By D.R. STEWART World Staff Writer on Jan 8, 2012, at 2:22 AM Updated on 1/08/12 at 4:06 AM
Two years ago, Arrow Trucking Co.'s world crashed.
On Jan. 8, 2010, Arrow filed for bankruptcy hours after attorneys for a Utah bank sued Arrow's top executives for fraud that allegedly cost the bank more than $15.1 million.
Three weeks earlier, Arrow executives had shut down operations, stranding hundreds of drivers with their freight around the country without fuel credit cards or money to get home three days before Christmas.
Just after 8 a.m. on Dec. 22, Arrow executives walked around corporate offices at 4230 S. Elwood Ave., told employees to gather their personal items and go home. Then they locked the doors and lay low for weeks as the lawyers and accountants took over.
Arrow bankruptcy trustee Patrick J. Malloy and a team of accountants reconstructed the company's financial records.
Malloy estimated Arrow's assets at $8.55 million and liabilities at $98.97 million.
As a result of avoidance claims and lawsuits against the Utah bank and former Arrow Chairwoman Carol Pielsticker Bump, Malloy was able to distribute more than $4 million in Arrow bankruptcy estate assets to 640 former Arrow employees who had filed wage and employment law violation claims against the estate. The two distributions to former Arrow employees paid wage claims in full, Malloy said.
In the U.S. District Court case, Transportation Alliance Bank of Ogden, Utah, alleges former CEO James Douglas Pielsticker, Chief Financial Officer Jonathan Moore and General Counsel Joseph Mowry participated in an alleged scheme to inflate invoices that TAB purchased from Arrow.
The bank also alleged Arrow executives made "irrational and wasteful" decisions, accepted executive compensation that exceeded the value of services provided to the company and "systematically" looted Arrow of money and other valuables.
Since the suit was filed, TAB has reached settlement agreements with Bump, Piel Corp., Moore and Mowry, who died at his Houston home last month. The bank's lawsuit against Pielsticker has not been settled, court documents show.
Woven between the bankruptcy case and TAB's district court case are tales of spending sprees by Arrow executives - and their indifference at the consequences, an alleged criminal conspiracy and lives upended amid the implosion of the 61-year-old trucking company.
It all came to a head in October 2009 when Chief Operating Officer Gary L. Jones confronted Doug Pielsticker and Mowry in Pielsticker's office.
"I said, 'What in the hell is going on here?' " Jones recalled in his July deposition with TAB's lawyers. "How did this happen? How did it get to this point?' You know, and of course, they were all dumbfounded like, 'What do you mean?'
"Well, your company is, you know, going down the tubes, boys. So you can either admit it yourself or admit it to me or whatever, but ... we got a problem here."
Leadership changes
In 2001, when Arrow Trucking CEO Jim Pielsticker died in a plane crash in Canada, his wife, Carol, did not have an active role in managing the Tulsa flatbed carrier nor did she have a salary, she told TAB's attorneys in a deposition taken in July.
She inherited Arrow, the position of chairwoman and her husband's $1 million a year salary at his death, she said.
She was not a hands-on executive, Carol Pielsticker Bump said.
"I did not have a general and active management of the business," she said. "I did not preside at all meetings. I did not have anything to do with management."
Similarly, Doug Pielsticker's work at Arrow before his father's death was relatively brief, encompassing training programs in various departments over two years, he told TAB's attorneys in March.
TAB's attorneys asked Pielsticker to describe his father's management style.
"Entrepreneurial, hands-on," Pielsticker said.
Pielsticker described his own CEO style as "somewhat removed," and he said he delegated many of his duties to other executives so he could concentrate on human resource issues.
"Operationally, the president handled the company, Tom Witt," Pielsticker said. "Financially, really, Joe Mowry. (Jonathan) Moore handled the company. I would be involved just on the bigger stuff when it came up. You know, when there was a problem, they would come to me. I would ultimately have to go to my mom. We would talk about how to solve problems."
Inflated invoices
Mounting unpaid bills and daily cash crises allegedly led Arrow executives to drastic remedies, court documents and employees say.
Arrow billing clerk Michelle Bullard told TAB lawyers on June 16 that Arrow employees - at the direction of Arrow executives - began submitting false invoices to TAB in July 2009.
Bullard said intentional falsification of invoices began after employees discovered an erroneous bill "for a very large dollar amount" that TAB had purchased.
"And I think it was after that original error - it was not long after that that we started doing a couple of invoices that were overbilled," Bullard said. "... I would look at how many invoices we would have to bill for the day and just try to, I guess, achieve the needed dollar amount by splitting it between all those bills, you know, inflating ... several invoices. It was arbitrary."
