By Clarissa Kell-Holland, staff writer
Since the April raid on the Pilot Flying J headquarters as part of an investigation into allegations that the company failed to pay some of its customers what they were owed, the fallout doesn’t seem to be slowing down.
While a criminal investigation launched by the Federal Bureau of Investigation and the Internal Revenue Service is ongoing, no criminal charges have been filed yet against Pilot Flying J or its owner, James “Jimmy” Haslam III, as of press time. However, civil lawsuits against the truck stop chain and employees continue to mount.
After news of the investigation broke, Haslam, also owner of the Cleveland Browns’ football team, originally denied that the rebates weren’t passed onto customers. He later stated that the investigation centered on a “small group” of Pilot’s trucking company customers.
However, in the weeks following the raid, Haslam has personally contacted nearly 300 of Pilot’s trucking company customers that may have been affected by the alleged rebate scam, offering to write them a check on the spot to right any wrongs.
The alleged scheme was a lot like the flea flicker, a misdirection play designed to trick the defense into thinking the offense is running the ball instead of passing.
Pilot’s alleged rebate scam was designed to encourage trucking companies to purchase a certain amount of fuel from the company each month. Then that amount was adjusted by a certain percentage to allegedly profit the company and boost the commission of its sales staff before the checks were sent out.
While some trucking companies discovered the rebate discrepancies through internal audits, others weren’t aware of potential shortages until news of the criminal investigation broke. Some companies who have found they did not receive the full rebate amount owed and have been reimbursed say they will continue to fuel at Pilot because its fueling network is so large and fuel prices remain among the lowest.
Flagged for unsportsmanlike conduct
The contents of the FBI’s120-page affidavit, unsealed a few days after the raid of Pilot Flying J in April, would shock many people. It outlines alleged schemes to defraud trucking companies out of money owed through rebate or discount programs offered by the truck stop chain.
Over a period of time, an informant who worked at Pilot and cooperated with the FBI, recorded a series of meetings with Pilot’s national sales staff. The affidavit quotes offensive language, including racial remarks.
The affidavit alleges the company manually changed rebate amounts in what Pilot’s national sales staff nicknamed “manuels,” “manuals,” “manwells” or “mannys.”
A confidential informant who worked at Pilot and cooperated with the FBI recorded a meeting with national sales staff about the alleged rebate scheme targeting Hispanic trucking company owners in South Florida. The informant recorded a conversation where Kevin Hanscomb, current director of sales for the east region, told other Pilot sales staff about a possible vulnerability because of a “language barrier.”
“They’re not stupid; there is just … uh … there is a language barrier. So you can get away with a little bit more because they know that they are not going to understand everything you say. So you can say cost minus, or cost plus 3, and it’s cost plus 5 and they’re not going to go oh well, he’s screwing us … maybe I misunderstood. So there is some forgiveness there that probably isn’t at other parts of the world.”
If trucking companies discovered a discrepancy in the amount they were owed, Pilot employees allegedly blamed a computer glitch for the error, then would send out a check for the full amount owed. According to court documents, some of Pilot’s sales staff made a company ask a minimum of three times before the sales staff would provide any back-up documentation about the customer’s rebate.
An FBI informant recorded a conversation with John Freeman, who is currently the vice president of sales for Pilot. In the conversation, Freeman brought up a situation with trucking company Western Express. Freeman said Western Express discovered his rebate scam.
Freeman reportedly said that after the rebate fraud was detected, he bought an airplane belonging to Western Express for $1 million, instead of refunding the money by check to the trucking company.
“Did it for five years, cost us a million bucks,” Freeman said. “I mean we made $6 million on the guy, cost us a million bucks.”
According to the affidavit, Freeman was recorded saying that Haslam, Pilot’s chief executive officer, was aware of the situation.
“I mean, I called Jimmy (Haslam) and told him I got busted at Western Express,” Freeman said according to the affidavit.
According to the affidavit, Freeman was recorded another time by the FBI informant. Freeman participated in a February meeting to discuss a two-tiered pricing structure that would “impose higher prices on less sophisticated customers.” Mark Hazelwood, president of Pilot, and other regional and national sales directors for Pilot Flying J also participated. According to court documents, that plan was later scrapped.
Since the allegations made against Pilot were announced, nearly everyone in the industry who purchases large amounts of diesel fuel is questioning whether they are really getting what they paid for at the pump.
Ryan Mossman, vice president and fuel center general manager of FuelQuest, a third-party fuel invoicing program, told Land Line that improper invoicing, as well as the recent allegations made against Pilot Flying J, highlights a large problem.
His company, which manages the purchasing and payment of more than 20 billion gallons of diesel each year, has designed a software program to manage the whole fuel transaction, including taxes, to ensure customers are getting what they paid for.
However, Mossman admits these services may not be cost effective for small companies or owner-operators who can’t afford to have a third-party company negotiate and verify their fuel purchases.
Mossman said that while trucking companies are able to verify that they get what they pay for, owner-operators leased to a company using this type of system are in the dark because they are not privy to the negotiated price for fuel.
“It’s a good question, but the trucking companies have to have some sort of transparency with the owner-operators,” he said.
Rick Ash, an OOIDA member from Lakewood, CO, is leased on with a trucking company that uses Pilot Flying J for its fueling needs. He isn’t privy to the agreed-upon price for fuel before he sees the price at the pump.
“All I know is that they can negotiate a price that on my own I can’t,” Ash said. “Typically, drivers won’t come and work for a company that doesn’t offer some type of fuel discount.”
In cases where trucking companies with owner-operators are owed money through Pilot Flying J’s rebate program, Pilot Flying J spokesman Tom Ingram said it is up to the trucking company to decide “how much or what goes to the owner-operators.” LL