FBI: Pilot worker says Jimmy Haslam knew of fraud; governor has 'absolute faith' in brother

Thursday, April 18, 2013 at 7:40pm

A Pilot Flying J employee told investigators that CEO Jimmy Haslam, who is also the owner of the Cleveland Browns, knew about rebate fraud at the truck stop chain his family owns, according to an FBI affidavit unsealed Thursday.

The 120-page document was filed federal court in Knoxville, where Pilot is based, alleges that members of the company's sales force preyed on smaller trucking companies by reducing the amount of rebates they were owed for buying certain amounts of fuel.

Special Agent Robert H. Root alleged a "conspiracy and scheme to defraud executed by various Pilot employees to deceptively withhold diesel fuel price rebates and discounts from Pilot customers ... for the dual purposes of increasing the profitability of Pilot and increasing the diesel sales commissions of the Pilot employees participating in the fraud."

Gov. Bill Haslam, meanwhile, urged people to reserve judgment about the investigation.

Bill Haslam's spokesman David Smith said in a statement late Thursday that the governor "continues to have absolute faith in his brother's integrity."

Smith said the governor stressed that the investigation is still in its early stages and that he "has faith in Pilot to do the right thing."

One employee identified only as a confidential source told investigators that the rebate scheme was discussed during sales meetings attended by Haslam and Pilot President Mark Hazelwood.

The informant said the practice was known by a variety of euphemisms ranging from "manual rebates" to "screwing."

Haslam denied wrongdoing in a news conference earlier this week. He said in a statement Thursday that "the foundation of this company is built on its integrity and that any willful wrongdoing by any employee of this company at any time is intolerable."

He said the company would continue to cooperate with authorities and conduct its own investigation.

Informants secretly recorded conversations among Pilot employees holding frank —and often profane — discussions about the rebate scheme, and agents interviewed current and former members of the sales team.

The investigation began after agents were contacted in May 2011 by a confidential informant who said they had been told about the scheme by a Pilot Flying J employee. The investigation continued through this month. Jimmy Haslam bought the Cleveland Browns in a $1 billion deal last summer.

Haslam was in Cleveland on Thursday to help prepare for next week's NFL draft. League spokesman Greg Aiello declined to weigh in on whether the investigation would affect Haslam's role as team owner.

"We must respect the process of a federal investigation and decline comment," Aiello wrote in an email.

Pilot Flying J, a privately held company with annual revenues of $29 billion, is the nation's No. 1 retailer of diesel fuel. It is mostly owned by Haslam; his brother, Bill; their father and company founder Jim Haslam; and other family members.

When Pilot bought its nearest competitor Flying J out of bankruptcy in 2009, federal trade officials worried the combined entity owned by the powerful Haslam family could corner the market on diesel fuel.

To alleviate "competitive concerns," the Federal Trade Commission in 2010 required Pilot to sell some truck stops to a competitor, Love's, and share its fuel purchase technology before it could merge.

When asked earlier this week whether the probe was related to the FTC's previous concerns about unfair competition, Haslam replied: "We would not think so." An FTC spokesman declined to comment.

According to the IRS, it is common for fuel stops to hand out monthly rebates on purchased fuel. Rebates should be reported as income, as a reduction of expense, or as a reduction to the cost of the new asset.

Not all customers doing business with Pilot are on the rebate program.

Pat Marsh, chairman of Shelbyville, Tenn.-based Big G Express, said his trucking company had a rebate program set up when it was a client with Flying J. Since the Pilot takeover, that system has been replaced with pre-negotiated prices paid at the pump with swipe cards. It tracks the mileage on trucks, the identity of the driver and the amount of fuel purchased

"The more we buy, the cheaper the price is," said Marsh, who is also a Republican state representative, said in an interview before the affidavits were released. "We negotiate our price talking to the corporate people and the sales people and by how many gallons we purchase."

Marsh said he was surprised to see the Pilot Flying J headquarters raided.

"We've had nothing but a great relationship with those guys," he said. "They treat us fairly."

Several trucking companies are named in the affidavit as having not received their negotiated rebates from Pilot. None immediately responded to messages from The Associated Press seeking comment.

