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Pilot Flying J Takes Steps to Address Federal Allegations

April 22, 2013

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The head of Pilot Flying J Monday announced several steps the company is taking to address the questions raised in a federal probe of its fuel rebate program, including an internal audit, placing some employees on leave, eliminating manual rebate calculations, and adding a chief compliance officer.

Following a raid on April 15 at Pilot Flying J headquarters by the FBI and IRS, affidavits and search warrants were unsealed claiming the company systematically bilked customers out of rebate money and discounts they were due in a fuel purchase program.

In a statement, Pilot Flying J CEO Jimmy Haslam said it appears that the federal investigation is focused on a narrow slice of the company's business in which rebates on diesel fuel purchases are manually calculated and paid to a relatively small number of its 3,300 trucking company customers.

"We are continuing to cooperate appropriately with investigators, but we are determined to understand on our own the questions they are asking and to do everything we can to make sure we are never in this position again," he said. "To that end, I’m announcing today five steps that we taking to address the issues raised by the investigation."

1. Pilot Flying J will bring its field audit team to its Knoxville, Tenn., headquarters to review all 3,300 contracts with trucking company customers, not just the relative few implied in the federal affidavit, "and to proactively address any miscalculations that we may find."

Haslam said he hopes the process won't take more than four to eight weeks. He noted he has already spoken personally to several customers, including Curt Morehouse with Morehouse Trucking and Tommy Hodges with Titan.

2. Several members of the diesel fuel sales team were placed on administrative leave. On an interim basis, the company is restructuring that team pending further investigation "to get control of that operation and restore confidence to our customers."

"We cannot ignore the content of the federal affidavit released last Thursday evening," Haslam said. "We are not judging the guilt or innocence of the team members placed on administrative leave. We are addressing actions and words that fail to show proper respect to our customers and that violate the character, values and principles that have been core to this company since it was founded 54 years ago."

The company is withholding the names of those being placed on leave.

3. All diesel fuel customers be converted to electronic calculation and payment, to avoid abuse that might be enabled by manual calculation and payment. This process should be completed by June 30.

4. Outside counsel has been asked to help create and staff a position of chief compliance officer to report to the company’s general counsel to deal with any similar questions or issues that might come up in the future. This position is expected to be filled within 30 days.

"Had we had one before, perhaps some team member would have raised a question about manual rebates internally before anyone would ever have gone to federal investigators," Haslam said. "If we had discovered any irregularities on our own, we would have fixed them on our own."

5. In a special meeting Sunday, the board of directors voted to hire an Independent Special Investigator to oversee and validate all of its internal inquiries related to the federal investigation. This person also is expected to be in place within 30 days.

"We know this process is going to be difficult and probably will last for a while, but we are not going to sit by idly in the meantime.  We are going to diligently and aggressively figure out for ourselves what’s going on, and if we find anything amiss, we are going to make it straight right away."

Related stories:

4/22/2013: Trucking Company Files Lawsuit Against Pilot Flying J Following FBI Raid

4/19/2013: Federal Probe Alleges Pilot Flying J Defrauded Customers

4/15/2013: FBI, IRS Raid Pilot Flying J Headquarters

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