Pilot Flying J Trial in Chattanooga Reveals Details of Scheme to Defraud Truck Stop Customers

Defense attorneys for the highest-ranking Pilot Flying J executive charged in a fuel rebate scandal say former president Mark Hazelwood was too busy doing his job to be involved in the scheme, reports the Knoxville News-Sentinel.

That also goes for CEO Jimmy Haslam, defense attorneys say. Jimmy Haslam, who has not been charged, is the brother of Tennessee Gov. Bill Haslam and owner of the Cleveland Browns football team. The truck stop giant is a Haslam family business. Gov. Haslam is no longer involved in its daily operations.

The trial of Hazelwood and three others started last week on Monday in U.S. District Court in Chattanooga and is expected to last until at least late December.

Former vice president of sales Scott Wombold and regional account representatives Heather Jones and Karen Mann are also standing trial in Chattanooga on charges of conspiracy to commit wire and mail fraud. Hazelwood and Wombold deny involvement in the scheme and Jones and Mann have said they simply followed orders.

In secret recordings made by a sales employee for investigators, Hazelwood’s voice can be heard in talk of the scheme. Haslam’s voice is not heard in any recordings that have been released.

Prosecutors say Pilot Flying J cheated trucking companies out of promised diesel fuel rebates. In all, 18 former employees were charged in the scheme and 14 pleaded guilty. Federal agents raided the company’s corporate headquarters in Knoxville in 2013. Prosecutors say the company defrauded customers of more than $56 million from 2008 to 2013.

The former employees took advantage of fluctuating fuel prices to deceive trucking company customers, who they considered ignorant dupes, according to prosecutors and court testimony.

According to the Knoxville News-Sentinel:

The fraud depended on an arrangement known as “cost-plus,” in which clients would be promised a rate based on wholesale fuel cost plus a pumping fee, usually of a few cents per gallon. Between wholesale costs that fluctuated daily and the various state and local gas taxes, most customers couldn’t keep up to verify they got the deal promised…

Customers might be promised a price of cost-plus 3 cents, pay twice that amount and never know it. Sales reps calculated the figures themselves, a process known as the manual rebate.

In testimony last week, Arnie Ralenkotter, a former regional sales director for Pilot Flying J, explained how in 2008 he emailed a trucking company with one fuel rate but then 20 minutes later emailed a regional account representative with a revised one. “I was cheating them out of the agreed-upon deal,” he testified Thursday, according to Courthouse News Service. When a prosecutor asked why, he answered, “So we could make more profit at Pilot and I could make more commission.”

Courthouse News Service reported that “according to his May 2013 plea agreement, Ralenkotter was the first sales director at Pilot to admit to conspiring to defraud trucking companies. He faces up to 20 years in prison and a fine of up to $250,000.”

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2 Thoughts to “Pilot Flying J Trial in Chattanooga Reveals Details of Scheme to Defraud Truck Stop Customers”

  1. […] former employees of the truck stop chain are currently on trial in U.S. District Court in Chattanooga. In all, 18 former employees were charged in the scheme and […]

  2. Kevin B

    All one has to do to understand where the guilt lies, is to think through how the money would flow, and to whom. Can anybody really believe that a bunch of middle management employees are somehow going to benefit without the owners benefiting? And can anybody really believe that the owners would not be aware a such a positive change in their cashflow? But IF this was the case, how can we trust that a Haslam is responsibly managing our tax dollars?