The Pilot Travel Centers Fraud
Back in July 2014, Pilot Travel Centers, the largest truck stop company in the United States, accepted legal responsibility for the criminal conduct of its employees committing fraud trucking companies. This agreement resulted in a $92 million fine for misconduct and full restitution to be provided to those companies defrauded. 14 employees pled guilty to their roles in the fraud and another four were indicted and are currently on trial for their alleged crimes.
Per the Department of Justice press release, a 58 page complaint detailing the allegations, and a 120 page affidavit in support of a search warrant from the FBI, the scheme was referred to as a discount fraud. Pilot agreed to provide trucking companies discounts on the sale of diesel gasoline at Pilot's truck stops, and the total amount of those discounts would be rebated monthly. Pilot then fraudulently withheld a portion of the discounts due by providing fake spreadsheets and fabricated “back up” documentation evidencing fraudulent calculations of the smaller discount paid out. This scheme resulted in $56 million in discounts withheld to hundreds of Pilot’s customers.
The DOJ press release also stated,
“Pilot further confirmed that supervisory employees encouraged participation in discount fraud for the company’s benefit. For example, during a November 19 and 20, 2012, annual sales training meeting at Pilot’s headquarters in Knoxville, a Pilot supervisor encouraged and taught Direct Sales employees how to deceptively reduce the rebates paid to some customers for the purpose of making targeted accounts more profitable for the company...
Additionally, Pilot confirmed that in February 2013 certain Pilot employees involved with Direct Sales expressed an intent to expand the scheme to defraud by having Direct Sales personnel identify and target Pilot’s off-invoice customers that were considered to be too unsophisticated to carefully monitor diesel pricing data in conjunction with their periodically received fuel invoices.”
It’s bad enough to defraud your own customers, but to specifically target those you believe are weak and too unsophisticated to adequately monitor their finances is as low as you can go.
Not only was this fraud audacious, but the number of people involved is staggering to see (per news channel WBIR’s image from this article):
The Pilot Travel Centers CEO
Amongst the guilty, indicted, and informants, there is one white square around Pilot’s CEO, Jimmy Haslam who has “No charges” against him. Haslam, a billionaire (worth a reported $3.6 billion) thanks to Pilot, also happens to be the owner of an NFL team, the Cleveland Browns.
Since the fraud was exposed in 2014, Haslam has continually stated he knew nothing about it. In Haslam’s defense, Pilot is a multi-billion dollar company with thousands of employees and presumably numerous reporting structures. It’s not impossible for a CEO to be unaware of serious misconduct at his company.
Flash forward to November 2017 when the trial began for four employees, including Pilot’s former President, Mark Hazelwood, who all maintain their innocence. The trial recently included an audio recording (from the same sales training session on November 19 and 20, 2012 quoted above from the DOJ press release) where Hazelwood explained the fraud scheme as a “savings,” and the recording included Haslam replying, “sounds like Stick’s old deal with Western1.”
John “Stick” Freeman was the VP of Sales at Pilot who was caught by Western for overcharging them. Pilot apparently agreed to purchase a dilapidated plane from Western for $1 million in order to placate Western.
The trial also included an audio recording of Freeman (the VP of Sales) saying that Haslam absolutely knew about the scheme and loved it. Emails have reportedly been exhibited at the trial that include an employee saying,
“I don’t guess I need to reiterate what Jimmy said in his update, but I’m going to anyway,” Ralenkotter wrote. “We need to make certain we are doing everything we can to deliver the gallons on our focus accounts. Work hard, work smart, find creative ways to get gallons.”
The FBI even tried to implicate Haslam in a failed attempt by recording a call with an employee, Brian Mosher, who pleaded guilty to participating in the fraud. Mosher told Haslam, “Jimmy, we’ve been caught,” in an attempt for Haslam to acknowledge the fraud.
According to the Knoxville News Sentinel, Mosher’s wife alerted executives at Pilot that the FBI was using her husband to get to Haslam and others prior to a raid of their corporate offices. By the time Haslam received the phone call, he said, “I understand there are some folks at your house,” and handed the phone to his lawyers.
This sounds like a movie! And as the credits roll, Haslam walks away, clean as a whistle.
NFL Response (or lack thereof)
Though Haslam appears to be in the clear from criminal prosecution, you may be wondering what the NFL is doing with this information?
I’ll let NFL reporter Jason La Canfora take this one:
With that in mind, let’s read the first page and top of the second page of the NFL’s Personal Conduct Policy for Players in 2016:
So everyone (their emphasis), including owners, who is part of the NFL must refrain from “conduct detrimental to the integrity of and public confidence in” the NFL. Further, “we are all held to a higher standard” than being found guilty of a crime.
For the record, integrity is defined as the quality of being honest and having strong moral principles.
When it comes disciplining an NFL billionaire like Haslam based on company policy, where is the line in the sand? Clearly, it’s not enough for an owner to be disciplined if he’s the CEO of a company that defrauded its customers out of $56 million, paid a fine of $92 million, and accepted legal responsibility for the criminal acts of its employees. It’s not enough for an owner to be disciplined if the CEO was present at a sales meeting where a supervisor was teaching its employees how to deceptively reduce the rebates paid to some customers to make the company more profitable.
The Pilot fraud focused on the same trait that so many fraudsters have focused on to defraud professional athletes: the victim’s unsophisticated knowledge of finance, and therefore, their inability to monitor the data that underlies the fraud, meaning the fraudsters don’t think they’ll get caught.
Yet I doubt the NFL sees the irony. And if, in the end, all we have for Jimmy Haslam is irony, then it’s a sad day for integrity.
1 - This statement was also quoted in the 58 page complaint filed against Pilot by “Pilot Employee 12,” who it now appears is referring to Haslam. There do not appear to be any other references to Pilot Employee 12 in the complaint.