017. The carrier had to restate several years of financial results, going back to 2014, its stock tanked and it was delisted from the New York Stock Exchange in April 2018. Celadon [OTC: CGIP] stock was traded on the OTC “pink sheets” market. 

“Celadon showed the industry that even the largest companies in the space are vulnerable, but the Celadon story is a company-specific one, caused by alleged fraud and negligence and a board that was complacent and perhaps complicit in the downfall of the firm,” said Craig Fuller, chief executive officer and founder of FreightWaves. “Trucking is a hard business, even for the biggest players. It requires grit and commitment to operating principles. The folks accused of taking Celadon down thought they were smarter than everyone else and got caught when the market turned against them.”

Only days before the company’s bankruptcy filing, federal prosecutors indicted former Celadon Chief Operating Officer William Eric Meek, 39, and former Chief Financial Officer Bobby Lee Peavler, 40. The Indianapolis men were charged with nine counts each, including one count of conspiracy to commit wire fraud, bank fraud and securities fraud; five counts of wire fraud; two counts of securities fraud; one count of conspiracy to make false statements to a public company’s accountants and to falsify books, records and accounts of a public company; and one count of making false statements to a public company’s accountants.

Peavler faces two additional counts of making false statements to a public company’s accountants.

Prosecutors alleged the two former Celadon executives were engaged in a complex securities and accounting fraud scheme that cost the truckload and logistics company’s shareholders more than $60 million.

But after the company defaulted on its loan covenants and couldn’t secure additional financing, the company swiftly collapsed.

A former corporate recruiter for Celadon said that just days before the company announced it would abruptly wind down business operations, he was instructed to keep hiring. That was until Dec. 6, the day FreightWaves reported the struggling carrier planned to file for bankruptcy.

“I’ve never felt so betrayed, professionally,” Ernesto Gonzales, who worked for the doomed carrier as a recruiter for two years, told FreightWaves. “I was told we were trying to turn things around.” 

He still stands behind his comment to FreightWaves last year about the carrier’s collapse. “The actions of a selfish few screwed over thousands,” Gonzales said. 

Gonzales found another corporate recruiting job in March, but the COVID-19 pandemic slowed down his recruiting efforts as companies adjusted hiring because of rocky economic conditions. He lost his job in May. 

Instead of spending money on vacations in 2020, Gonzales said he and his spouse decided to live off of their savings for a few months and wait for new job opportunities. He started a new job as a recruiter for an industrial staffing company in Indianapolis on Nov. 3.

While there were red flags that the company was in serious financial trouble, Gonzales said he and others were reassured the company would remain solvent. Looking back, he refers to the Celadon collapse as the “Titanic effect.”

“We were in denial that something like this could happen to a carrier of Celadon’s size,” he told FreightWaves. “I now have my eyes wide open and will do my due diligence to see if there’s any financial problems or a criminal element within the company.”

Gonzales said that employees and truck drivers depend on carrier executives to make sound business decisions on their behalf.

“We need to know how committed they [executives] are to the company,” he said. “We are at the bottom of the food chain. We count on them to make good financial decisions, not collapse like Celadon.”

The rise and fall of Celadon is a complex story

Celadon was founded by Stephen Russell and Leonard Bennett in 1985 with 50 leased tractors and 100 trailers – hauling automotive parts to a new Chrysler plant in Mexico. The company expanded its operations throughout North America and operated 4,000 trucks at its peak.

The carrier’s stock was listed on the NYSE in 2009. Russell stepped down as CEO in 2012 and appointed his successor, Paul Will, a certified public accountant, whom he tapped to lead the carrier. Will worked as a Celadon executive for 24 years before resigning in July 2019, two months after news of the financial scandal broke. 

Danny Williams, 36, of New Palestine, Indiana, former president of Quality Companies, a subsidiary of Celadon, pleaded guilty to conspiracy to commit securities fraud, make false statements to a public company’s accountants and falsify books, records and accounts of a public company, in April 2019.

Court documents claim that from 2013 to 2016, Celadon expanded its Quality truck leasing company, which Williams ran, from approximately 750 to more than 11,000 trucks. 

