Tuesday, February 9, 2016

Indictment Shows Emails Detailed Pilot Rebate Fraud

By Walter F. Roche Jr.

First it was the transcripts of secretly taped sales meetings, but now federal prosecutors have provided new evidence of massive rebate fraud in a series of emails sent by sales executives of Pilot Travel, the nation's largest truck stop firm.
In a 58-page 14-count indictment made public Tuesday, prosecutors detailed how those executives, including then President Mark Hazelwood and Vice President John Freeman systematically lulled unsuspecting truck operators and reduced their promised rebates by millions of dollars.
The indictment charges the Pilot sales staff with "lulling and attempting to lull targeted trucking companies into believing that Pilot was honestly and accurately applying" promised discounts.
And, the indictment charges, the goals were simple: increase market share and profits along with commissions to those in on the scheme.
"Maybe we just need a rebate Queen," one Pilot sales executive conjectured during an exchange about who else in the company should be let in on the scam.
In another exchange Arnold Ralenkotter heaped praise on a sales staffer for her recent rebate shaving efforts.
"Good initiative. That's what I like to see," Ralenkotter wrote.
"I've been doing it a lot more and loving it," the staffer, Karen Mann, responded. "Thanks Arnie."
"Grab that bull by the horns," Ralenkotter responded.
Ralenkotter is one of 10 former Pilot staffers who has already entered a guilty plea.
The indictment Tuesday named eight more,  including Hazelwood, who now face charges of conspiracy to commit mail and wire fraud.
Hazelwood also faces witness tampering charges. The indictment charges that Hazelwood tried to influence his former administrative assistant who was being questioned about his knowledge of the fraud.
 Freeman, the former Pilot vice president of sales, sent an email in which he boasted about how badly one trucker was fooled.
"He's crazy and thinks he's getting  deal and he's not," Freeman wrote. "He's not getting what he thinks."
The indictment also repeats excerpts from the secretly recorded sales meetings held in November 2012 at Freeman's lakeside home.
"We're playing f**kin poker with funny money," Freeman said according to the indictment.
Indicted along with Freeman and Hazelwood were Scott Wombold, Vicki Borden, John Spiewak, Katy Bibbee, Heather Jones and Karen Mann.
Wombold is also charged with lying to a federal agent when he stated that the rebate scheme was not discussed at sales meetings.
Specific victims cited in the indictment include Queen Transportation of North Carolina, BP Express in Tennessee, Koleasco in Michigan and P & I in Ohio.
When officials at Tennessee's Smith Transportation and other companies figured out they weren't getting promised rebates Pilot staffers cited computer glitches and "inadvertent changes," according to the indictment.
The emails cited in the indictment contained detailed information showing what customers should have received compared with the "savings" generated by cutting the promised rebates.
The new wave of indictments is but the latest blow to Pilot since the rebate fraud first became public in April of 2013. The company has paid $176 million to settle claims by truckers and the federal government.
Pilot issued a statement stating that they were disappointed and saddened by the developments and would continue to cooperate in the investigation.
Not named or even referenced in the indictment was Pilot's top executive and owner James A. Haslam, who has consistently denied any knowledge of the rebate fraud.

Eight More Pilot Employees Indicted in Rebate Fraud

By Walter F. Roche Jr.

A federal grand jury has indicted eight former Pilot Travel employees, including the former president and the top sales executive, on mail and wire fraud charges stemming from rebate fraud allegations.
The indictments bring to 18 the number of one time Pilot employees to be charged in a scheme to cheat truckers out of millions of dollars in promised rebates.
The indictment dated Feb. 3, but not released till Tuesday, follows a three year probe of the largest truck stop firm in the country.
Not indicted was company president James A. Haslam, also the owner of the Cleveland Browns. Haslam, brother of Tennessee Gov. William Haslam, has repeatedly denied any knowledge of the scheme.
The probe became public on April 15, 2013 when FBI agents raided Pilot's Knoxville headquarters.
Those indicted were former President Mark Hazelwood, Vice President John Freeman, Vicki Borden, John Spiewak, Katy Bibbe, Heather Jones and Karen Mann.
Hazelwood was charged with conspiracy to commit mail and wire fraud and witness tampering. All were charged with mail  and wire fraud. Hazelwood was arraigned today in U.S. District Court in Knoxville, TN. and entered a not guilty plea.
The remaining defendants were expected to appear and enter not guilty pleas later in the day.
In an affidavit filed in 2013 in U.S. District Court in Knoxville, an FBI agent provided a detailed description of the rebate fraud scheme, including secretly taped sales meetings in which Freeman and Hazelwood played prominent roles.
The affidavit, including transcripts of the sales meetings, was filed just days after the April 15 raid.
Ten other former Pilot employees have been charged and entered guilty pleas to similar charges and they await sentencing.
The rebate charges have already proven costly to Pilot. The company paid $84 million to settle a class action filed in Arkansas and $92 million to settle with the federal government.
Civil suits against the chain are still pending in Alabama and Ohio.
Pilot issued a statement stating they were "disappointed and saddened by today's events," but added that policies had been put in place to ensure it won't be repeated.
"The company has cooperated with the investigation since it's beginning and will continue to do do," the company said in its statement.

Sunday, February 7, 2016

Judge Denies Move to Block Pilot Travel's Lawyers

By Walter F. Roche Jr.

An Ohio judge has rejected an attempt by trucking firms to bar Pilot Travel from utilizing a New York law firm to defend itself against rebate fraud charges.
In a two-page order issued Thursday Franklin County Common Pleas Court Judge David C. Young ruled that the White and Case law firm can represent Pilot in the ongoing litigation.
The ruling comes in a suit filed in behalf of FST Express and HB Logistics, two firms that charge that Pilot cheated them out of promised fuel rebates.
The suit is one of only two still pending against Pilot following an FBI raid on its headquarters on April 15, 2013.
FST and HB had argued that White and Case lawyers should not be allowed to represent Pilot because the firm only disclosed information at the last minute on corporate details which made it impossible for the truckers to continue to pursue their claims in federal court.
Pilot, however, insisted that it disclosed the new information as soon as company lawyers became aware of it. The company also noted that White and Case had extensive knowledge of the issues in the suit.
Without repeating the details of the opposing positions, Young said he found the Pilot arguments "persuasive," adding that he did not see the need for a hearing on the matter.
In the other remaining rebate suit Wright Transportation is suing Pilot in an Alabama court.
The rebate fraud allegations already have proven costly for Pilot, the nation's largest truck stop firm.
The company paid $84 million to settle a class action suit in Arkansas and it paid $92 million to settle a case with the federal government.
An affidavit filed in federal court in Tennessee shortly after the 2013 raid, detailed a longstanding scheme in which Pilot sales executives secretly reduced rebates promised to truckers. The filing included transcripts of Pilot sales meetings which were secretly recorded by an informant.
Ten former Pilot officials have entered guilty pleas to mail and wire fraud charges in connection with the rebate fraud charges. They have not yet been sentenced.