A group of Celadon Group Inc. investors has agreed to settle its class-action lawsuit against the Indianapolis-based trucking company for $5.5 million, saying the recovery might be the best it can hope for considering the firm’s “uncertain” financial future.
The settlement, which is awaiting approval from a New York federal judge, would resolve suits brought by several parties over financial-reporting issues that have plagued Celadon for at least four years.
If approved, Celadon’s insurer would pay $5.5 million in cash into a settlement fund that would be distributed to a class of investors that acquired Celadon stock between Oct. 29, 2013, and April 13, 2018.
According to court papers filed earlier this month, lead plaintiffs Greater Pennsylvania Carpenters’ Pension Fund and Arkansas Teacher Retirement System agreed to the settlement on behalf of themselves and the other members of the settlement class.
The plaintiffs said the settlement was “the best option” available and would provide “a meaningful recovery.” They also expressed concern that taking the trucking company to trial would deplete any funds Celadon has “available to pay a significant judgment.”
In fact, the plaintiffs said, “there appears to be significant risk that the company will go bankrupt.”
In an email, Thom Albrecht, Celadon's chief financial officer and chief strategy officer, said “Celadon continues to tackle problems and resolve issues from its past.” He declined further comment.
The trucking firm was first sued in early 2017 by investor Denis Chavez, who alleged the firm was misleading shareholders about its financial status and covering up a U.S. Securities and Exchange Commission investigation into the company.
The defendants named in the suit include Celadon and two now-former executives: CEO and President Paul Will and Chief Financial Officer Bobby Peavler.
The Chavez suit eventually was consolidated with several other lawsuits as part of a class action.
In May 2017, Celadon revealed that its auditor, BKD LLP, had raised questions about a complicated joint-venture arrangement that involved the sale of leased equipment. As a result, the company said at the time, its last 18 months of financial statements should not be relied upon. Celadon’s board hired outside firms to review the statements.
After an internal probe and an executive-suite housecleaning, Celadon officials admitted in April that their financial-reporting issues were much older and deeper than they realized. The firm said the problems are so extensive that it wouldn't be able to resolve them in time to avoid being delisted from the New York Stock Exchange.
It also said it likely overstated some of its earnings by as much as $250 million during a three-year period that ended in 2016.
The company now sells shares on the over-the-counter exchange. Share traded Friday morning at $2.62 each, down from the mid-20s in 2015.
The firm admitted it was under a federal investigation earlier this year.