However, in 2016, the value of many of Celadon’s trucks, including those owned through Quality, dropped significantly, in part due to an economic downturn in the used truck market.

Celadon and Quality had hundreds of 2012 International ProStar tractors with defective MaxxForce engines in its truck fleet, which drastically decreased their value as drivers were unwilling to lease or drive them.

While the market value for the 2012 ProStars owned by Quality was estimated at $15,000 apiece, Celadon’s accounting records listed them as high as $60,000, according to the indictment.

Also alleged in the court filing is that by 2016, Meek, Peavler, Williams and others knew the real value of a substantial portion of Celadon’s trucks had declined significantly. Instead of accounting for the decline in truck values, the former executives allegedly devised a scheme to conceal millions of dollars in losses from Celadon shareholders, banks and the investing public.

The indictment claims the former executives schemed with an Indianapolis-based truck dealer to trade hundreds of its older and unused trucks, including the ProStars, for newer used trucks.

The trades were listed as independent “purchases” and “sales,” and the invoices were inflated to avoid scrutiny.

According to the indictment, Meek emailed Williams in June 2016 and stated that Celadon “really need[ed] to sell the $70M or so in excess,” which the company’s accounting records showed the trucks were worth. In an email, Williams allegedly responded to Meek that “we aren’t in the money on hardly any of the $70M.” The indictment said that if the overvalued trucks were sold at their fair market value, the company would suffer losses.

From June to September 2016, the executives at Celadon and Quality traded approximately 1,000 trucks to the truck dealer at inflated prices and received more than 600 trucks in return, concealing tens of millions of dollars in losses from shareholders, banks and the investing public, according to the indictment.

Celadon financed many of its operations through a revolving line of credit from a collection of banks. In September 2016, Meek, Peavler and their co-conspirators realized Celadon was in jeopardy of violating the bank covenant that limited its debt-to-earnings ratio, the indictment states.

In order to conceal this information from the banks and investors, Meek, Peavler and others allegedly convinced the truck dealer to pay Celadon approximately $25 million prior to the quarter ending on Sept. 30, 2016, according to the indictment. In exchange, the former Celadon executives and Williams allegedly agreed to pay back the truck dealer “a similar amount of money” three days after quarter-end.

Celadon’s quarterly financial statements did not reflect the secret arrangement with the truck dealer. The former executives allegedly used the money to pay down part of its debt owed to its banks prior to the close of the quarter on Sept. 30, 2016.

Celadon’s independent auditors began asking questions about the truck trades in late 2016 and early 2017, the indictment states.

Federal Judge James R. Sweeney II has extended the deadline until Dec. 22 for prosecutors to file their responses to the discovery motions in Meek and Peavler’s case. Attorneys for the former Celadon executives have until Jan. 12 to file their responses, according to court documents. 

Lessons learned

Nearly 4,000 Celadon drivers and employees were let go after the company declared bankruptcy.

While many former Celadon drivers and employees landed on their feet after the carrier’s demise, some decided to leave the industry altogether.

One trucking veteran said he had seen too many shutdowns in his 40-plus career. He once viewed Celadon as a company “too big to fail” despite its financial scandal. But as he cleaned out his truck and gathered his belongings, his perspective changed. 

“I’ve been in this industry a long time and I’ve seen its ups and downs,” said the former truck driver from Missouri. “I’ve decided I’m too old and too tired to keep playing this game.”

Click for more articles by FreightWaves Senior Editor Clarissa Hawes.

Dec. 6: Celadon bankruptcy, biggest in truckload history, expected by midweek (with video)

Dec. 7: Rival carriers rush to assist stranded Celadon drivers (with video)

Dec. 9: Celadon’s Mexican carrier Jaguar Transportation ‘still pulling strong’

Dec. 9: Celadon’s Canadian carrier Hyndman Transport shuts down

Dec. 12: Former Celadon employees, drivers describe chaos after abrupt bankruptcy filing

Dec. 24: Celadon leaves former drivers hanging without bankruptcy filing in Canada