Former Roadrunner Transportation exec guilty in $245M scheme
August 4, 2021
A jury in a federal Wisconsin district found one former Roadrunner Transportation Systems executive guilty of charges stemming from a $245 million fraud scheme while acquitting two others.
On July 29, a jury in a U.S. District Court for the Eastern District of Wisconsin found Peter Armbruster guilty on four of 15 counts related to a fraud scheme after a 14-day trial. Armbruster was the chief financial officer at Downers Grove, Ill.-based Roadrunner Transportation Systems during the scheme.
However, the jury cleared Mark Wogsland and Bret Naggs on all counts. Wogsland and Naggs were both controllers for the truckload segment at Roadrunner Transportation. Ironically, Wogsland and Naggs were initially the only two indicted for the scheme. In June 2018, both men were indicted on charges related to the scheme. Armbruster was not indicted until nearly one year later.
Armbruster’s sentence hearing is scheduled for Oct. 29.
Roadrunner Transportation shareholders lose millions
According to the indictment, Armbruster, Naggs and Wogsland allegedly defrauded shareholders and misled independent auditors and regulators from 2014 to 2017 about the actual financial condition of Roadrunner Transportation.
In 2014, the defendants allegedly identified misstated accounts on balance sheets totaling $7.5 million. Of the outstanding receivables, debts arising from Roadrunner Transportation’s lease-purchase program were among the most significant, accounting for as much as $10 million. More than $3 million was considered “uncollectable” because many drivers who owed money had left the company, making it unlikely that the funds would be recovered in full.
Despite discovering these financial issues, the three executives allegedly left essentially worthless assets and receivables on the balance sheet instead of writing them off. The men also deliberately concealed overstated assets and other misstated accounts. These misstated accounts were left on the balance sheet throughout 2014-17, fraudulently boosting Roadrunner Transportation’s financial performance.
However, the three executives failed to completely write off the misstated accounts, resulting in the accounts resurfacing two years later. By then, the misstated accounts had ballooned to between $25 million and $50 million, according to the indictment.
From 2014 to 2017, more than 37 million shares of Roadrunner Transportation stock were held. In January 2017, Roadrunner Transportation announced that it had identified potential accounting discrepancies and accounting errors. Just one day before the announcement, Roadrunner Transportation stock was trading at $11.74 a share. By the day after the announcement, stock prices dropped to $7.54 a share, a loss of more than $160 million.
One year later, on Jan. 31, Roadrunner Transportation announced restated financial results. On Jan. 30, stocks were trading at $7.14. By Feb. 2, Roadrunner Transportation stock plummeted to $4.90 a share, costing shareholders an additional $85 million.
Two of three defendants acquitted
All three defendants were charged with:
- One count of conspiracy to make false statements to a public company’s accountants and to falsify a public company’s books, records and accounts.
- Two counts of false entries in a public company’s books, records and accounts.
- One count of conspiracy to commit securities fraud and wire fraud.
- Two counts of securities fraud.
- Two counts of wire fraud.
Armbruster and Wogsland were charged with one additional count of securities fraud.
Armbruster also was charged with one count of bank fraud; two counts of false statements to a public company’s accountants; one count of false entries in a public company’s books, records, and accounts; and two counts of wire fraud.
Wogsland also was charged with two counts of false statements to a public company’s accountants and one count of insider trading.
Naggs also was charged with one count of false entries in a public company’s books, records and accounts.
Wogsland and Naggs were found not guilty on all counts. However, Armbruster was found guilty of one count related to misleading Roadrunner Transportation’s accountants, two counts related to falsifying the company’s books/records/accounts and one count of securities fraud. He was found not guilty of the remaining 11 counts. A civil complaint is pending against all three defendants. LL