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Rebate Scam Allegedly Earned Millions for Truck Stop Operator Pilot Flying J

Apr 23, 2013

Pilot Flying J truck stop chain is the subject of a fraud investigation by the FBI, which is looking into an alleged scam involving Pilot executives stealing millions of dollars owed to customers in the form of gas rebates to boost the company’s bottom line and also fatten their commissions.

The investigation roared into the public’s eyesight last week, when federal agents raided the company’s West Knoxville, Tenn.-based corporate headquarters. A 120-page federal search warrant affidavit was filed in U.S. District Court in Knoxville, Tenn. It specifically charged sales employees with pocketing fuel price rebates and discounts that should have gone to the company’s trucking company customers, The Plain Dealer reported, adding that the affidavit also revealed that FBI and IRS agents are investigating charges of conspiracy, mail fraud and wire fraud.

The document also noted that the scheme had to involve the company’s highest-level executives, the Plain Deal reported, noting that current president Mark Hazelwood and CEO James A. “Jimmy” Haslam III, who also owns the Cleveland Browns, had to be aware of it because “rebate fraud-related activities have been discussed during sales meetings in Knoxville, Tenn., in which Hazelwood and Haslam have been present.”

Haslam earlier this week revealed details of the company’s response to the charges, while at the same time remaining mindful not to acknowledge that any of the allegations were true, The Tennessean reported.

Immediate steps taken by Pilot Flying J include putting members of the sales team on administrative leave and hiring an outside investigator with experience working at the U.S. Justice Department to conduct an independent review. The response also included ordering internal auditors to review the multibillion-dollar truck stop company's direct billing process with each of Pilot's 3,300 trucking clients, USA Today reported.

“We make mistakes like any company does but there is absolutely no excuse for that kind of behavior,” Haslam was quoted as saying by The Tennessean. “I don’t think I’ve ever been as embarrassed as I have been since I read the affidavit.”

He added: “I, more than anyone, understand the damage to relationships,” noting whereas the company once had the best relationships in the trucking industry, since the FBI raid and accompanying news, “[w]e now have the worst,” he said.

Haslam did not name the executives who were put on leave, USA Today reported, although the affidavit included “especially blistering” recorded conversations involving John Freeman, the vice president of sales, and Brian Mosher, the director of sales for national accounts.

The rebate program would give a trucking company a certain number of rebates based on the volume of diesel fuel its individual drivers purchased at Pilot’s truck stops, which are located throughout the U.S.

The Tennessean reported that, “according to secretly recorded conversations transcribed in the FBI affidavit, sales staffers were manually reducing the rebate that was owed, counting on the companies to not catch the error.”

Pilot Flying J has more than 650 locations and 23,000 employees; last year, it reported $29.2 billion in sales, according to USA Today.  

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