An amended lawsuit seeks to tie Pilot Flying J CEO Jimmy Haslam to an alleged scheme to defraud participants in the company’s fuel-rebate program.
Attorneys for National Retail Transportation Inc. and Keystone Freight Corp. amended their complaint against Pilot Travel Centers, Pilot Corp. and Propeller Corp. on Friday, Nov. 14, to say that Haslam, former sales vice president Mark Hazelwood, and other named company officials profited from the scheme by shorting trucking companies enrolled in their rebate program.
The lawsuit resides in the U.S. District Court for the Eastern District of Kentucky but features allegations and breaches of contract in the state of New Jersey.
The plaintiffs allege that Haslam, Hazelwood and other named defendants concocted the scheme, sent fraudulent rebate checks to trucking companies, and made false statements when confronted about discrepancies in the amounts.
Other defendants named in the complaint are John Freeman, Arnold Ralenkotter, Brian Mosher, Scott Wombold, Vickie Borden, Lexie Holden, Kevin Hite, Tim Prins and Karen Mann.
Plaintiffs accuse the defendants together and in smaller groups of fraud, breach contract, unjust enrichment, aiding and abetting, engaging in “unconscionable commercial practices” under the New Jersey Consumer Fraud Act, falsely advertising the price of fuel under New Jersey’s advertising regulations, conspiracy to engage in racketeering, conspiracy to commit fraud, and conducting an enterprise through racketeering.
“In particular, the defendants conspired to send false fraudulent, misleading, manipulated, modified, statements and rebate checks to the plaintiffs knowing that said rebate checks and statements were false, fraudulent and misleading so as to defraud the plaintiffs of their proper rebate,” plaintiffs stated in a document known as a Bill of Particulars.
“Each of the rebate checks sent were fraudulent in that defendants intentionally manipulated the rebate due and owing and then represented that the rebate check accurately reflected the correct amount due, knowing that same was false and misleading,” the document states.
The document specifically accuses Haslam of knowing about and helping to orchestrate the activities. NRT/KFC refers to the trucking companies, National Retail Transportation Inc. and Keystone Freight Corp.
“James Haslam instructed Pilot employees to advise NRT/KFC that they would receive specific discounts in the form of monthly rebates for each gallon of fuel purchased from Pilot,” the document states.
“Haslam never intended for Pilot to honor its agreement with the plaintiffs and rather, each month, Pilot’s employees under Haslam’s direction and control manually adjusted and reduced the rebates that were due and owing to NRT/KFC.
“Pilot’s employees, under Haslam’s direction and control, sent fraudulent rebate checks to NRT/KFC in New Jersey.
“As a result of said action, NRT/KFC suffered a loss of the full amount of the rebate along with other losses including being denied the opportunity to purchase fuel from Pilot competitors at a lower price, increased borrowing costs and paying interest on certain loans.
“Pilot and Haslam personally benefited from the scheme in the form of increased profits, bonuses, valuation of his company and compensation packages.”
Federal investigators launched an investigation into Pilot’s rebate program based on testimony from informants. The FBI and IRS raided company offices in Knoxville, Tenn., in April 2013, and also searched homes and properties of individuals.
A series of lawsuits followed the raid and the publication of a telling affidavit about the conduct of certain company officials and sales staffers concerning the rebate program.
In the summer of 2014, Pilot Flying J agreed to pay a $92 million penalty as well as $85 million in restitution to 5,000 rebate customers to avoid prosecution.
Individuals remain the subject of separate lawsuits.
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