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A fraud prosecution of two former executives of now-defunct Celadon Group Inc. that has lingered in the courts for nearly three years has been dismissed at the request of the U.S. government amid allegations of inaccurate statements by an FBI agent working on the case.
A federal judge approved the dismissal request in August in a case involving criminal charges against former Celadon President William Meek and former Chief Financial Officer Bobby Peavler. The two were indicted Dec. 5, 2019, for their alleged role in a complex securities and accounting scheme in 2016 and 2017 that the government said inflated the company’s income and earnings per share.
The former executives were charged with one count each 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.
More on Celadon
Dec. 9, 2019: Celadon Files for Bankruptcy
Dec. 5: Two Former Celadon Executives Charged in Fraud Scheme
Aug. 15: Celadon Gets $165 Million Infusion From Luminus Management
April 29: Celadon Group Sells Intermodal Operations to Bison Transport
April 25: Celadon to Pay $42.2 Million After Admitting to Accounting Fraud
April 22: Celadon Sells Logistics Group, Hopes for Financial Reporting in Fall
Oct. 3, 2017: Celadon Acknowledges Active SEC Investigation
July 13, 2017: Celadon Chairman, CEO Paul Will Steps Down
July 3, 2017: Celadon to Record Impairment Charge in Review of Company’s Value
May 2, 2017: Celadon's Financial Statements Called Into Question
April 25, 2016: Celadon Founder Russell Passes Away
June 23, 2014: Celadon’s Russell Used Hard Work, Luck To Build Large Cross-Border TL Carrier
Peavler was charged with two additional counts of making false statements to a public company’s accountants, according to the indictment.
Celadon closed its doors shortly after the criminal charges were filed in December 2019.
The dismissal in August with prejudice means that government prosecutors cannot refile the case against the two executives.
Attorneys for both executives said that despite the dismissal, they would have proved their clients were innocent had the case gone to trial.
At the time of the original indictment in 2019, the U.S. Securities and Exchange Commission also filed a civil complaint against the two executives that was stayed, awaiting resolution of the criminal court case.
At press time, the SEC case remained in place and it was unknown if SEC would continue to pursue its civil litigation. A federal magistrate ordered the parties to file a joint status report by Nov. 2, stating specifically how they propose the civil case should proceed, including imposition of case management plan deadlines and any settlement.
Questions about the government’s case against the executives began after an August 2019, six-hour “proffer” interview among Peavler, his attorneys, FBI agents and U.S. Justice Department prosecutors. The proffer interview was intended to allow Peavler to tell his side of the story to prosecutors.
Celadon Group, Inc. Enters into Corporate Resolution for Securities Fraud and Agrees to Pay $42.2 Million in Restitution https://t.co/Yc8sTUdkQm— Justice Department (@TheJusticeDept) April 25, 2019
But the government’s case began to have problems after a written report from the proffer interview filed by one of the FBI agents on the case, Special Agent Victoria Madtson, was shortly viewed as suspicious by Peavler and his attorneys.
In testimony and documents, Madtson said that Peavler “affirmed” his guilt in a statement during the interview.
However, the interview was not recorded or transcribed, a factor that ultimately worked against the agent’s claims after one of Peavler’s attorneys who took notes at the meeting expressed “deep concerns” that Madtson’s statements were not accurate. In response to the defense attorneys’ accuracy questions about Madtson, federal Judge Jane Magnus-Stinson, of the U.S. District Court for the Southern District of Indiana, held two evidentiary hearings in February.
“Special Agent Madtson has undergone significant training as an FBI agent and is experienced in interviewing witnesses and suspects and preparing [FBI interview] FD-302 reports, specifically in cases involving white collar and financial crimes,” Magnus-Stinson wrote in a July 27 court order. “Despite her background and experience, however, she proved to be a questionable witness in this case for several reasons.”
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Madtson did not capture the questions that were asked during the proffer interview, the precise answers that were given or which individual said what, the judge wrote.
“Special Agent Madtson appears to have misattributed statements made by other individuals to Mr. Peavler,” the judge added.
“The cross-examination of Special Agent Madtson was devastating,” the judge continued. “On numerous occasions — at least 150 by the court’s count — she indicated that she did not have any independent recollection about the proffer interview other than what was recorded in her notes or her FD-302.”
The judge chided the government for not choosing to record the interview with Peavler, which caused the dispute to lead to “complex and protracted pretrial litigation.”
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“The court could have been spared days of time and work had the proffer interview been recorded,” she wrote.
“The government should change the way that it investigates its cases,” said Michael Kelly, one of Peavler’s attorneys, and a partner in the Washington, D.C., firm of Akerman LLP. “The Department of Justice should record its interviews in every case and not rely on FBI agents to write a summary of what was said.
“In this case, an inaccurate summary led an FBI agent to testify falsely in an evidentiary hearing. Those types of mistakes are too dangerous and can lead to an innocent man being convicted. Taping interviews is the best way to follow the facts wherever they lead — which should be the DOJ’s mission in every case.”
Calls seeking comment from the Indianapolis FBI office were not returned at press time; the U.S. Attorneys Office for the Southern District of Indiana declined to comment.