Pilot Flying J attorneys deny Haslam's involvement in rebate scam

By Greg Grisolano, Land Line staff writer | Monday, December 08, 2014

Attorneys for Pilot Flying J CEO Jimmy Haslam are asking for a federal judge to dismiss a lawsuit brought by two trucking companies alleging that Haslam directed a fuel-rebate fraud scheme for his family’s truck stop chain.

The dismissal motion, which was filed Dec. 5 in the U.S. District Court for the Eastern District of Kentucky, argues that the complaint filed by attorneys for plaintiffs National Retail Transportation Inc. and Keystone Freight Corp. “fails to state any viable claim against Haslam.”

“Rather than backing their claims with details about how Haslam supposedly acted to
deprive them of rebates owed under their fuel purchase contract with Pilot Corporation… Plaintiffs offer only conclusory assertions, contending that Haslam ‘was aware of and directed Pilot’s employees to engage in a scheme to defraud its clients’ and ‘personally benefited’ from the alleged scheme,” Haslam’s attorney, Stephen D. Brody wrote in the motion to dismiss.
 
The amended suit was filed on 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.

But those assertions are “unsupported by allegations describing who Haslam supposedly directed, what he communicated, or when any directions were given” according to Brody.

“Similarly, plaintiffs do not allege that Haslam participated in meetings in which the alleged scheme was planned, discussed or implemented. They do not allege that Haslam ever communicated with Plaintiffs or even that he communicated with someone who did so,” he stated.

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.

Senior Editor David Tanner contributed to this report.

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