A federal judge ruled on a flurry of motions and claims Wednesday in an ongoing civil lawsuit brought by seven trucking companies who say they were duped as part of fuel rebate scam perpetrated by Pilot Flying J, the company’s subsidiaries and its executives.
The rulings mean that the lawsuit, which is being brought by companies who opted out of a proposed $85 million settlement that Pilot agreed to last year, can proceed. However, the judge did dismiss some of the allegations filed against the company.
Altogether about two dozen counts were allowed to proceed against Pilot, including charges of fraud, negligent misrepresentation and breach of contract. The judge also granted Pilot’s motion to dismiss more than a dozen other counts.
The judge also dismissed seven of 11 claims against CEO Jimmy Haslam, but allowed four charges to go forward including conspiracy to commit fraud and unjust enrichment allegations.
Among the revelations in Judge Amul R. Thapar’s 77-page ruling is the judge’s statement that based on the facts asserted by two New Jersey-based trucking companies alleging a RICO conspiracy on the part of the defendant corporations and individuals, it’s plausible that Haslam and other executives may have been aware of and helped continue the fraud scheme. Haslam has not been charged with any crimes.
The judge stated that at least four facts “plausibly suggest that some of the individual defendants managed or knowingly carried out the fraudulent rebate scheme.” Specifically:
- that Haslam and executives such as former national director of sales Brian Mosher, former regional sales director Arnold Ralenkotter, former sales vice president Mark Hazelwood, and former vice president of sales John “Stick” Freeman planned a 2012 annual meeting with “breakout sessions for teaching other employees to reduce rebates without detection”;
- that those individuals planned teaching sessions to train employees – or directly taught other employees how to do so;
- that Mosher, under orders from Hazelwood, told others to reduce rebates manually; and
- that Freeman hosted a meeting at his residence to “discuss how to perpetuate the fraudulent rebate scheme.”
“Together, these facts at least plausibly suggest that Haslam, Mosher, Ralenkotter, Hazelwood, and Freeman “adopt[ed] the goal of furthering or facilitating the criminal endeavor,” the judge wrote in the order.
The order allows the suit to proceed, but the allegations must still be proven in court.
When reached for comment, a spokesperson for Pilot Flying J submitted the following response via email:
“These plaintiffs opted out of a class settlement that would have assured them any amount owed plus interest, choosing instead to make exorbitant claims. We are pleased that the Court dismissed a number of plaintiffs’ claims and believe that plaintiffs' remaining efforts to collect excessive damages and attorney fees lack merit. We intend to continue to defend against them vigorously.”
Mosher and Ralenkotter are among 10 former PFJ employees who have pleaded guilty to fraud-related charges involving the fuel rebate scheme last year and are cooperating with authorities. Hazelwood and Freeeman, who were both fired by the company in May 2014, received target letters from federal prosecutors last year, stating that prosecutors have “substantial evidence” linking them to crimes. Neither man has been charged.
Pilot agreed to pay $92 million in fines and accept responsibility for the criminal conduct of employees in exchange for an agreement with federal prosecutors to avoid prosecution. The agreement does not prevent individual employees of the company from being prosecuted, however.
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