Three former Roadrunner execs indicted in $245M fraud scheme

April 10, 2019

Tyson Fisher


Three former Roadrunner Transportation Systems executives were charged in federal court for criminal and civil charges alleging a fraud scheme that cost shareholders $245 million.

The indictment filed on April 3 supersedes a similar complaint filed last June.

On April 3, three former Roadrunner execs were named in two separate lawsuits for their alleged role in an accounting scheme that caused stocks to plummet to an initial loss of more than $160 million. That was followed by another round of falling stock prices. The three executives: Peter Armbruster, chief financial officer; Mark Wogsland, controller for the truckload segment; and Bret Naggs, also controller for the truckload segment.

The U.S. Securities and Exchange Commission filed the civil complaint, with the U.S. Department of Justice filing the criminal indictment. Both series of charges were filed in the U.S. District Court in the Eastern District of Wisconsin.

“Rooting out individuals and companies involved in transportation-related corruption and corporate fraud schemes intent on providing false or misleading information to the Federal government remains a high priority for the U.S. Department of Transportation Office of Inspector General,” DOT-OIG regional special agent in charge Andrea Kropf said in a statement. “Today’s superseding indictment reinforces that, working with our law enforcement and prosecutorial partners, these blatant acts of fraud and deception will not go unnoticed or be tolerated.”

According to the indictment, Armbruster, Naggs and Wogsland defrauded shareholders and misled independent auditors and regulators from 2014 to 2017 about the actual financial condition of Roadrunner.

In 2014, the defendants identified misstated accounts on balance sheets totaling $7.5 million. Of the outstanding receivables, debts arising from Roadrunner’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 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’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.

From 2014 to 2017, more than 37 million shares of Roadrunner stock were held. In January 2017, Roadrunner announced that it had identified potential accounting discrepancies and accounting errors. Just one day before the announcement, Roadrunner 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 announced restated financial results. On Jan. 30, stocks were trading at $7.14. By Feb. 2, Roadrunner stock plummeted to $4.90 a share, costing shareholders an additional $85 million.

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 is also 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 is also charged with two counts of false statements to a public company’s accountants and one count of insider trading.

Naggs is also charged with one count of false entries in a public company’s books, records and accounts.

In June 2018, Naggs and Wogsland were indicted for their role in the scheme. The indictment filed in April adds Armbruster to the indictment and includes more charges. The most recent indictment supersedes the 2018 indictment.

The corporate headquarters for Roadrunner Transportation is in Downers Grove, Ill. Has recruiting offices in Cudahy, Wis.