Western Express Inc. of Nashville, Tenn., is the latest trucking company to file a lawsuit against Pilot Flying J. The trucking company claimed it was defrauded out of $2.5 million, resulting in losses of more than $75.5 million in an alleged fuel rebate scam.
In its complaint, filed in state court in Louisiana, Western alleges that Pilot sales staff knowingly withheld funds “which (Pilot) knew Western needed to operate its business and meet its obligations.”
The company, which has 2,550 power units and the same number of drivers, claims it purchased more than $1 billion worth of fuel from the truck stop chain from 2005 through 2013. Western Express alleges it was overcharged by as much as 9 cents per gallon over an eight-year period as a result of Pilot’s fuel rebate program.
According to court documents, Western Express claims that “Pilot’s fraudulent deprivation of Western’s rebates created a shortfall in Western’s business that dramatically impacted Western’s finances.”
As a result, Western Express claims that it was forced to default on a loan covenant with its lenders, which required them to enter a consulting agreement with Knight Management Services Inc., and enter into a stock option investor rights agreement with Knight Capital Growth Inc., as well as “enter amendments and waivers to their credit facilities with JP Morgan Chase and Key Principal Partners.”
Western Express was one of the trucking companies targeted by Pilot Flying J sales staff, according to the 120-page affidavit. The Federal Bureau of Investigation and the Internal Revenue Service raided Pilot’s headquarters on April 15.
In the affidavit, one of the FBI informants, who worked for Pilot Flying J, recorded a conversation with John Freeman, who was the vice president of sales for Pilot. Freeman is recorded as saying that Pilot overcharged Western Express by approximately $450,000 per month.
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.
In its suit, Western Express charges Pilot with fraud and wrongful conversion, as well as a jury trial. It seeks punitive damages and reimbursement of attorneys’ fees.
While the criminal investigation is still ongoing, seven former Pilot employees have pleaded guilty to their roles since news of the alleged fuel rebate scam broke in mid-April. More than two dozen trucking companies have filed state and federal lawsuits against the truck stop chain.
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