Fuel Smarts

8 Indicted in Pilot Flying J Fuel Rebate Scam

February 09, 2016

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Photo by Jim Park
Photo by Jim Park

The former president of travel plaza chain Pilot Flying J has been indicted, along with seven other former employees, on federal charges related to an alleged fuel-rebate scheme.

Pilot owner and CEO Jimmy Haslam was not among those indicted. Haslam has repeatedly denied any knowledge of the fuel rebate scheme.

In addition to former President Mark Hazelwood, seven other people were targeted in the indictments unsealed Tuesday, including former vice president of sales John Freeman,  who the FBI has said was the architect of the fuel rebate scheme, and former Pilot vice president of direct sales Scott Wombold. Others indicted were Vicki Borden, Katy Bibee, Heather Jones, Karen Mann, and John Spiewak.

Federal authorities say all eight participated in "a scheme and artifice to defraud certain interstate trucking companies and for obtaining money from certain interstate trucking companies by means of materially false and fraudulent pretenses, representatives and promises.”

Hazelwood also has been charged with witness tampering, and Wombold with lying to agents with the FBI and IRS.

Ten former Pilot employees have already pleaded guilty and are awaiting sentencing.

Federal authorities said Pilot promised fuel rebates to trucking customers but never actually paid them out, defrauding customers of more than $56 million. In 2014, the company reached a $92 million settlement with authorities and promised to help authorities in the ongoing investigation.

As part of that settlement, Pilot confirmed that “fraudulent conduct involving diesel fuel price discounts was prevalent within its direct sales group and carried out with the knowledge and participation of employees responsible for the operation and oversight of direct sales.”

Pilot Flying J also has reached an $85 million settlement with trucking customers who sued the company.

One lawsuit against the company remains. Wright Transportation filed suit against Pilot in December of 2015 in an Alabama court alleging Pilot lied about it's diesel prices. That lawsuit has not been resolved.

Ten former Pilot employees have pleaded guilty to charges related to the rebate scheme.
Hazelwood, who left the company in 2014, was released on the condition he does not leave the area of Nashville or Knoxville.

Pilot Flying J released a statement saying that it could not comment further on matters that are part of an ongoing investigation.

“We can say that since this unfortunate episode began, the company has put in place policies and procedures unparalleled in the industry to prevent anything like this from happening again.

“The company has cooperated with the investigation since its beginning and will continue to do so. The company repaid affected customers, accepted legal responsibility, and agreed to pay a monetary penalty. The trust and confidence of Pilot Flying J’s customers continues to be of paramount importance to the company and their continued support and loyalty is very much appreciated.”

The history

In 2013, Pilot Flying J headquarters in Knoxville, Tenn., was raided by FBI and IRS agents, following an investigation that started in 2011.

A 120-page indictment accused the company of scheming to engage in rebate fraud, withholding fuel rebates and other discounts from its 5,500 trucking company customers for years.

With this week’s indictments, reports the Knoxville Sentinel, “the prosecutors turned to a rare device in federal court — the ‘speaking’ indictment, which lays out with specificity the alleged scheme and reveals sections of the government's evidence against each defendant.”

That evidence includes emails and audio recordings in which Hazelwood and his alleged co-conspirators talked about their intent to cheat less-sophisticated trucking companies out of their rebates.

"Say one thing, do another," Freeman wrote, according to the Sentinel. "Use smooth talking and a little change.”

Secret recordings of Hazelwood allegedly captured him not only giving his approval of an expansion of the alleged fraud, but also telling his sales executives how to choose victims.

Comments

  1. 1. steve [ February 10, 2016 @ 04:10AM ]

    COMDATA is now pulling a similar scheme

  2. 2. One horse operation [ February 10, 2016 @ 05:19AM ]

    Haslim didn't know anything about it? He was to busy dreaming about owning a football team and drafting a Star Quarterback

  3. 3. nick [ February 10, 2016 @ 09:33AM ]

    This is what happens when you let companies repeatedly buy out the competition.Poilot owns,Flying J and Mr.Fuel.Where are trucking companies to go for fuel?

  4. 4. Amit [ February 12, 2016 @ 11:50AM ]

    When the government allows companies to conduct monopolies this is what you get. 90% of Mom and Pom truck stops have gone out of business because they can't fight against the big Three Pilot, Petro and Loves who sign contracts for Diesel with the companies which prohibits their truckers from purchasing Diesel elsewhere unless in small amounts in an emergency.

    The Truckers have to put up with rude and impersonal service and eat pre-packaged food and fast food versus the home cooking they used to enjoy at many mom and pop truck stops that knew them by name and gave them personal attention.

    The big three are working on another scheme as we speak, independently or in collusion (I have no idea which way) with the parking of Trucks so that they can squeeze the last dime from the truckers. Just wait and see what happens in the next few years regarding the issue of parking.

    What choice do you have with Cable, Internet, Utility services? The same scam running amok in this great land of ours.

  5. 5. Dream Big Transportation [ February 16, 2016 @ 09:51AM ]

    I use (Nastek) Fleetone. They have website with yesterday's today's and after noon(tomorrows prices). It uses petro/TA Sapp bros and many old Ambest truck stops. No discount at loves and can not fuel at Pilot/Flying J. Have to be a fleet of less than 300 Trucks and not leased to a large company. I get billed at discount price and do not have to preload my fuel card like Com Data and EFS. This fuel card has awesome discounts as big or bigger than the fleets get. National Association of Small Trucking Companies. Do not request a generic Fleet One Account. Google Nastek.

 

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