Trendset in Bankruptcy - Owes Millions!
Trendset Information Systems, a major provider of freight audit and payment services, is bankrupt, owing millions of dollars that shippers had advanced to it to pay their freight bills.
An involuntary bankruptcy petition was filed on behalf of three large shippers on April 15th, putting Trendset into Chapter 11 bankruptcy. The initial reported claims already appear to be greater than $25,000,000, just from five former clients, and we continue to hear of additional Trendset clients with significant claims and possible losses.
According to the court filings:
1. Trendset, Inc. (“Debtor”) offers manufacturers and distributors pre-audit and freight payment services. Petitioning Creditors, among others, contracted with Debtor for such services, which generally entail (1) reviewing and auditing invoices submitted by carriers for transport of Petitioning Creditors’ freight, (2) advising Petitioning Creditors of the amounts required to pay their carriers’ invoices, (3) holding such amounts wired by Petitioning Creditors in trust, and (4) paying such amounts to the appropriate carriers for payment of the corresponding invoices.
2. Petitioning Creditors’ claims arise from Debtor’s loss or misapplication of funds entrusted to Debtor for the purpose of being passed-through to their carriers. As a result, Petitioning Creditors have been forced to seek return of the lost or misapplied funds from Debtor due to the breach by Debtor of its contractual obligations to Petitioning Creditors.
3. On March 25, 2013, Petitioning Creditors received an email from Debtor’s President and Chief Executive Officer (the “March 25th Email”). The March 25th Email notified Petitioning Creditors that Debtor would “not be able to pay all of the freight bills in our system which have been processed and are ready for payment” because of a “significant” deficiency in the bank accounts used to pay carriers for many of Debtor’s customers, including Petitioning Creditors. These accounts were admittedly “not subjected to the rigorous financial controls which should have been in place.” A copy of the March 25th Email is attached hereto as Exhibit “A.”
Trendset's CEO stated in the March 25th email referred to in the court papers:
We strive to deliver the best service possible in order to provide value to your company. Our goal is to process your freight invoices with absolute accuracy and timeliness.
I am writing to inform you that in some respects, we have failed to live up to that promise. You are one of Trendset’s customers for whom we provide the payment of invoices after we have audited and reviewed them. I regret to inform you that we have had a failure of our system for processing and making those payments.
One of our trusted employees engaged in a fraud and embezzled funds from our Company’s bank accounts-the accounts from which we pay your freight invoices. The fraud was discovered through a review of suspect transactions first noted by our bank. Federal authorities, including the FBI, were alerted and a forensic review was conducted. The employee was indicted and plead guilty to certain charges. . . .
These accounts and transactions were not subjected to the rigorous financial controls which should have been in place.
As a result, we believe there is a deficiency in two of the bank accounts which we use to make payments to freight carriers on your behalf. These two accounts are used to pay freight bills for several of our customers. Because of the deficiency, we will not be able to pay all of the freight bills in our system which have been processed and are ready for payment.
On April 12, 2013 the U.S. Attorney’s Office for the Western District of North Carolina issued a press release regarding a husband and wife sentenced on April 11, 2013 for filing false tax returns. According to the press release, the wife, Julie Greene Tucker, 52, was an employee of Trendset from around 1996 to July 2011, with her last position at Trendset being Director of Administration. In that capacity, she had access to Trendset bank accounts and had the authority to write checks and initiate wire transfers from these accounts on behalf of Trendset.
Apparently, for about 15 months, Julie Tucker took advantage of her position to embezzle Trendset funds which were used to pay bills, buy vehicles, make major home renovations and live a lavish lifestyle. Of note, as a result of the sentence, amongst other things, Julie Tucker was ordered to pay $590,128 as restitution to Trendset. What is particularly obvious is that from the Bankruptcy filings and other sources, the total “deficiency” appears to be significantly greater than the $590,128 that Julie Tucker was ordered to repay.
This is a developing situation, and at this time it is purely speculative how much money is missing, or where it went. One thing that seems clear, is that while Julie Tucker’s actions were responsible for part of the problem, a lot more money needs to be accounted for. If you have any questions, are involved or have additional information, please contact the Transportation & Logistics Council.
The bankruptcy case, Case No. 13-2225, was filed in the Bankruptcy Court for the District of South Carolina.