For more than five years, former employees allege some Pilot Flying J employees and management conspired to defraud trucking company customers out of millions of dollars they were owed in rebates and discount programs for purchasing a certain volume of diesel fuel through the truck stop chain each month.
According to the affidavit that was unsealed in federal court in Knoxville, TN, on Thursday, April 18, the alleged rebate scheme was designed for the dual purposes “of increasing the profitability of Pilot and increasing the diesel sales commissions of the Pilot employees participating in the fraud.”
A criminal investigation was launched on Monday, April 15, after questions were raised concerning the company’s rebate and discount fuel programs. The Federal Bureau of Investigation and the Internal Revenue Service raided the company’s Knoxville, TN, headquarters, seizing computers and other documents relating to the alleged rebate fraud scheme. Several subpoenas were also served on Monday.
At a press conference on Tuesday, Pilot Flying J CEO Jimmy Haslam, denied that the rebates weren’t passed onto customers.
However, in the affidavit, one of the FBI informants, who worked for Pilot Flying J, 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 claims Western Express discovered his rebate scam.
Freeman stated 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.”
When asked who knew about the rebate scam regarding Western Express, Freeman stated that Jimmy Haslam, who is Pilot’s Chief Executive Officer, and owner of the Cleveland Browns’ football team, was aware of the situation with Western Express.
“I mean, I called Jimmy (Haslam) and told him I got busted at Western Express,” according to the affidavit.
According to the affidavit, Freeman, who was again being recorded by the FBI informant, 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.
“I tell you what would be great in our world internally, if we could have two-tier pricing,” Freeman was recorded as saying. “Have a set of racks for those companies that don’t close-watch, don’t optimize and then another set of racks where you have to get in that optimizing close-watch game.”
In a statement after the affidavit was unsealed on Thursday, Jimmy Haslam, Pilot’s CEO, released this statement.
“I now understand more clearly the questions the federal investigators are exploring,” he said. “I value the relationships we have with our customers, our vendors and our team members across this country and regret that they have to go through this with us, but I trust and believe their faith in this company and its principles has never been misplaced.”
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