Judge orders mediation between Pilot, plaintiffs in consolidated rebate fraud cases

By Clarissa Hawes, Land Line staff writer | 8/1/2014

U.S. District Court Judge Amul R. Thapar has ordered mediation between Pilot Flying J and the plaintiffs in a consolidated federal case over allegations the trucking companies were victims of an elaborate manual rebate scam.

The alleged scam was brought to light in April 2013, 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 Flying J 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.

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.

Seven cases were consolidated by the U.S. Judicial Panel on Multidistrict Litigation in the spring. In his July 29 order, Judge Thapar has assigned those cases to U.S. Magistrate Judge Gregory Wehrman for mediation.

“We respect the judge’s opinion as to mediation and are hopeful it will be successful,” Pilot Flying J Spokeswoman Rachel Albright told Land Line on Wednesday, July 31.

The lawsuits, which were transferred to the U.S. District Court for the Eastern District of Kentucky, were filed by seven trucking companies who opted out of an $85 million class action settlement, to pursue their own legal action against Pilot.

Previously on July 21, Judge Thapar ruled that the consolidated case could not proceed with discovery until Pilot had time to file its motions to dismiss.

The judge also raised concerns in the July 21 order that the companies in the consolidated case were not named in the Federal Bureau of Investigation’s affidavit. Most of the lawsuits filed over allegations of fuel rebate fraud have based their cases on critical information contained in the affidavit.

“The plaintiffs’ absence from the affidavit has created some predictable problems for their allegations of fraud,” Thapar ruled on July 21.

In addition to the consolidated case, there are also several lawsuits remaining against Pilot in state courts around the country.

So far, 10 former employees, including those with supervisory roles, agreed to cooperate 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, according to a press release issued by the U.S. Attorney for the Eastern District of Tennessee.

Some Pilot executives have been let go as part of the ongoing criminal probe, including Pilot Vice President of Sales John Freeman and 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.

Pilot CEO James “Jimmy” Haslam III, also owner of the Cleveland Browns, has denied any involvement since news of the fuel rebate scam broke.

Copyright © OOIDA