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SEC charges former Roadrunner executives with accounting fraud

April 5, 2019
Peter Armbruster and two former employees of Roadrunner Transportation Systems Inc., were charged with fraud.

The Securities and Exchange Commission on April 3 charged the former CFO and two former employees of the publicly traded transportation company Roadrunner Transportation Systems Inc., with fraud for manipulating the company’s financial results in order to meet earnings targets and projections.

The SEC alleges that Peter Armbruster, 60, the former CFO of Roadrunner Transportation Systems Inc., headquartered in Downers Grove, IL, hid incurred expenses by improperly deferring and spreading them across multiple quarters to minimize their impact on Roadrunner’s net earnings. Armbruster then allegedly manipulated certain reductions to liabilities, creating an income “cushion” that could be accessed in future quarters to offset expenses. 

The SEC further alleges that Armbruster, as well as Bret Naggs and Mark Wogsland, former controllers of Roadrunner’s Truckload segment, identified and failed to write-off millions of dollars in overvalued assets and overstated receivables at one of Roadrunner’s operating companies. 

According to the SEC’s complaint, Armbruster, Naggs, and Wogsland also misled Roadrunner’s outside auditor about these misstated accounts, and as a result Roadrunner materially misstated its operating income, net income, and earnings per share in its annual, quarterly and current reports filed with the SEC.

“Investors depend on reliable financial statements to make informed decisions,” said Joel R. Levin, director of the SEC’s Chicago regional office.  “As we allege, these former, high-ranking executives deprived investors of truthful, reliable information on Roadrunner’s financial health.  Instead, they employed deceptive accounting to manipulate earnings in an effort to chase earnings targets and projections.”

In a parallel action, the Fraud Section of the U.S. Department of Justice has filed criminal charges against Armbruster, Naggs, and Wogsland.

The SEC’s complaint, filed in federal court in Milwaukee, WI, alleges that Armbruster, Naggs, and Wogsland violated the antifraud and other accounting-related provisions of the federal securities laws. The complaint seeks permanent injunctions, penalties, and officer-and-director bars against all defendants, disgorgement plus interest from Wogsland, and clawback bonuses and other incentive-related compensation paid to Armbruster while the alleged fraud was taking place.

About the Author

Michael Catarevas

An experienced, award-winning journalist and editor, Catarevas began his career in trade publishing, working at Chain Store Age Executive and National Home Center News. He also served as the longtime editor for two globally circulated fitness titles, Exercise & Health and Men’s Workout. He then moved to Tennis magazine and tennis.com as executive editor. He has also been a frequent freelance writer, contributing profiles, in-depth news stories and features for Connecticut magazine and other publications. Before coming aboard at Fleet Owner he was managing editor for the New Canaan Advertiser newspaper.

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