Haslam Deposition Sought In Pilot Rebate Case

By Walter F. Roche Jr.


An Alabama trucking firm is seeking court approval to force Cleveland Browns owner James A. Haslam to undergo a sworn deposition to obtain "critical" information in a suit charging rebate fraud.
In a motion filed in circuit court in Mobile, Ala., Wright has charged Haslam has "played games in an effort to avoid" being deposed.
Wright is one of four trucking firms still pursuing rebate fraud claims against Pilot Flying J, the family owned company that Haslam heads.
Citing an affidavit filed by a federal agent investigating Pilot's handling of promised rebates, the motion filed by Alabama attorney Stephen M. Tunstall charges that Haslam had knowledge of and participated in a scheme to cheat truckers out of millions of dollars in promised rebates.
The filing disputes claims by Haslam's lawyers that the Alabama court lacks the authority to force Haslam's testimony.
While avoiding court testimony, Haslam has repeatedly asserted publicly that he had no knowledge of the scheme to cheat truckers out of rebates.
In a recent filing in the Alabama litigation, Pilot's lawyers have asserted that "Mr. Haslam is not subject to jurisdiction in Alabama" on any of the allegations raised in the Wright suit.
Citing actions in a parallel federal court suit that was later dismissed, Wright charged that Haslam was using the same arguments that were rejected in the federal suit.
"Haslam's deposition is critical," the filing states.
In a related ruling in the same suit Judge Sarah Hicks Stewart has cleared the way for Wright to begin gathering evidence against former Pilot President Mark Hazelwood.
Hazelwood was one of several top Pilot officials to be indicted by a federal grand jury in Knoxville earlier this year.
Charged with conspiracy to commit mail fraud and witness tampering, Hazelwood and the seven other recently charged defendants have entered not guilty pleas.
Ten other former Pilot employees, however, have entered guilty pleas to mail and wire fraud charges and await sentencing.
Three other trucking firms have filed suit in state court in Ohio. Lawyers for the truckers recently filed notice that they intend to call Haslam as a witness in the upcoming trial.
Pilot already has paid some $175 million to settle suits filed by truckers and the federal government stemming from the rebate fraud allegations.
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Haslam Named as Witness in Rebate Suit

By Walter F. Roche Jr.

Cleveland Browns owner James A. Haslam 3rd has been named as a witness in a civil Ohio case in which his trucking company has been charged with cheating transportation firms out of promised rebates.
The witness lists, including Haslam, were filed this week in Franklin County Ohio where FST Express and two other firms have filed suit seeking recovery of lost rebates and other damages.
The witness lists include several former Pilot employees who already have entered guilty pleas to charges that they defrauded truckers out of promised rebates.
In addition to those who have entered guilty pleas and await sentencing, the lists include several former Pilot executives who were recently indicted in a continuing federal probe of the rebate fraud. That includes former Pilot President Mark Hazelwood who was indicted on charges of wire fraud and witness tampering.
The witness lists were filed as the anniversary date of a federal raid on Pilot Flying J's Knoxville is fast approaching. The widely publicized raid by FBI and IRS agents took place on April 15, 2013.
FST Express is one of three companies that filed suit against Pilot in Ohio after rejecting a proposed civil class settlement in federal court in Arkansas.
Those who have entered guilty pleas and are on the witness lists include Janet Welch, Arnold Ralenkotter and Brian Mosher.
In addition to Hazelwood the lists include recently indicted former Pilot sales vice president John Freeman.
Also included on the witness lists are two FBI informants, identified only as CHS-1 and CHS-2, and  an FBI agent, Robert Root, who was  involved in the lengthy investigation of the nation's largest truck stop chain.
It was a lengthy affidavit by Root filed in U.S. District Court in Knoxville that provided the first detailed public disclosure of the rebate fraud charges.
Ten former Pilot employees have entered guilty pleas and await sentencing. The newly indicted former employees recently had their cases delayed for some 14 months.
Haslam, whose brother Bill is the governor of Tennessee, has repeatedly denied any knowledge of the scheme to cheat truckers out of promised rebates. Secretly recorded conversations of Pilot's former sales executives include statements asserting that Haslam was present at meetings where the scheme was discussed.
The allegations of rebate fraud already have proven costly for the Haslam family held company. The class action settlement had an $84 million price tag and a subsequent settlement with the federal government cost the Knoxville firm $92 million.
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Pilot Criminal Trials Delayed 18 Months

By Walter F. Roche Jr.

