SEC charges former Celadon exec for alleged used truck sales fraud

The Securities and Exchange Commission has filed a lawsuit against Danny R. Williams, former president of the now-shuttered Celadon Group subsidiary Quality Companies, alleging he committed accounting fraud via a scheme to sell the company’s used trucks at inflated prices to third parties and then buy back the trucks at those inflated prices. The market regulator also alleges that Williams lied to Celadon’s board of directors about the transactions.

The SEC filed its lawsuit on May 9. Separately, Williams has pleaded guilty to criminal charges relating to the equipment sales, the SEC says.

The alleged scheme allowed Celadon to avoid recording losses on the equipment — the source of legal and financial troubles that plagued the company since 2017. Celadon just last month announced it had agreed to a $42 million settlement with the U.S. Department of Justice and the SEC to end a criminal investigation into its accounting practices from 2014-2016.

The Indianapolis-based giant, which operates upwards of 5,000 trucks, said in April 2018 that it had over-reported its income for those years by between $200 million and $250 million due, in large part, to the Quality Companies’ equipment trading practices.

The New York Stock Exchange halted trading of Celadon stock in spring of 2017, delisting the company after it failed to submit required financial reports. The company’s stock was later re-listed, and trading resumed, after it filed the necessary reports.

The company also entered into a $5.5 million civil settlement over the reporting errors.

An independent auditor, BKD, discovered the accounting discrepancies in early 2017, prompting Celadon to withdraw its previously filed SEC forms, leading to its de-listing on the NYSE.