CHATTANOOGA, Tenn. (CN) – Four years after FBI agents burst into the Knoxville, Tennessee, headquarters of the truck stop giant run by the powerful Haslam family, the criminal trial begins Monday for former Pilot Flying J employees accused of defrauding trucking companies through a fuel-rebate scheme.
In 2014, Pilot admitted corporate responsibility for promising a series of rebates to trucking companies that bought fuel at its truck stops but then mailing checks with smaller discounts.
It signed a criminal enforcement deal and agreed to repay the trucking companies it duped, and also agreed to pay a $92 million fine to the U.S. government.
The company’s CEO, Jimmy Haslam, owns the National Football League’s Cleveland Browns and his brother, Bill Haslam, is the Republican governor of Tennessee who used to serve as Pilot’s president. Both brothers are billionaires, due in large part to the success of the truck stop chain.
According to prosecutors, 10 Pilot employees pleaded guilty to fraud charges in 2014.
In an indictment filed in February 2016, the government charged eight more former Pilot employees, but four pleaded guilty last month.
Now, only four remain. The two executives and two sales representatives pleaded not guilty to charges of wire fraud and conspiracy to commit mail fraud and wire fraud.
When Courthouse News reached out to the defendants’ lawyers, they declined to comment because U.S. District Judge Curtis Collier instructed them not to speak to reporters.
The remaining defendants include Heather Jones and Karen Mann, who worked as regional account representatives at the company’s Knoxville headquarters, and two former Pilot executives.
Mark Hazelwood, Pilot’s former vice president of sales and development, rose to the rank of company president in 2012.
In addition to the fraud and conspiracy charges, the indictment lists one count of witness tampering against Hazelwood based on prosecutors’ claim that he called his administrative assistant and falsely told her that he never read the trip reports he asked for.
Scott Wombold served as vice president of Pilot’s direct sales division from 2010 to April 2013. Besides the conspiracy and fraud allegations, prosecutors accuse him of three counts of making false statements during an interview with FBI and IRS agents when they searched Pilot’s headquarters.
The scheme siphoned $56 million from trucking companies from 2008 to 2013, federal prosecutors claim.
In order to attract trucking companies to stop at its locations, Pilot sold fuel to trucking companies at the cost the truck stop chain paid for it, plus a pump fee, usually a few cents a gallon.
For companies that burn through hundreds of thousands of gallons of fuel a week, a few cents represented significant savings. As the training manual created for Pilot’s direct sales division noted, “Fuel is a trucking company’s largest variable cost.”
But according to prosecutors, some employees in the direct sales division identified trucking companies that were not closely tracking the amount of fuel they consumed, the price of the fuel and the receipts they received.