Former employees of Roadrunner Transporation Systems Inc. have been charged with accounting fraud by the Securities and Exchange Commission. The charges came earlier in the month when two former employees and the former CFO of Roadrunner were charged for manipulating the company’s financial reports to meet earnings projections and targets.
Expenses were improperly deferred and spread across multiple quarters to help minimize the risk of the expenses on the company’s earnings.
Peter Armbruster, the former CFO, was charged for hiding these incurred expenses. The SEC claims that Armbruster created an income cushion for the company. Two additional employees were responsible for failing to write-off several millions of dollars of overvalued assets. The duo also overstated receivables at one of Roadrunner’s companies.
Outside auditors were misled, leading to the companies misstating earnings per share, net income and operating income on all filings with the SEC.
The scheme reportedly led to $245 million in losses to the company’s shareholders.
Roadrunner fired Armbruster when the company discovered accounting issues for two of its subsidiaries. He worked for the company from 2005 to 2017. Filings with the SEC show that the company still paid nearly $240,000 to the ex-CFO in severance pay. The fraud led to net income being overstated by $66.5 million between 2011 and Q3 2016.
Armbruster was allowed to receive bonuses based on the company’s performance. He received at least $128,000 in bonuses while manipulating the company’s results. He also sold stock in the company that led him to earn $310,000 in gains. Another employee that was charged with accounting fraud was able to profit from the sale of stock and exercised options with a $230,000 profit.
“When an accountant has knowingly committed negligence or wrongful acts, such as embezzlement, he may make misrepresentations to hide his actions. A misrepresentation in itself is a negligent act. When establishing a claim of intentional misrepresentation, a plaintiff will need to prove that the information provided is false and that it caused damage. Gross negligence claims and intentional misrepresentations could result in higher awards for the plaintiff,” claims Gassman Legal, P.C.
All of the men involved are prohibited from working for a public company as officers or directors. The trio must also pay civil penalties, which have yet to be specified, and forfeit any ill-gotten gains they received from their fraudulent actions.
Attorneys working on the behalf of Armbruster claim that their client is innocent of all allegations against him.