Prosecutor Says ‘Greed and Power’ Drove Truck Stop Execs

CHATTANOOGA, Tenn. (CN) – On the first day of the conspiracy trial for former employees of truck stop giant Pilot Flying J, the last image a federal prosecutor left with jurors was that of lessons learned in kindergarten. You don’t run with scissors. You don’t lie.

Assistant U.S Attorney David Lewen said Monday the four former Pilot employees sitting across the room in the Chattanooga, Tenn., federal courthouse ignored that lesson from 2008 to 2013.

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.

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. Jimmy Haslam has denied any knowledge of the scheme.

The company 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.

Eighteen former Pilot employees were charged, and all but four pleaded guilty. Their trial on conspiracy charges began Monday in Chattanooga.

Speaking for about an hour, Lewen delivered the government’s opening statements.

He said the lies stretched from Pilot’s headquarters in Knoxville and extended to its hundreds of rest stops that dot the nation’s interstate system. Under the scheme, the prosecutor said, the former employees lied to customers, encouraged others to lie, and eventually lied to law enforcement.

The day began as defense attorneys brought in folding tables still covered in plastic wrap. With four defendants on trial, the defense team spilled into the gallery.

Two former executives and two employees of Pilot are accused by federal prosecutors of conspiracy to commit mail and wire fraud.

Mark Hazelwood, the former president of Pilot, also faces one count of witness tampering 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, former vice president of Pilot’s direct sales division, faces three counts of making false statements when the FBI and the IRS executed a search of Pilot’s headquarters in April 2013.

Heather Jones and Karen Mann, both inside sales representatives, worked in Pilot’s Knoxville headquarters. Prosecutors say they talked with trucking companies and alerted others involved in the rebate scheme when one of the customers grew suspicious.

“You’re going to see that this conspiracy would have been impossible without the inside sales representatives,” Lewen told jurors.

When potential jurors first arrived Monday in the wood-paneled, art deco courtroom, they filled two-thirds of the gallery, with a dozen or so more standing in the aisles.

U.S. District Judge Curtis L. Collier asked potential jurors about how much they had heard of the case.

Nineteen out of 45 potential jurors heard about it on television, newspaper, radio and the internet. One potential juror, a lawyer, discussed the case with fellow lawyers. Other candidates knew truckers or worked for the accounting firm that helped Pilot with forensic accounting. The prosecution and defense team called in six potential jurors to ask them specifics of what they had learned.

By the end of jury selection, 16 remained. The final jury consists of 12 jurors and four alternatives. It is made up of eight men and eight women. The case was moved to Chattanooga because of heavy publicity in Knoxville, where Pilot is headquartered.

Lewen said Monday the Pilot employees engaged in “one giant bait and switch.”

Companies don’t pay retail price for their diesel, the price advertized on the side of highways. Instead, Pilot and other truck stop companies offered to sell trucking companies a cost-plus discount, the wholesale price for the fuel plus a few cents. The fewer the cents, the better the deal it was for the trucking companies.

But the prosecution claims Pilot’s direct sales team would single out trucking companies not closely tracking their rebates, jack up the prices and lessen the rebates, and then continue to lull the companies into thinking they were getting competitive deals on diesel.

With other customers, they would allegedly increase prices to see if the customers would notice.

With the average truck burning through 1,600 gallons a fuel in a month, a few cents per gallon quickly grew significant.

“You’re going to see the power of pennies in volume,” Lewen told the jury.

Pilot Flying J, Lewen said, is one of the “three big dog” diesel suppliers, competing with Love’s Travel Stops & Country Stores and TravelCenters of America, selling diesel by the billions of gallons.

Competition is fierce.

“A gallon of diesel that is being pumped out of Loves or TA is not a gallon of diesel being pumped out of Pilot,” Lewen said.

Motivated by “greed and power,” Lewen claimed, the employees accused of conspiracy to commit fraud kept the scheme from certain people in the direct sales division. They sought out trucking companies they thought were “unsophisticated” and wouldn’t catch the scheme, he said.

The prosecution seeks to make its case using emails, secret recordings of direct sales meetings and cooperating witness testimony from people who have pleaded guilty.

It expects to take 15 trial days to present its case, with the defense expecting to take roughly the same amount of time. Because the trial will take Fridays off, it could run past Thanksgiving into the Christmas season.

Lawyers from the former employees’ defense team will deliver opening statements of their own Tuesday.

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