AttachmentSize
PilotFlyingJaffadavit.pdf2.12 MB

11 Comments on this post:

By: pswindle on 4/18/13 at 11:05

Do you think that something could happen at Pilot and the owners would not know about it, and that includes our Governor? The rich just can't be rich enough, and the little man always gets hurt. It is hard for the little man to fight this kind of abuse without some power.

By: Rasputin72 on 4/19/13 at 3:31

There is a reason that the little man is called the "little" man.

By: bfra on 4/19/13 at 7:10

Of course the Gov. knew! Hey Raspy, the Gov. & his brother may be the "little men" in this situation, morally.

By: Rocket99 on 4/19/13 at 8:34

Well, the Gov and friends are ripping off the citizens of this state with all the sweetheart deals they are giving to their buddies. Just look at al the sudden interest in renovating all of the state office buildings in Nashville in less tahn two years. The Pellisipi College deal in Strawberry Plains. Selling of some of the state office buildings in Memphis, Knoxville and elsewhere. THe attempt to sell the Cordell Hull building in Nashville. The high leases the State is paying Haslam friends for space while all of this renvation work is going on.

All of this needs to be investigated with a fine tooth comb. Haslam and friends are trying to bankrupt the state.

By: budlight on 4/19/13 at 9:46

I doubt if Gov. Haslam knew of anything that was wrong. And I bet some disgruntled employee is "enhancing" the story. Let's do some real discussing about things like thee Muslim takeover of our school system, or the poor who are really deserving who can't get help because of the people who are on welfare or other programs who are cheating the system.

Let's talk about the over-drugging of our kids who teachers and parents just want to shut up so they drug them on the pretense they have ADD or some other made up condition.

By: pswindle on 4/19/13 at 10:46

The FBI had a case when they raided the offices of the mighty. GOV. HASLAM SHOULD KEEP HIS MOUTH SHUT BECAUSE IT MAY COME BACK TO HAUNT HIM. LOOK AT ROMNEY, HE GOT HIS WEALTH ON THE BACKS OF THE WORKING PEOPLE. SO, THIS IS JUST ANOTHER REASON THAT THE GOVERNOR WOULD NOT RELEASE ANY OF HIS INCOME TAXES. WHEN WILL WE LEARN THAT THEY HAVE SOMETHING TO HIDE IF THEY DO NOT COME CLEAN.

By: Kosh III on 4/20/13 at 10:01

It's not just employees, it's trucking companies who figured out this "business-friendly" scheme was fraking them over just so the rich could get richer. This is a perfect example of how the love of money is the basis of all evil--greed and selfishness.

By: pswindle on 4/21/13 at 2:45

I understand that the Haslams are good business people. So where did they think that the extra millions came from? This had to be going on for years. That is some profit to not know where it was coming from. Do they think their fellow Tennesseans are dumb and stupid? They may be right if we keep electing this type of businessmen to run our state. But I'll say, with Gov. Bredesen and his wife, we got a jewels. He saved the state and she saved the mansion with money from individuals donors. We get lucky sometimes, and sometimes not. I began to take a closer look when every bill that was passed helped his family (Haslam) and their businesses. What did Geo. Bush try to say, "you can fool some of people................./" Hopefully, we are learning something in TN.

By: yogiman on 4/22/13 at 6:03

It's easier to accuse than it is to prove. Question: Was the accuser fired by Pilot for some reason?

By: PKVol on 4/22/13 at 8:42

If what is being described really happened, it seems like a civil matter and not a criminal matter. If the unpaid rebates were being pocketed, then it becomes criminal because of unreported income.

By: yucchhii on 4/22/13 at 9:46

I don't understand, what's all the wonder? Gov haslam is a CLEAR CRIMINAL...after what he did to the occupy protestors, that demonstrated that he has CLEARLY something to hide!! As the same with the CRIMINALS that run legislative plaza in making up the law that says NO CAMPING on state property and passing it...regardless of what anyone who pays TAXES may have to say about it. Did they take a PUBLIC vote on it?...NO!! Anyway, same holds true for the brother of the head CRIMINAL of the starte...he's a CRIMINAL TOO...Must run in the FAMILY!!