Celadon Group’s recent filing for Chapter 11 Bankruptcy marks the largest ever trucking sector bankruptcy in history. And it was abrupt, leaving over 3,000 drivers jobless, stranded with their rigs, and far from home. Our experienced Las Vegas bankruptcy attorneys believe this is just the beginning of a much larger industry downturn.
What Led to The Sudden Bankruptcy?
This extreme situation is due to a scandalous accounting fiasco that prosecutors believe will cost Celadon shareholders $60 million. Celadon’s former COO and CFO are both being indicted on fraud charges. The two conspired to cover-up losses by inflating invoices on truck sales, failing to disclose that vehicles had been sold to a dealer with an agreement that the dealer would be paid back next quarter, and downright, bold-face lying to auditors.
Industry-Wide Trucking Downturn Throughout 2019
Celadon, the Indianapolis-based trucking company, is not alone. Cassandra Gaines, a transportation attorney and head of Gaines Law Group, reported to CBS MoneyWatch, “This isn’t the first time this year we’ve seen a trucking company fail and drivers abandoned. That’s been happening a lot in 2019.”
A trucking industry-wide downturn has left hundreds of other trucking companies in total collapse, as of this year. In the first three quarters of 2019, almost 800 carriers went out of business, which is more than double the number in the whole year of 2018.
What are some of the reasons behind this massive downturn? They can’t all be accounting scandals, can they? Well, two of the recurring factors include the ever-rising price of insurance and various tariffs that impact the ability to get cheaper products from China.
Bankruptcy Leaves Drivers Shocked and Empty Handed During the Holidays
Celadon had a fleet of about 3,300 tractors and 10,000 trailers. The total estimated job loss of drivers and other Celadon workers affected by the bankruptcy totals nearly 4,000. As for those truck-drivers stranded mid-route: they were left on their delivery paths without fuel cards or any directions on how to return their rigs. They had questions about pay and benefits, too – and all this during the holiday season.
“So every company driver and owner-operator lost our jobs today without being notified about the closing of the doors of this mega-company,” Celadon driver, Roderick Orr, posted on his Facebook account. “A lot of people I know are stuck all around the country trying to get home and look for another job.”
Stephanie Floyd, a Celadon driver’s wife, said her family found out about the Chapter 11 Bankruptcy from a competing company – not from Celadon itself. “It’s heartbreaking, trying to find another job on the drop of a dime, hoping to find something in time, so we don’t miss a paycheck for bills and still be able to afford to buy our children stuff for Christmas,” she said.
Andrea Smith has been driving with Celadon for a year and shares, “I’m not sure what’s going to happen.” That appears to be the collective sentiment for former workers at Celadon. They were left with absolutely no idea this downturn was about to hit. Some drivers are dependent on their health benefits for vital medications for chronic diseases. Because of the nature of the company’s collapse, they are unsure if they’ll be able to get enough medications before they secure their next job or obtain new health insurance.
Celadon CEO Apologizes; Blames Investigation and Debt
Meanwhile, CEO Paul Svindland made a public statement that he would “…like to thank our dedicated administrative employees and drivers whose efforts should not be seen as a reflection of this Chapter 11 filing. They have sacrificed so much of their time and effort for Celadon, and for that, the company is eternally grateful.”
He also stated that “Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements… When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies.”
A sliver of hope:
Dave Ables, chief executive of Dart Transit, stated in an open letter to former Celadon drivers that his company is “…committed to matching or exceeding your existing pay package for a like job or route and many of our open jobs come with a generous sign-on bonus as well.”