FILE - In a Tuesday, Feb. 9, 2016 file photo, former Pilot Flying J President Mark Hazelwood, left, leaves federal court after being arraigned, in Knoxville, Tenn. Four former executives, including former Pilot Flying J President Hazelwood, and ex-vice president Scott Wombold, go on trial in Chattanooga on Monday, Nov. 6, 2017. (Michael Patrick /Knoxville News Sentinel via AP)
November 05, 2017 - 11:34 AM
NASHVILLE - The country's largest truck stop chain was flying high. Its CEO had recently bought a pro football team and his brother was the popular Republican governor of Tennessee hinting at aspirations for national office. Then federal agents descended on the family-owned company's headquarters.
The ramifications of the 2013 raid on Pilot Flying J were immense. Fourteen former members of the sales team pleaded guilty to participating in a scheme to rip off trucking company customers they deemed too unsophisticated to realize they weren't receiving the rebates they had negotiated. Four former executives, including the onetime Pilot president, go on trial on Monday.
Pilot, which is run by Cleveland Browns owner Jimmy Haslam, agreed to an $85 million settlement with most of the defrauded customers as well as a $92 million penalty to the government.
The company was founded by family patriarch Jim Haslam, a former University of Tennessee football player, with a single gas station in 1958. By the time of the raid, the company had $31 billion in annual revenues.
In surprise development last month, Pilot announced that it was selling a major share — and ultimately a majority stake — in the business to Warren Buffett's Berkshire Hathaway. At the time of that announcement, Pilot said it had $20 billion in annual revenues.
The Haslam family will keep its controlling stake until 2023, when Buffett's company will take over an 80 per cent share.
Jimmy Haslam has insisted he was unaware of the rebate scam until the unsealing of a 120-page FBI affidavit that included transcripts of undercover recordings of Pilot employees discussing the scheme, often in crass terms.
His brother Bill Haslam has said he has not been clued in to company operations since he left the family business to run for Knoxville mayor in 2003 and later for governor in 2010.
In one recorded meeting of regional sales directors at the lake house of John "Stick" Freeman, the Pilot vice-president of sales told younger colleagues that they should carefully target customers.
"Some of 'em don't know what a spreadsheet is. I'm not kiddin'," Freeman said. "So, again, my point is this: Know your customer.
"If the guy's sophisticated and he truly has gone out and gotten deals from the other competitors and he's gettin' daily prices from us, don't jack with his discounts, 'cause he's gonna know, OK?"
Freeman, who was described in court documents as the architect of the scheme, was among four former members of the Pilot sales team who pleaded guilty in July and agreed to co-operate with federal authorities.
The remaining four going on trial this week are former Pilot President Mark Hazelwood, former vice-president Scott "Scooter" Wombold and two other former members of the sales team, Heather Jones and Karen Mann.
Federal prosecutors have said it could take about three weeks to present the government's case, while defence attorneys have told the judge they expect it will take about the same amount of time to put on their cases.
The trial was moved from Knoxville, where the Pilot is headquartered, about 100 miles (161 kilometres) to the southeast to Chattanooga.
News from © The Associated Press, 2017