An Indiana trucking company with nearly 4,000 employees said Monday that it filed for bankruptcy and will shut down all operations, just days after two former officials were charged in an accounting fraud scheme.
The Chapter 11 bankruptcy filing by Indianapolis-based Celadon Group left more than 3,000 drivers jobless and, in many cases, stranded across the U.S. after their company gas cards were cancelled, according to local media reports. Another 500 administrative jobs are expected to be eliminated through the bankruptcy, the company said Monday.
Celadon has faced significant costs related to a federal investigation of the fraud scheme and also must deal with debt and "enormous challenges" in the industry, chief executive Paul Svindland said in a statement.
Celadon's former president and chief operating officer, William Meek, 39, and its former chief financial officer, Bobby Lee Peavler, 40, were indicted on conspiracy and other charges. They knew the value of a substantial portion of Celadon's trucks had declined and that many trucks had serious mechanical issues that made them unattractive to drivers, according to the indictment.
Earlier this year, Celadon agreed to pay $42.2 million to settle securities fraud allegations stemming from falsely reporting profits and assets. The company's stock was trading at less than 3 cents a share on Monday, down from a 52-week high of $2.83 last April 11.
Celadon said it was the largest provider of international truckload services in North America, and its bankruptcy filing means 3,300 trucks and 10,000 trailers will stop rolling.
"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," Svindland said.
The unraveling of the alleged scheme comes as the North American trucking industry is in a slump, reports Russ McQuaid of CBS affiliate WTTV.
Industry analysts report that 640 trucking firms declared bankruptcy during the first half of this year as freight volumes have declined for eleven straight months and the market has been in a recession.
Cummins of Columbus, Indiana, the largest manufacturer of truck engines, recently announced it was laying of 2,000 workers.
Michelle Sloan spent seven weeks in Indianapolis learning to drive a truck and was hours away from taking her first load out on the road last Friday when her trainer cancelled the trip, explaining that Celadon had lost three of its major customers.
"I'm upset. I still have a son at home that expects Christmas. So I hope I get a job soon," Sloan told McQuaid. "I think they could've handled things differently, but I don't think they knew all of their accounts would pull out so quickly. As soon as they heard about the bankruptcy thing, they did."
Drivers say recruiters for other trucking companies have been on the Celadon lot, offering potential jobs to laid off truckers. Some competitors have even offered bus tickets home and food to feed the stranded drivers.