Posted 5/4/2009 12:00 am
Updated 2 years ago
Several of its former employees also have sued Continental, claiming they didn’t receive their vacation pay or severance pay after the truckload, intermodal and brokerage business was sold on Dec. 4 to Celadon Group Inc. of Indianapolis for $24.1 million.
Continental’s owner, Ed Harvey, also has been in sued in U.S. District Court for not repaying a $1.3 million loan that he took out in December and that was due in March.
Adding more to Continental’s troubles is a seven-figure judgment it was hit with in October over an accident involving one of its drivers.
Ralph Bradbury, Continental’s former president, declined to comment. Bradbury and Pete Campbell, who was Continental’s executive vice president, are the only two administrative officers who are now working for Celadon. Harvey didn’t return a call for comment.
Lane Kidd, the president of the Arkansas Trucking Association, said he didn’t know what caused problems for Continental.
But overall, “the trucking industry has been on a gradual slide since the third or fourth quarter of 2007,” Kidd said. “2008 was a very slow year for all sectors of the trucking industry. And you began to see balance sheets becoming more leveraged, except for those companies that really have some strong cash reserves. A buyer’s market ensued.”
In 2008, 3,065 trucking companies with five or more trucks went out of business, which was up 54.4 percent from 2007, according to the American Trucking Associations of Arlington, Va.
Celadon spokesman Craig Koven said he wasn’t sure when Continental contacted Celadon about selling the company.
“When we go in and get involved with a company, they’re usually in some kind of financial trouble and the owner or the management is looking to get out of the business altogether,” Koven said.
On Dec. 4, Celadon bought Continental’s assets, but not its employees, Koven said.
“So employees, any kind of liabilities that the company [has], those are things we don’t take on,” he said.
Some of Continental’s employees weren’t happy with the purchase.
Ronald Baird of North Little Rock had worked in Continental’s road assist department for five years when he learned on Dec. 17 that he wouldn’t have a job.
“They gave us one week notice,” he said. “We got no vacation pay. We got no severance pay. We got nothing.”
Baird is one of 38 former Continental employees who have sued Continental in an attempt to receive their vacation or severance pay, which they said they were entitled to according to the company’s employee handbook.
The lawsuit is seeking class-action certification for the approximately 470 Continental employees who lost their jobs because of the sale, according to the lawsuit filed by attorney Abraham Bogoslavsky of Little Rock. (Bradbury told Arkansas Business in December that Celadon rehired about 300 drivers. But about 250 jobs were lost as a result of the purchase.)
The employees said they were supposed to receive their vacation payments in their Dec. 26 checks but didn’t, the lawsuit said.
“And for some employees [their paycheck] did not include all wages due and owing,” Bogoslavsky said in the lawsuit.
The employees are suing for breach of contract and failure to pay wages due.
“I’m 60 years old and I get laid off a week before Christmas,” Baird said. “I still don’t have a job. … I’m sitting here trying to live on unemployment, and that’s a joke.”
Continental denied the employees’ allegations in its answer filed in the case.
The attorney for Continental, Michael Moore of Little Rock, didn’t return a call for comment.
In another lawsuit, this one filed in U.S. District Court in Little Rock, the Continental employees have alleged that Celadon Trucking Services Inc. violated the Worker Adjustment & Retraining Notification Act because it didn’t give employees 60 days’ notice that they would be out of a job.
The employees are seeking class-action status for that lawsuit as well and want back pay and benefits up to a maximum of 60 days plus at least $200,000 for each member of the class.
Celadon said in its answer that it never employed the plaintiffs. It asked that the case be dismissed.
Continental also is dealing with a 2002 accident involving one of its drivers.
The driver was at an Ohio truck stop when he ran over a man’s leg, which resulted in its amputation, Michael Bruno of Toledo, Ohio, the attorney who represented the plaintiff, said last week.
The victim, Sean McManhon of Park Rapids, Minn., sued Continental and argued that the driver was acting within the “course and scope of his employment,” Bruno said.
