CHATTANOOGA, Tenn. (CN) – Government attorneys prosecuting four former employees of Pilot Flying J for conspiracy and fraud played a tape Wednesday of a secretly recorded training session during which they say the fuel rebate scheme at the center of the trial was taught to employees.
Prosecutors want the tape to convince the jury that from 2008 to 2013, the defendants joined a conspiracy in Pilot’s direct sales division to swindle about $56 million from trucking companies by promising discounts on fuel but then reducing those discounts by pennies per gallon without telling customers.
Pilot – which deals in so much fuel for the trucking industry that it buys space on pipelines to ship it – admitted corporate responsibility for the fraud in 2014, paid a fine to the government and repaid the trucking companies.
The company’s CEO Jimmy Haslam owns the National Football League’s Cleveland Browns and its former president in the 1990s, Bill Haslam, is the governor of Tennessee. Pilot’s truck stop locations dot the highway, making it a familiar site on almost any long road trip.
In the tape played for jurors Wednesday, former district sales manager Brian Mosher told participants at a sales division training session that some trucking companies were unsophisticated.
“Some of them don’t know what a spreadsheet is,” he said in 2012.
Mosher told trainees how to look at profit and loss statements to see where to manually adjust rebates.
The four defendants whose trial is being held a federal courtroom in Chattanooga are former Pilot president Mark Hazelwood, former vice president of direct sales Scott Wombold and two regional account representatives, Heather Jones and Karen Mann.
According to prosecutors, Jones, Mann and Wombold, who headed the department at the time, were in the training meeting when the alleged conspiracy was discussed.
Leaving that 2012 meeting, Janet Welch said her impression of what Mosher communicated was “make as much as you can without being caught.”
Welch worked for Pilot from 1998 to July 2013, when she pleaded guilty to one count of conspiracy to commit fraud. The charge carries a punishment of up to five years in prison and a fine of $250,000, but under her plea agreement, the former senior regional account representative agreed to truthfully testify in exchange for consideration of her cooperation when U.S. District Judge Curtis Collier, who also presides over the trial, later sentences her.
While Welch sat on the witness stand Wednesday, Assistant U.S. Attorney Trey Hamilton coaxed from her a description of that Nov. 19, 2012 sales meeting, which, according to Welch’s plea agreement, shows members of Pilot’s sales team conspiring to defraud customers.
The whole sales division gathered in one place, which only happened once or twice a year. One participant wore a wire and recorded the conversation for investigators. After the large meeting, the sales department broke out into smaller sections.
The prosecution handed out a binder of the transcripts of the recording of the breakout session to the jury.
Mosher said during session, “My point is this: Know your customer… If, if the guy’s sophisticated and he truly has gone out and gotten deals from the other competitors and he’s gettin’ daily prices from us, don’t jack with his discounts, ‘cause he’s gonna know, okay?”
In the recording federal investigators obtained from the meeting, Jones also talked about the number of truck companies that asked for proof on the pricing of its fuel.
“I mean, on a percentage-wise, very few of ‘em actually ask for backup,” she said. “I would say less than 10 percent.”
If a company did ask for documentation, regional account representatives would have to give the numbers a “gyration,” said Mosher, who has pleaded guilty in the case.
Welch testified that calculating manual rebates was a task that took some time to perform.
Prosecutors pointed out that Wombold did not object to Mosher’s presentation, ask for clarification or interrupt it to say this was not how things should be done.
During his cross-examination, Wombold’s lawyer Eli Richardson asked Welch about the changed rebates: “Did Scott say ‘don’t tell the customer?’”
“No, sir,” Welch replied.
Further questions from Sara Compher-Rice, the Oberman & Rice attorney representing Mann, came fast.
Welch responded from the witness stand with simple answers.
Compher-Rice asked Welch if she ever complained about manual rebates and how they caused extra work and headaches.
“I’m sure I had,” she said.
Yes, the inside sales team sought to simplify things, Welch said, and yes, the inside sales representatives would have gladly given up producing manual rebates.
Welch testified she worked more than 40 hours a week to keep up with the rebate workload and said she did not realize that what she was doing was illegal when federal agents raided Pilot’s Knoxville, Tenn., headquarters on April 15, 2013.
In the defense’s opening statements on Tuesday, Mann’s other lawyer, Jonathan Cooper of Whitt Cooper, said that the prosecution needed to prove that Mann intended to deceive customers, and “prove what was in Karen Mann’s head.”
“It was never your intent to harm your customers?” Compher-Rice asked Welch on Wednesday.
Welch, who pleaded guilty four years ago and still awaits sentencing, lowered her head and her face grew red.
“No, ma’am,” she said, breaking down.
As Compher-Rice began another question, the prosecution objected. She finished questioning Welch.
Welch was still dabbing her eyes as Rusty Hardin, representing defendant Hazelwood, took the podium and began his cross-examination.
The trial is expected to last at least six weeks.