It hasn’t exactly been the best of times lately for FreightRover, at least not when it comes to legal drama and company leadership. The Indianapolis-based firm, which works to accelerate B2B payments to truck operators, apparently has removed its CEO and COO — the result of a financial accounting scandal at another trucking firm where FreightRover executives had worked.
PYMNTS readers might recall that late last year, FreightRover secured $500 million in financing to fuel its factoring operations, with the capital coming from Crayhill Capital Management. FreightRover said it would use the funds to bolster its invoice financing services for truck operators that wait to get paid from shippers. The company offers an app for truck drivers, which can allow access to funding as soon as they input information on their shipments.
Leadership Changes
Now, FreightRover is in the news again because it reportedly removed from its website leadership team page any mention of (apparently former) CEO Eric Meek and COO Danny Williams — though, as of Wednesday afternoon (May 8), Meek still listed that position on his LinkedIn page, while the page for Williams seemed to be offline. In any case, FreightRover lists as its president Scott Prince (he doesn’t have the CEO title) and no official COO.
The problems reportedly stem not from FreightRover, but from Celadon Group Inc., a trucking firm also based in Indianapolis (capital of a state whose motto is “The Crossroads of America”). Caledon used to employ Meeks and Williams before they went to FreightRover, according to reports. FreightRover would not confirm to media outlets that the two had been fired or otherwise separated from the company, though their disappearance from the leadership web page certainly sent a big signal within the trucking industry.
On his LinkedIn page, Meeks lists 13 years of employment at Celadon, including jobs as president and CEO from August 2015 until April 2017, and as COO before that. Williams reportedly was president of a Celadon subsidiary called Quality Companies during the period of alleged fraud.
Fraud Allegations
Here is what happened, at least according to the U.S. Department of Justice. Celadon recently agreed to “pay total restitution of $42.2 million for filing materially false and misleading statements to investors and falsifying books, records and accounts.”
More specifically, the fraud alleged by federal prosecutors involved Celadon subsidiary Quality Companies, a tractor-and-trailer leasing firm.
“Quality’s financial performance began to struggle in 2016 due in part to a slowdown in the trucking market. In addition, Quality owned a significant number of a truck models with mechanical issues, which many drivers did not want to lease. By 2016, many of Quality’s trucks were idle, unleased and overvalued on Quality’s books by tens of millions of dollars,” the DOJ statement reads.
Federal prosecutors said that “instead of properly reporting Quality’s financial difficulties to investors, members of Celadon’s and Quality’s senior management team, all acting within the scope of their employment, participated in a scheme that resulted in Celadon falsely reporting inflated profits and inflated assets to the investing public through Celadon’s financial statements.
FreightRover Financing Work
There is no indication from the Department of Justice — nor from the trucking industry and local B2B media outlets that have been covering this case — that FreightRover was involved in any of the alleged crimes committed by people at Celadon and Quality Companies.
As for FreightRover, it has apparently issued no statement nor made any public comment about leadership changes. That company continues to work to grain traction in its particular niche of the B2B payments world — a world where the pace of innovation seems to be speeding up, but where much work remains, including when it comes newer forms of financing.
According to reports, FreightRover will be able to roll the $500 million over every 42 days, allowing the company to rotate $4.5 billion in financing every year.
Factoring can be a controversial industry, thanks to high interest rates. In FreightRover’s case, annual percentage rates are between 9.5 percent and 12 percent for carriers that need financing, but many find that favorable to waiting several weeks to get paid. Reports noted the company also digitizes this process, making it easier for truckers to operate.
Reports have noted that, across industries, large firms take longer to pay their suppliers. The 1,000 largest U.S. firms analyzed by The Hackett Group took an average of 56.7 days to pay their suppliers in 2017, an increase from 2016. That’s the challenge and opportunity pursed by FreightRover, leadership changes or not.
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