Pilot reaches $92 million agreement with DOJ over rebate scam

By Clarissa Hawes, Land Line staff writer | 7/14/2014

Pilot Flying J, which has been embroiled in a criminal probe of its diesel fuel sales rebate program for the past 15 months, has agreed to pay a $92 million penalty, make full restitution to fraud victims, and continue to cooperate with an ongoing federal investigation into its rebate program.

A criminal enforcement agreement was reached on Monday, July 14 between Pilot, the U.S. Attorney’s Office for the Eastern District of Tennessee and the U.S. Department of Justice.

According to the agreement, Pilot will not be prosecuted as long as the company pays the agreed upon fine of $92 million over a two-year period and fully cooperates with the federal investigation into the company’s direct sales division.

The nation’s largest truck stop chain has already paid $56 million to its customers as part of a class action settlement reached with trucking company customers over its manual rebate program.

So far, 10 former employees in the company’s direct sales division, including those with supervisory roles, have been cooperating with federal investigators. The employees have pleaded guilty to mail and wire fraud charges in connection with their involvement in the “fraudulent reduction of diesel fuel price discounts owed to Pilot customers,” said William C. Killian, U.S. Attorney for the Eastern District of Tennessee.

Some Pilot executives have been let go as part of the ongoing criminal probe, including 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.

Mark Hazelwood, former president for Pilot, and Scott Wombold, vice president of national accounts, are also 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 program. The home offices of some of the company’s sales personnel were also searched.

There are 10 lawsuits remaining against Pilot in state courts around the country. More may be filed by trucking company customers who opted out of the class action settlement.

The alleged manual rebate scam was brought to light nearly two years after informants who worked for Pilot notified federal agents of a possible 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 since news of the fuel rebate scam broke.

“We, as a company, look forward to putting this whole unfortunate episode behind us, continuing our efforts to rectify the damage done, regaining our customers’ trust, and getting on with our business,” said Haslam in a statement on July 14, the day the settlement was announced. “We’ve been committed from the beginning of this to doing the right thing, and that remains our commitment.”

Copyright © OOIDA