The Securities and Exchange Commission (SEC) has announced charges against Roadrunner Transportation Systems, Inc., a shipping and logistics company, for its involvement in a long-term accounting fraud. The SEC revealed on February 14, 2023, that Roadrunner manipulated its financial reports over several years, specifically from at least July 2013 to January 2017. This action highlights the SEC’s commitment to ensuring financial transparency and holding companies accountable for misleading investors.
Based in Downers Grove, Illinois, Roadrunner Transportation allegedly engaged in fraudulent activities to meet earnings targets and analyst expectations. According to the SEC’s order, Roadrunner’s scheme involved several deceptive practices. These included improperly deferring expenses and spreading them across multiple financial quarters to minimize their impact on the company’s reported net earnings. This manipulation allowed Roadrunner to create a false impression of its financial health. Furthermore, the company is accused of failing to write down assets that had become worthless and receivables that were uncollectable, further distorting its financial picture.
Another key aspect of the fraud involved manipulating earnout liabilities related to Roadrunner’s acquisitions. This tactic created an artificial income “cushion,” which the company could then use in subsequent quarters to offset actual expenses. The SEC order emphasizes that Roadrunner actively concealed this fraudulent conduct from its independent auditor, undermining the integrity of the financial oversight process.
As a direct consequence of these actions, Roadrunner Transportation materially misstated its financial results in numerous public disclosures. These misstatements appeared in earnings releases, investor earnings calls, and official quarterly and annual reports. This pattern of misreporting spanned from at least the second quarter of 2013 through the third quarter of 2016, deceiving investors and the market about the true financial condition of Sec Roadrunner Transportation.
The SEC’s order details the specific violations committed by Roadrunner. These include violations of antifraud, reporting, books and records, and internal accounting controls provisions. Specifically, Roadrunner violated Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, along with related rules.
Without admitting or denying the SEC’s findings, Roadrunner has agreed to a settlement to resolve these charges. As part of the settlement, Roadrunner will cease and desist from future violations of these securities laws. The company is also required to pay disgorgement of $7,096,092 and prejudgment interest of $2,539,820. The SEC order notes that these payments are considered satisfied due to a previous settlement payment made by Roadrunner in a related securities litigation case, In re Roadrunner Transportation Systems, Inc. Securities Litigation, Case No. 2:17-cv-00144 (E.D. Wis. Jan. 31, 2017).
The SEC investigation into sec roadrunner transportation was a collaborative effort. Bradley Lewis and Wilburn Saylor, Jr. from the SEC’s Chicago Regional Office conducted the investigation, under the supervision of Brian Fagel. The SEC also acknowledged the assistance of the Fraud Section of the U.S. Department of Justice in this matter. This case underscores the SEC’s vigilance in policing financial markets and protecting investors from fraudulent accounting practices.
