Criminal case against former Celadon execs headed for court

More than two years after they were indicted on multiple fraud charges, two former Celadon Group Inc. executives are soon to have their day in court — if the pandemic allows it.

As of now, a four-week jury trial is scheduled to begin Feb. 22 for Celadon’s former president and chief operating officer, Eric Meek, 41, and its former chief financial officer, Bobby Peavler, 42. Both men were charged in December 2019 on multiple counts of fraud and making false statements to a public company’s accountants while they were working at the now-defunct Indianapolis trucking company.

Meek faces 10 charges, while Peavler faces 12. All the charges are related to a complex joint-venture arrangement involving the sale of trucks through a Celadon division called Quality Cos. A third executive, former Quality President Danny Williams, entered into a plea agreement on three charges in April 2019.

A member of Peavler’s defense team, Chicago attorney Sergio Acosta of Akerman LLP, declined to comment, as did the U.S. Attorney’s Office, which is prosecuting the case. Indianapolis attorney Jon Bont of Paganelli Law Group, who is on Meek’s defense team, did not respond to email and phone messages.

The case is being handled in federal court in Indianapolis. But the pandemic has delayed the progress of the case several times, and it might do so yet again.

Indiana Southern District Court Judge Jane Magnus-Stinson, who is hearing the case, said that, since the beginning of the pandemic, she has been mindful of jurors’ safety. “It was always my goal to never infect a member of the public by compelling them to appear in court for a proceeding,” the judge said during a Jan. 14 pretrial hearing.

Magnus-Stinson said the trial will proceed as scheduled only if the COVID-19 positivity rate in the court’s Indianapolis district is below 10% as of Feb. 8. If the positivity rate is above that threshold on that date, or if it drops and then rises again after that date, the trial will be delayed.

According to the Indiana State Department of Health, the positivity rate for Indiana was 30.4% for the seven-day period ending Jan. 14, which was the most recent data available. The court’s Indianapolis district includes 26 counties in the central and east central part of the state, where current positivity rates ranged from 16.8% in Fayette County to 35.7% in Marion County at IBJ deadline.

“I know the case has been pending for a considerable period of time, and there’s been delays due to COVID,” Magnus-Stinson said during the hearing. “I know the parties have been waiting for their day in court. … We’ll just have to see what the pandemic has to say about our desire to get this case to conclusion.”

No pleas

Whether the case proceeds as scheduled or faces another delay, it does appear to be headed for trial.

During the Jan. 14 hearing, federal prosecutor Kyle Sawa told the judge that, when his office asked Meek’s and Peavler’s defense attorneys if their clients were interested in a plea agreement, “both of those conversations were met with a negative.”

Meek’s attorney, Jon Bont, and Peavler’s attorney, Michael Kelly, confirmed to the judge during the hearing that their clients were not interested in plea agreements.

That makes this case fairly unique, said a legal expert not connected with it.

In the federal court system, about 97% of defendants choose to plead guilty, said Todd Haugh, a former criminal defense attorney and an associate professor of business law and ethics at Indiana University’s Kelley School of Business.

That, Haugh said, is because of the high likelihood of conviction in such cases. “The cases that are brought [in federal court] are usually very strong.”

That being true, he said, defendants may calculate that a guilty plea gives them a better chance of receiving a lighter sentence than they would get if convicted by a jury.

However, Haugh noted, plea agreements can also come together late in the game — sometimes on the eve of the trial date or even after the trial has started.

When fraud cases do go to trial, they are typically complex — and that is certainly true in this situation.

In Meek’s and Peavler’s indictment, prosecutors allege that the two, along with Williams and an unnamed person identified as Executive 1, conspired to conceal tens of millions of dollars in Celadon losses through a series of equipment trades from June 2016 to April 2017.

The indictment describes Executive 1 as the company’s CEO. Paul Will served as Celadon’s CEO during the period in question, although he has never been charged in connection with the case. Reached by phone earlier this week, Will declined to comment.

The trades involved Celadon-owned trucks the company had listed on its books as worth up to $60,000 each. But because of a drop in the used-truck market, plus the fact that some trucks had “a significant mechanical issue,” those trucks’ market value was only about $15,000, the indictment says. To deal with the problem, prosecutors say, the defendants traded about 1,000 trucks to an unnamed truck dealer at inflated prices, receiving more than 600 trucks in return.

The transactions were designed to move the overvalued trucks off of Celadon’s books so the company would not have to account for their decline in value, the indictment says.

In one trade, prosecutors say, Celadon timed the transaction so that the payment for the overvalued trucks came in just before the close of the financial quarter, making Celadon’s financial situation look stronger than it actually was.

The scheme resulted in “the concealment of tens of millions of dollars in losses from shareholders, banks, and the investing public,” the indictment says.

Breaking it down

 

In cases like this, prosecutors face the challenge of making a complex case understandable to a jury.

“If you’re prosecuting, you want to paint [the case] in the starkest and clearest possible terms,” said criminal defense attorney Richard Kammen, a partner at Indianapolis-based Kammen and Moudy LLC. Kammen has expertise in white-collar defense but is not involved with the Celadon case.

The exhibit list that prosecutors have submitted includes more than 500 items, most of them emails. The content of the individual emails is not accessible to the public in court filings, but the description of the emails indicates that many were sent to, from or copied to the defendants and other former Celadon employees.

Other items on prosecutors’ exhibit list include minutes from Celadon’s board meetings and copies of financial reports filed with the U.S. Securities and Exchange Commission.

Peavler’s attorneys have also submitted an exhibit list of hundreds of items, most of them emails. Meek’s attorneys have submitted an exhibit list, but it is not accessible to the public.

All parties in the case have also filed lists of potential witnesses, though those lists are also not publicly accessible.

The email-heavy nature of the exhibit lists is no surprise, Kammen said. “At the end of the day, most of the time, white-collar cases are often about the documents,” he said.

Because white-collar-crime cases typically include a paper trail that can serve as evidence, fraud cases are fundamentally different from violent-crime cases.

In the case of a violent crime, IU’s Haugh said, the focus is typically on whether the defendant committed the crime. But in fraud cases, especially where documents show who was involved, the intent behind actions is key. If the defendant took an action with the intent to deceive others, for instance, that’s much different than if the defendant acted out of poor judgement.

“There’s bad business strategies, bad business deals that happen all the time,” Haugh said. “Those are not criminal.”•

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