Guilty Pleas Reveal Details of Pilot Flying J Rebate Scheme
Two employees indicted, charged with conspiracy; prompts statement
KNOXVILLE, Tenn. -- Pilot Flying J has released a statement following plea agreements submitted in federal court by two employees, reported the Associated Press. Regional sales director Arnold "Arnie" Ralenkotter pleaded guilty to one count of conspiracy to commit mail fraud in U.S. District Court in Knoxville, Tenn. Regional accounts representative Ashley Smith Judd also pleaded guilty to conspiracy.
As reported in a Raymond James/CSP Daily News Flash on Wednesday, they are the first to be charged in the investigation that went public with an April 15 raid on Pilot Flying J's Knoxville headquarters by FBI and IRS agents. Federal prosecutors allege members of Pilot's sales team deliberately withheld rebates on diesel fuel purchases to boost Pilot Flying J profits and to pad sales commissions.
A waiver of indictment filed on Wednesday and signed by Ralenkotter said he conspired with other people, including Pilot Flying J employees, to commit mail fraud and wire fraud.
"The primary purpose of the conspiracy was to send fraudulently reduced rebate check amounts to some of Pilot's trucking company customers so that Pilot could fraudulently retain rebates that were owed to those customers and so that Pilot could create and maintain the false pretense that those customers were in fact receiving their agreed upon diesel price discount with Pilot," the indictment cited by The Knoxville News Sentinel.
In a statement released by Pilot Flying J spokesperson Tom Ingram, the company said, "The statements released by the federal court today do not come as a surprise given what we've been learning in our own internal investigations, but are nonetheless disappointing. We want to assure our customers that we are taking every step to correct any wrongdoing that has occurred and to make certain that it does not happen again."
Pilot Flying J CEO Jimmy Haslam has denied any wrongdoing.
Their pleas signal that Judd and Ralenkotter are cooperating in the federal probe. Both are free on bond., said the News Sentinel.
According to documents cited by the newspaper, Ralenkotter would "deceptively" withhold discounts from the company's customers. He engaged in the scheme with other employees from about 2008 to April 2013, the documents alleged. A regional account representative would send a monthly spreadsheet via email to Ralenkotter, who worked in Hebron, Ky. That spreadsheet identified the actual rebate amounts Ralenkotter's customers should receive pursuant to their discount agreement and recommended amounts by which to deceptively reduce the targeted customers' rebate amounts without telling them.
Judd was instructed by and conspired with other Pilot Flying J employees to change customers' monthly rebates without the customers' knowledge, the report added. She was an account representative whose job was to send out rebate checks and talk to rebate customers about any issues or concerns they had. She is accused of lying to companies who questioned the accuracy of their rebates.
Judd also conducted discussions about rebate reductions over the phone, rather than by email, "to minimize the potential that evidence of the Pilot employee conspiracy to reduce customer rebates could be easily retrieved in email," the report said.
Pilot Flying J has more than 550 retail locations across North America. It is also one of the nation's largest wholesale fuel providers, delivering more than 500 million gallons of fuel to thousands of customers in 47 states and eight Canadian provinces. The company employs approximately 18,000 people and is the largest operator of travel centers and travel plazas in North America.