Two more Pilot Flying J executives have been fired as the criminal investigation into the truck stop chain’s alleged manual rebate scam continues.
A source close to the investigation has confirmed for Land Line on Monday, June 2, that John Freeman, vice president of sales at Pilot, as well as Vince Greco, who was the former director of sales for the company’s western region, are no longer with the company.
A criminal investigation was launched on April 15, 2013, 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, Tenn., headquarters, seizing computers and other documents relating to the alleged rebate fraud scheme. The home offices of some of the company’s sales personnel were also searched.
For more than a year, Freeman has been on paid administrative leave following the raid on the company’s headquarters in Knoxville. It’s unclear whether Greco had been working at Pilot or had also been placed on paid leave.
In the affidavit, which was released just days after the raid in 2013, one of the FBI informants, who worked for Pilot Flying J, recorded a conversation with Freeman. He brought up a situation with trucking company Western Express. Freeman claims Western Express discovered his rebate scam. After the scam was detected, Freeman bragged that 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 in the affidavit 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 another meeting to discuss a two-tiered pricing structure that would “impose higher prices on less sophisticated customers.” Mark Hazelwood, who is no longer 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.”
Two former high-ranking officials also left their positions at Pilot Flying J in mid-May. A source close to the Pilot Flying J investigation confirmed at that time that Mark Hazelwood, former president for Pilot, and Scott Wombold, vice president of national accounts, were no longer with the company. According to court documents, Hazelwood has been named as a defendant in some of the civil lawsuits filed against Pilot.
Since a criminal investigation was publicly launched into Pilot Flying J’s fuel rebate programs 13 months ago, the country’s largest truck stop chain has faced 31 federal and state lawsuits. A total of 10 former Pilot employees are awaiting sentencing for their roles in the alleged fraudulent scheme.
In April, the U.S. Judicial Panel on Multidistrict Litigation granted Pilot’s motion to consolidate the remaining seven federal lawsuits filed against the truck stop chain. However, 10 lawsuits remain against Pilot in state courts around the country, and more may be filed by trucking company customers who opted out of the $85 million class action settlement.
The four-judge panel decided the seven lawsuits filed in six federal districts will be consolidated and transferred to the U.S. District Court for the Eastern District of Kentucky. Pilot had requested in its motion that the cases be transferred to the U.S. District Court in Knoxville, Tenn.
“We preferred a Tennessee venue, but we are pleased the court has consolidated the remaining cases,” Albright told Land Line.
The alleged manual rebate scam was brought to light nearly two years after informants who worked for Pilot notified federal agents of an alleged conspiracy. Trucking companies were allegedly defrauded 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.
Pilot CEO James “Jimmy” Haslam III, also owner of the Cleveland Browns, has denied any involvement in the alleged fuel rebate scam.
“April 15, 2013, was an extremely embarrassing and humbling day for Pilot Flying J,” Haslam wrote in a statement. “Since then, we have pledged to make things right with our customers.”
In the statement, Haslam said that Pilot has paid “virtually every customer with interest” and has “put the proper systems and controls in place to ensure this type of behavior does not happen again.”
After the federal probe was launched, the initial word from Pilot was that only a small group of trucking companies had been targeted by the alleged manual rebate scheme. However, the scope of the investigation was quickly expanded. Of the approximately 5,500 members of the class that was part of the $85 million settlement, only around 60 trucking companies opted out of the deal to pursue their own legal action.
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