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Questions Arise Over Appointment of Pilot Flying J Committee Head

May 6, 2013

By Evan Lockridge

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As lawsuits continue to mount against the truckstop chain Pilot Flying J, its board of directors has appointed a head of a special committee overseeing an internal investigation along with what it calls a special independent counsel – but questions are quickly being raised about one of the choices.

Pilot Flying J announced it would make the appointments following allegations that the company did not pay the full rebates owed on fuel purchases to some companies, in a scheme that used manual calculations and allegedly targeted "unsophisticated" trucking companies.

Brad Martin, retired chairman and CEO of Saks Inc., will serve as the head of a special committee of the board that will work with the independent counsel and receive his eventual report. No date for releasing the report has been announced.

Martin is chairman of RBM Venture Company, a private investment firm. He serves on the board of directors of FedEx, First Horizon, Chesapeake Energy, and Dillard’s and will become the interim president of the University of Memphis on June 30.

According to published reports, however, Martin has longstanding connections with Pilot Flying J CEO Jimmy Haslam's family that could compromise his objectivity. He is on the board of Pilot Flying J and is an adviser to a European firm that owns about one fifth of Pilot. Martin also sits on two separate corporate boards that have directors involved with Pilot, according to Cleveland.com.

The website reports that in 1999, when Martin was head of Saks, the company hired Jimmy Haslam's brother, Bill, to start up online retail operations for Saks in New York. Two years later Bill Haslam got into politics, becoming the mayor of Knoxville in 2003, and in 2010 was elected governor of Tennessee. Bill Haslam is a member of the board of the University of Memphis, which last month appointed Martin as its interim president. Gov. Haslam has repeatedly said he has no involvement in the operations of Pilot Flying J, but still owns part of the company that he says is managed in a blind trust.

Attorney Reid Weingarten of law firm Steptoe & Johnson has been named the independent counsel that the company says will “lead, oversee, and validate an internal investigation of recent federal allegations that Pilot Flying J underpaid rebates on diesel fuel purchases owed to some of its trucking company customers.”

Weingarten works from Steptoe’s Washington, D.C., and New York offices and has represented individuals and corporations in some high-profile cases. Prior to joining Steptoe & Johnson, he served as a trial attorney for the Public Integrity Section of the U.S. Department of Justice and as a deputy district attorney for Dauphin County, Pennsylvania.

In a company statement, Martin said, “We’re pleased to have someone with Mr. Weingarten’s background, credentials, and reputation take on this assignment. He is the perfect person to help us understand the facts and do the right thing during this difficult period.”

The federal government made public its investigation into Pilot Flying J on April 15 when agents served a series of search warrants on the company’s Tennessee headquarters and elsewhere, from the FBI and IRS. So far no arrests have been made, but the company has placed some employees on administrative leave.

At least three class action lawsuits have been filed against Pilot Flying J by trucking company customers.

On April 21 the Pilot Flying J board voted to hire special counsel to "oversee and validate internal inquiries related to the investigation.”

In announcing the decision by the board to hire special counsel, Jimmy Haslam, Pilot Flying J CEO and board member said on April 22, “Because there is a federal investigation now, we have to take extraordinary steps to do whatever is necessary to repair any damage done to this company’s reputation and restore the full integrity on which this company was built.”

The federal affidavit used to secure the search warrants claims Haslam and other high-ranking company officials were involved in the alleged scheme. Haslam has denied any wrongdoing by himself or other company employees. 

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