Pilot Flying J Won't Face Fraud Prosecution

But individuals may still be prosecuted over diesel rebate scheme in $92 million federal deal

Jimmy Haslam Pilot Flying J (CSP Daily News / Convenience Stores / Truckstops)

Jimmy Haslam at an April 2013 press conference.

KNOXVILLE, Tenn. -- "We, as a company, look forward to putting this whole unfortunate episode behind us, continuing our efforts to rectify the damage done, regaining our customers' trust, and getting on with our business," Jimmy Haslam, CEO of Pilot Flying J, said in announcing that Pilot Flying J has reached an understanding with the U.S. Attorney's office, Eastern District of Tennessee, and the U. S. Department of Justice, that the company will not be prosecuted for fraud.

On April 15, 2013, the FBI and IRS raided Pilot Flying J's Knoxville headquarters, beginning an investigation into an alleged scheme perpetrated by some members of the company's sales staff to withhold rebates owed to trucking company customers for contacted diesel fuel purchases.

About a dozen participants have pleaded guilty to fraud and are cooperating with the authorities. Several executives have been fired.

Haslam has denied any knowledge of the rebate scheme.

Pilot Flying J reached an $85 million settlement with hundreds of trucking customers who were affected by the alleged fraud. The company has agreed to repay any amounts owed plus 6% interest; however, more than a dozen companies are pursuing lawsuits outside of the settlement, and Pilot Flying J is seeking to consolidate the pretrial proceedings in several cases.

A federal judge dismissed racketeering and deceptive trade practices charges against the company.

As reported in a 21st Century Smoke/CSP Daily News Flash, the deal with the U.S. Attorney assumes that Pilot Flying J follows the terms of the agreement, including paying a monetary penalty over the next two years and fully cooperating with the federal government's investigation of fraudulent conduct within the company's diesel fuel sales discount programs.

The Criminal Enforcement Agreement is neither an indictment nor a finding of guilt. It states that the company will not be prosecuted under any current circumstances so long as the company complies with the terms of the agreement; however, individuals may still be prosecuted.

Pilot Flying J also acknowledges and accepts full responsibility for any criminal conduct committed by its employees, including some personnel involved with the operation and oversight of its direct diesel fuel sales group, an approximately 90-member division of the company.

Over the two-year term of the agreement, in addition to paying the monetary penalty, which the government has set at $92 million consistent with the U.S. Sentencing Guidelines, the company also commits to keep the government advised of the status of its internal compliance program, which it voluntarily initiated immediately following the execution of the warrant last year.

"The past 15 months, since the federal government served a search warrant on the company's headquarters, have been very trying for all involved," said Aubrey Harwell, Pilot Flying J's attorney. "The company has cooperated fully with the government and will continue to do so. As to its customers, the company has gone to extraordinary lengths to understand and identify any wrongdoing and make it right."

He added, "Under the terms of the agreement, the company has certain obligations, which it fully intends to fulfill. We appreciate the diligence the U.S. Attorney's office has shown in this matter. It certainly has been no less diligent than our own internal investigation. I believe this agreement is the result of the good intentions of both sides to do the right thing."

Knoxville, Tenn.-based Pilot Flying J, which overall has 23,000 employees and 650 retail locations nationwide, is the largest operator of travel centers and travel plazas in North America. Haslam also owns the Cleveland Brown football team.

Part of CSP's 2014 Convenience Top 101 retailers