Whistleblower Efforts Likely Result in SEC Charging Celadon Executives

As part of our continuing effort to award credit to whistleblowers, today we identify the scheme and promise to follow up if ever a whistleblower is identified as the party who deserves the credit.

The Securities and Exchange Commission announced today that it was charging two executives of Celadon, a big trucking company with an investment scam.  According to the SEC, the guys running this company:

“…sought to conceal losses by engaging in a scheme to buy and sell trucks at inflated prices, in some cases double or triple their fair market value. The complaint alleges that as a result of the transactions with third-party dealers, Celadon materially overstated its pre-tax income, net income, and earnings per share in its annual report for the period ending June 30, 2016, and in its subsequent public filings through the period ending Dec. 31, 2016.  The complaint also alleges that Meek and Peavler lied to Celadon’s auditor…”

That’s a pretty complicated scheme.

Did the SEC just find out about this or did somebody lead them to the information? Accounting Shcmes like this are not so easy to find. Indeed that’s part of what led to enactment of the Dodd-Frank whistleblower reward law that led to the SEC whistleblower program. Finding fraud in this world requires some level of expertise.

We do not know and in a way that is a good thing. If a whistleblower reported this information and did so anonymously they would be protected from being identified and we want that to continue. The SEC has been very good about protecting the identities of whistleblowers who come forward to report fraud. We would like that to continue, even if it creates the unfortunate situation of the SEC making these kinds of announcements and nobody ever learning that there was somebody who led them to get the information in the first place.

A quick review of the SEC’s own listings tells us there is already at least one covered action listed by the SEC on its website indicating they have collected at least $1,000,000 against Celadon.

The SEC put out information on the company charging Celedon itself on April 25, 2019 saying it “avoided recognizing at least $20 million impairment charges and losses…” and even that listed appears to be related to several other SEC actions.

So now we have two executives being charged and we previously had the company listed in at least one action taken by the SEC.  Maybe somebody out there has already filed for an award and maybe someday we’ll learn about it. Maybe not. Common sense tells you though that this is not the kind of fraud any body can just walk down the street and learn about. At some point a complicated fraud like this, involving the executives, at a major firm has to be a matter for a whistleblower to provide the information. Here’s hoping that if we are right in this instance, that whistleblower gets well awarded by the SEC.  It is great to be able to see, even absent the implications for whistleblower law, that we can follow along the litigation being taken by the Commission and learn when those committing fraud are being prosecuted.

Still watch this space, if more comes up on this matter we’ll let you know as soon as we can if a whistleblower deserves the credit. For the Record, while I handle SEC whistleblower cases all the time, this is not one I handled.