Former Roadrunner CFO gets prison time for $245M fraud scheme
December 3, 2021
Former Roadrunner Transportation Systems Chief Financial Officer Peter Armbruster faces spending the next two years in prison for his role in executing a $245 million fraud scheme.
On Wednesday, a Wisconsin federal court judge sentenced Armbruster to 24 months imprisonment, one year on supervised release and a $400 penalty. Restitution will be decided in February. In July, a jury concluded that Armbruster lied to shareholders, auditors and regulators about the financial condition of Roadrunner Transportation.
In 2013, Armbruster and the two executives created an account for the sole purpose of inflating Roadrunner Transportation’s financial performance. Specifically, the men siphoned funds from a reserve allocated to owners of acquired companies for hitting certain milestones. Unknown to anyone else, the money was set aside as emergency funds in the event something bad happened with the company’s financials.
The following year, the three discovered more than $7.5 million in uncollectible accounts.
Among the largest of the uncollected debt were those owed by drivers participating in Roadrunner’s lease-purchase program. Many drivers who owed money had left the company.
The plan was to gradually write off about $2 million of the debt. That plan was delayed. Instead, Armbruster sold more than $1.5 million worth of Roadrunner stock.
In late 2016, a new financial executive discovered up to $24 million in accounting issues. Upon further inspection, that debt ballooned up to $50 million. Shortly after, Armbruster filed quarterly financials that failed to mention the known debts.
In an effort to cover up the multimillion dollar losses, Armbruster and the two financial executives left uncollectible accounts on the balance sheets. Furthermore, they failed to report certain expenses, including bonuses. On paper, everything looked great. In reality, Roadrunner Transportation was losing millions. No one, including investors and regulators, was aware.
Investors would not find out about the cover-up until 2017. After the announcement, Roadrunner stocks dropped from $11.74 a share to $7.54. After the company released updated and accurate financials in 2018, stock prices fell further to $4.90, a total loss of about $245 million.
In June 2018, only the two executives were indicted. One year later, Armbruster was added to the indictment. In July, a jury found Armbruster guilty on four of 15 counts. However, the two financial executives were found not guilty. LL