United States v. Armbruster

Facts

D's responsibilities as CFO included the preparation, certification, and filing of Roadrunner's consolidated financial statements with the SEC (P). The company's financial statements effectively incorporated the financial affairs of certain of Roadrunner's subsidiaries, including Morgan Southern, a Georgia-based transportation company. Morgan Southern's own accounting practices were lagging, with the company not regularly reconciling account balances and lacking adequate staffing. In 2014, Roadrunner's then-controller, Brock Even spearheaded an effort to examine the accuracy and integrity of Morgan Southern's financial accounting and reporting practices. Two of Roadrunner's departmental controllers, Bret Naggs and Mark Wogsland, traveled to Morgan Southern's home office in Georgia to examine the company's books and records. In November 2014 Stephen Voorhees became Morgan Southern's controller. When Voorhees left Roadrunner in April 2016, many deficiencies in Morgan Southern's accounting remained unresolved. Voorhees conveyed his key concerns and findings to a group of Roadrunner accountants including D. Voorhees found that Morgan Southern had inflated its balance sheet by at least $2 million and perhaps as much as $4-5 million. Morgan was carrying a receivable from IKEA Maersk above its net realizable value. Morgan Southern hired Christopher Lacey as its new controller. Lacey noticed the company's accounting problems, including the overstatement of the IKEA Maersk receivable and prepaid taxes account, and relayed his concerns to Roadrunner's vice president of finance Heather Hipke, and new Chief Operating Officer Mike Gettle. Hipke and Gettle reacted with similar trepidation and raised their own concerns with D in the third quarter of 2016. Roadrunner filed its 2016 third-quarter Form 10-Q. It reflected no adjustments of the carrying values of the two Morgan Southern balance sheet items and, it would turn out, it also included other misstatements. Roadrunner was in clear violation of GAAP. The Board was eventually informed and Roadrunner informed its independent auditor, Deloitte & Touche LLP, of the material misstatements in the third-quarter financial statements. Roadrunner filed a Form 8-K informing investors that they could no longer rely on any of the company's financial filings from 2014 or 2015 or its quarterly reports for the first three quarters of 2016. Roadrunner's share price dropped. The company filed restated financial statements, reporting a decrease of approximately $66.5 million in net income over the misstated periods. Roadrunner's share price plummeted again and in time criminal charges followed. Criminal charges were brought against D and two former departmental controllers, Bret Naggs and Mark Wogsland, alleging various forms of securities and accounting fraud. The jury returned a mixed verdict, acquitting Naggs and Wogsland on all counts but convicting D on four of the 11 charges brought against him. Convictions were on two counts of knowingly falsifying Roadrunner's accounting records by materially misstating the carrying values of the Morgan Southern IKEA Maersk receivable and prepaid taxes account; one count of fraudulently influencing Deloitte & Touche LLP, Roadrunner's external auditor, by submitting a false and misleading management representation letter relating to the third quarter of 2016; and one count of filing fraudulent financial statements with the SEC. D contends that P did no more than prove corporate accounting mistakes, not deliberate fraud on his part. D challenges only the district court's denial of his post-verdict motion under Rule 29(c) contesting the sufficiency of the government's evidence on each count of conviction.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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