A jury in Wood County, Ohio, in October awarded $1.25 million to McManhon.
McManhon hasn’t been paid yet.
One of the first signs of trouble came in October, when Continental failed to pay its $15,000 monthly rent payment to Fleet Equipment Leasing LLC of Memphis, according to a lawsuit filed in January in Pulaski County Circuit Court.
The rent was owed on 50 Great Dane over-the-road trailers. The lawsuit said Continental didn’t make its November, December or January payments either.
Fleet said Continental also failed to return the 50 trailers. At first, it was suing for at least $560,000, which included the price of the trailers and the overdue rent. But by the end of February, 38 of the 50 trailers had been returned, according to paperwork filed in the case, so Continental owed only $120,000 for the trailers at the end of February.
Mark Hodge of Little Rock, who is the attorney for Fleet, said last week that he didn’t know how many trailers were still unaccounted for. Continental has been “cooperative in returning the trucks,” he said.
Continental, though, hasn’t filed an answer in the case.
Another company also filed a lawsuit saying Continental was $24,000 behind on its fuel bill.
Mid-South Sales of Jonesboro, which is a distributor of fuel and petroleum products, said Continental owed for diesel fuel and other products purchased between September and December.
Continental hasn’t filed a response in the case, which was filed in January in Pulaski County Circuit Court.
On Dec. 4, the day Celadon announced the purchase of Continental, Ed Harvey and his wife, Bonnie, took out a $1.3 million loan from Daimler Financial Services Americas LLC of Farmington Hills, Mich.
The Harveys were supposed to repay the loan when they sold a yacht that is in Florida or interest in the Travis Lumber Co. of Mena, according to the lawsuit filed in U.S. District Court in Little Rock. If neither of those events happened, the money was due on March 4.
The lawsuit said that neither sale occurred. And the couple hasn’t repaid the money, the lawsuit said.
“We’re still trying to find the Harveys to get service on them,” said Mitchell Berry of Little Rock, the attorney who filed the case for Daimler Financial. On the promissory note application, they listed their address in Dallas, but they also have a Little Rock address.
Early Trucking Days
Bradbury, Continental’s former president, told the Arkansas Gazette in 1990 that Continental started out with five tractors in 1985 and then the company quickly took off.
Its revenue jumped from $6.8 million in 1986 to $19.8 million in 1989.
Bradbury credited Continental’s management team and its owner, Ed Harvey, for the success, according to the 1990 article.
By 1990, Continental owned or had an interest in more than 500 tractors and 800 trailers. And it continued growing in the 1990s.
At the end of 1997, Bradbury owned 5 percent of Continental. But Ed Harvey still was the largest shareholder with 87 percent of the company owned; Bonnie Harvey owned 2.6 percent. Ed Harvey’s stepdaughter, Jill Pryor, owned less than 1 percent of the company. Pryor’s husband is Sen. Mark Pryor, D-Ark.
In 1999, the American Trucking Associations listed Continental as one of the 10 most profitable truckload carriers in the country.
But Bradbury was burned out and left the company in 1999, he told Arkansas Business in 2006.
Bradbury also told Arkansas Business that he and Harvey had remained friends after the split with the company. Still, the departure proved costly for Continental.
In November 2002, Continental named Michael Kelly Wooldridge as president and Todd Tiefel as its CFO.
The two executives, who were paid more than $100,000 annually, stayed on until May 2005 when it was discovered that they schemed to take more than $1 million from the company, according to the U.S. Attorney’s office.
After Wooldridge and Tiefel left, Harvey called Bradbury in 2005 and asked him to return to Continental, which he did.
Tiefel pleaded guilty in January 2008 to aiding and abetting mail fraud. He was sentenced to 16 months in prison and ordered to repay Continental $558,000 and Harvey $25,000. Tiefel has to report to the Bureau of Prisons on June 8.
A U.S. District Court jury found Wooldridge guilty in January of mail fraud conspiracy but not guilty of credit card fraud.
A sentencing date for Wooldridge hasn’t been set yet.