UPDATE: Haslam Addresses Federal Investigation (Watch Press Conference)

Action against Pilot Flying J prompted by alleged "unpaid" rebates on fuel, CEO says

Greg Lindenberg, Editor, CSP

UPDATE: U.S. Attorney Bill Killian told The Knoxville News Sentinel on Wednesday that agents served a total of four separate search warrants on Pilot Flying J, one for each of its buildings. Agents served the first three warrants Monday afternoon--two at the main Pilot campus and a third at the company’s data center on Weisgarber Road--and served a fourth warrant Monday night at another building on the campus that Pilot Flying J shares with an accounting firm.

UPDATE: The federal investigation into Pilot Flying J "appears to be centered on a very insignificant number of customers and the application of rebates," CEO Jimmy Haslam said in a press conference Tuesday afternoon, "that the rebates that were owed to the customers were not paid. We, of course, disagree with that."

The rebates are for volumes of fuel a given trucking company would purchase. He said he did not know that amount of money or the number of customers involved, although he said Pilot flying J does business with 3,300 trucking companies and the percentage is "low."

It is a criminal investigation, Haslam said. It is focused on Pilot Flying J Inc. the truckstop company, not Pilot Corp. the convenience store company or another subsidiary. Although the IRS is involved, he is "very confident" it does not involve any tax evasion issues.

Pilot Flying J is also conducting its own investigation.

Haslam said the company has reached out to most of the trucking companies, and their support has been "overwhelming." And while suppliers are "concerned," they are "working well" with Pilot Flying J, he said.

Haslam also apologized to Cleveland, home of Haslam's Browns football team. "The last thing we ever want to do is put any kind of blemish on the city Cleveland, which we have grown to love, or the Browns, so I personally feel bad about that," he said. "Even though I don't think we've done anything wrong."

KNOXVILLE, Tenn. -- Pilot Flying J Inc. has issued a statement, obtained by CSP Daily News, offering additional details on the federal law enforcement activity surrounding the lockdown of the company's Knoxville, Tenn., headquarters on April 15. It said that the investigation focuses on trucking company rebates.

The FBI, IRS and local police "sequestered" the facility on Monday, refused to allow traffic to enter the grounds, would not answer questions and told reporters to leave.

"Two search warrants were served on the Pilot Flying J campus yesterday and late Monday night," said the statement. "Several subpoenas were served. It is not our place to be more specific."

It added, "We cannot comment on specifics of the warrants, but based on what we know, the investigation appears to revolve around the application of rebates to a small group of Pilot Flying J trucking company customers."

As to why this "ongoing investigation" is occurring, the statement said, "We do not know details. Apparently, authorities are reviewing information they gathered on Monday. Pilot Flying J is cooperating appropriately with the external investigation and conducting its own."

It also said that it "not for us to say" why a raid was necessary and whether it is a criminal investigation or whether it is politically motivated.

Federal authorities are not targeting any Pilot Flying J executives, "to our knowledge," said the statement.

CEO Jimmy Haslam said Tuesday the raid Monday on his company was part of a federal criminal investigation into claims of failure to pay rebates to trucking customers, reported The Knoxville News Sentinel. "It does not involve any tax issues," he said during a short press conference at the company's headquarters. "To my knowledge, there was no evasion of state or federal taxes involved."

Haslam characterized the claims as coming from a small number of customers but did not know the exact number. He said he did not know what documents were seized during the search by agents from the FBI and IRS. He said some sales people were subpoenaed. He would not say who. Haslam said he had not been subpoenaed.

It is business as usual at the company's retail outlets. A previous statement said, "Pilot Food Marts, Pilot Travel Centers and Flying J Travel Plazas remain open and continue to serve the public."

The company posted the following notice on its website: "Pilot Flying J Team Members are expected to report to work at the company's Knoxville headquarters on Tuesday, April 16th as usual. The message they will receive from CEO Jimmy Haslam will be 'Stay focused and do your job' supporting the companies' 500 travel centers and Pilot Logistics Services customers."

And CEO Jimmy Haslam posted a statement on the Pilot Flying J Facebook page Monday night that read: "The FBI secured our headquarters today and informed us they are investigating Pilot/Flying J. We will cooperate appropriately with any and all external investigations and conduct our own. I believe and trust there has been no wrongdoing. The integrity of our company always has been job No. 1."

Based in Knoxville, Pilot Flying J has more than 650 retail locations and is the largest operator of travel centers and travel plazas in North America. The Pilot Flying J network provides customers with access to more than 60,000 parking spaces for trucks, more than 4,400 showers and more than 4,000 diesel lanes, of which more than 2,800 offer diesel exhaust fluid (DEF) at the pump. Pilot Logistics Services is one of the largest independent energy logistics companies in North America, selling and distributing more than 1.3 billion gallons of refined petroleum products and serving more than 15,000 customers. Together, Pilot Flying J and Pilot Logistics Services generate sales of approximately nine billion gallons of petroleum annually.