"Looking back on the inflated invoice system," TAB attorney Jeffrey Shields asked Bullard, "who do you think now knew about it?"
"I think definitely Jonathan, Doug, Joe," Bullard said.
No accountability
The Utah bank realized something was amiss at Arrow in July 2009 when TAB officers noticed irregularities in documents Arrow submitted in support of its request for payment of accounts receivable.
In early September, TAB sent a finance manager to Arrow's Tulsa office. TAB's employee was told by Moore and Mowry that the irregularities resulted from errors made by a billing clerk who had been fired, the Utah bank said in its lawsuit against Arrow.
In mid-September, TAB's finance manager made a return trip to Arrow's west Tulsa offices.
In an agreement with Mowry, TAB's finance manager was allowed to place calls to certain Arrow customers to verify accounts receivable balances.
About 30 Arrow "customers" telephoned by TAB's finance manager confirmed the Arrow balances, TAB executives said.
"TAB later learned that the phone calls were made to Arrow Trucking accomplices purporting to be Arrow Trucking customers, and that such accomplices had responded falsely to the inquiries," TAB said in its lawsuit.
By October 2009, the TAB overbilling secret was out among several Arrow finance and accounting employees, but it was not known generally.
Gary Jones found out about it when he had Director of Pricing Sara Carter print a run of all Arrow customers and their invoices.
"And when I saw it, I saw these dumb ass amounts standing out in this run," Jones said in his deposition. "And I took it back to her (Carter), and I said, 'This is wrong' ... And she had kind of a funny look on her face, and I said, 'Run it again.'
"And she said, 'I don't have to.'
"I said, 'Why?'
"She said, '... I'm just doing what I'm told.'
"... And I went down and I got Doug and I got Mowry, and I said, 'You guys get your ass on an airplane and get to Salt Lake City and you get this son of a bitch straightened out.' I did not know the magnitude of it, and they assured me then that, 'Oh, it was just a few, just a few, just a few.'
"Well, it wasn't, of course," Jones said. "And it had been going on, I guess, for quite some time. ... But you know ... the people knew, they knew what was going on."
"And by 'they' you mean who?" asked TAB's lawyer.
"Doug, Mowry and Moore," Jones said.
Crashing down
Arrow began missing payments on its leased trucks from Mercedes-Benz Financial Services in September, court documents show.
By late fall of 2009, Arrow Trucking's financial situation had become desperate, court documents show.
Arrow paychecks and checks to vendors bounced, Arrow employees and vendors said.
In response to requests by Arrow executives, TAB made $1.18 million in emergency cash infusions to the Tulsa firm so it could make payroll and buy fuel.
In mid-December, the default issues had worsened to the extent that executives at Mercedes-Benz Financial Services, which did business as Daimler Truck Financial, demanded a meeting with Arrow executives at Daimler's offices in Fort Worth, Texas, on Dec. 18.
At the meeting, TAB executives advised Daimler and Arrow executives that the Utah bank had curtailed its financing of Arrow.
"In light of what we had learned that day, it was agreed by all participants that we needed to have an all-hands credit meeting which included TAB and Navistar (another of Arrow's truck lessors) on Monday (Dec. 21) and that Arrow needed to present its best case for continued operations," said Daimler's Britt Roberts, senior manager of fleet and small business credit.
Representatives of Arrow, TAB, Daimler and Navistar gathered at Daimler's offices or participated via conference call Dec. 21.
Doug Pielsticker was not present at the meeting, Daimler's Roberts said ("... we were told that Arrow had fired him over the weekend"), and Carol Pielsticker Bump did not enter the meeting room, although she was present in Daimler's offices.
Arrow representatives told TAB executives that over the previous year Arrow had appropriated for its own use more than $9 million of withheld federal income trust fund taxes and both employee and employer shares of Social Security and Medicare taxes.
TAB officials informed Arrow representatives that the Utah bank would not purchase anymore Arrow invoices.
Trying to stay alive
In an affidavit he gave on June 7, Daimler's Roberts said Larry Bump, Carol Pielsticker Bump's husband, took the lead at the meeting and gave a presentation that portrayed various present and projected financial and operational data for Arrow.
Larry Bump had a particular interest in Arrow's survival: During the previous months, he had transferred $6 million of his own money to Arrow to keep it afloat.
"While Mr. Bump did an excellent job making the presentation, TAB was unwilling to continue funding," Roberts said.
"After the meeting, we complimented Mr. Bump on the skill of his presentation and that we recognized he had little to work with."
D.R. Stewart 918-581-8451
don.stewart@tulsaworld.com
Original Print Headline: Implosion of Arrow Trucking
