Celadon Group depleted the cash generated by the profitable core business of Hyndman Transport without leaving sufficient funds for employees and creditors after its sudden shutdown, the Canadian trucking company’s former chief financial officer alleges in a forthcoming court filing.
Jeff Sippel details the allegations in an affidavit that a lawyer representing more than 200 former Hyndman employees and contractors seeking C$2.3 million in unpaid compensation plans to file in Ontario Superior Court on Wednesday as part of forthcoming Canadian bankruptcy proceedings.
Sippel, Hyndman’s CFO at the time of the Dec. 9 closure, alleges that Celadon’s transfers from Hyndman’s accounts, in effect, undermined former employees’ preferential standing under Canadian law and that its failure to initiate timely bankruptcy proceedings in Canada deprived them of federal benefits.
“I am also concerned that prior to ceasing operations, Celadon diverted funds from the accounts of Hyndman Canada without ensuring there will be sufficient cash left to pay amounts owing to employees as well other Canadian creditor claims,” Sippel said in the affidavit.
The former executive does not accuse Celadon of intentionally trying to harm former employees. But he raises serious concerns about cash transfers before and after Hyndman’s closure and its efforts to sell off Hyndman’s facilities in Canada.
Sippel’s claims, including that Hyndman had a net positive cash flow of more than C$600,000 in November and had several million dollars in receivables, also raise questions about why Celadon opted to close the trucking company rather than sell it intact.
Sippel intends to serve as the representative for the former employees – primarily truck drivers – as they seek C$2.3 million in unpaid compensation from Hyndman’s Canadian assets. Sippel contends that he is owed about C$77,000.
Celadon is planning to file for recognition of its Chapter 11 bankruptcy proceedings in Canada, perhaps as early as Thursday. A court-appointed receiver will oversee the liquidation of Hyndman’s assets and payments to creditors.
A judge in Canada has barred Celadon from transferring funds to creditors in U.S. Chapter 11 proceedings or selling assets in Canada without his approval.
A lawyer for Hyndman Transport did not immediately respond to FreightWaves’ request for comment.