A federal magistrate judge has agreed to delay the trials of eight former Pilot Travel executives for 18 months due to the complexity of the case.
U.S. Magistrate Bruce Guyton Tuesday set an Oct. 24, 2017 date for the former Pilot employees including its one time president and a top sales vice president.
Guyton agreed to the delay at the request of lawyers for the eight defendants who were indicted last month following a multi-year investigation. The decision followed a status hearing in U.S. District Court in Knoxville, Tenn.
The indictments stem from a probe that first became public on April 15, 2013 when federal agents raided the truck stop chain's Knoxville headquarters.
 Subsequently 10 Pilot executives and sales employees entered guilty pleas to mail and wire fraud charges related to a widespread scheme to cheat unsuspecting truckers out of promised diesel fuel rebates.
Those charged last month include former Pilot President Mark Hazelwood and Vice President John Freeman.
Not charged was the company's top executive James A. Haslam, owner of the Cleveland Browns. Haslam, brother of Tennessee Governor William Haslam, has denied any knowledge of the rebate skimming scheme.
Although it has settled civil suits with dozens of trucking firms at a cost of $84 million, Pilot is still facing suits in Alabama and Ohio filed by truckers who refused to accept a court approved settlement.
Pilot also paid $92 million to settle claims with the federal government.
Still other suits have been filed against Pilot in Florida and Tennessee recently charging that the company routinely placed excessive holds on trucking company credit cards.

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.
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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.

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.
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Pilot Appeals Ruling in Rebate Case

By Walter F. Roche Jr.

Pilot Flying J and its chief executive are moving on two fronts to block a suit in Alabama state courts which charges the company with cheating an Alabama trucking firm out of promised rebates.
Lawyers for Pilot and James Haslam, the truck stop chain's top executive and Cleveland Browns' owner, filed an appeal of a federal court ruling and asked a Mobile County court to either dismiss or stay action on the suit filed by Wright Transportation.
The Wright case is one of a handful remaining following disclosure of a federal probe of allegations that Pilot secretly and systematically reduced rebates promised to purchasers of the chain's diesel fuel.
In the appeal filed with the 11th Circuit Court of appeals, Pilot asked that the Oct. 25, 2015 decision of U.S. District Judge William H. Steele be reversed. Steele dismissed the Wright suit, leaving the trucker free to pursue the same claims in state courts.
The appeal filed jointly in behalf of Pilot, Haslam and former Pilot sales executive John Freeman, contends that under the Class Action Fairness Act, Steele was required to maintain jurisdiction over the case.
"Once original jurisdiction was conferred, it could not be divested by subsequent events," the 42-page brief states.
Freeman was featured prominently in secretly recorded Pilot sales meetings in which the rebate skimming scheme was detailed. Transcripts of those meetings were filed in U.S. District Court in Tennessee. Ten former Pilot executives have entered guilty pleas to charges stemming from the rebate probe. Freeman has not been charged.
Wright had concluded that he did have the discretion to dismiss the case. He noted that the case no longer had class action status and that several of Wright's claims, including racketeering charges, had already been dismissed.
Pilot, however, argued that Wright should not be allowed to re-litigate the case in state court after it had proceeded in federal court for some two years.
Citing multiple depositions and discovery requests, the motion states that Pilot had also provided Wright more than 27 gigabytes of data in the federal litigation.
"The district court erred because original jurisdiction under CAFA extended to the entire law suit - including each of the asserted claims - at the time Wright filed the suit, "the appeal states.
Wright, the filing concludes, "should not be allowed to force defendants/appellants to litigate this case for two years in federal court and then, near the end of substantial discovery, start over in state court."
In the filing in Mobile County court, Pilot asked that the state suit be dismissed under the provisions of a state law that protects parties from facing litigation on the same issues in state and federal courts.
Meanwhile, court records in Ohio show that one of four remaining suits against Pilot has been settled. A notice of voluntary dismissal with prejudice was filed by attorneys for Dick Lavy Trucking. Also settled was a suit filed in Illinois against Pilot by JF Freight
Still alive are suits against Pilot in Franklin County Ohio court by FST Express and HB Logistics. HB's claims include claims by a third firm, McGriff Transportation, which assigned its rights to HB.
The rebate allegations have cost Pilot some $176 million. The company paid $84 million to settle a class action suit in Arkansas and paid $92 million to settle civil charges with the federal government.
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