Tape of subordinate accusing Haslam, Hazelwood played in Pilot Flying J trial

CHATTANOOGA, Tenn., — Pilot Flying J Chief Executive Officer Jimmy Haslam not only knew one of his vice presidents was ripping off truckers but “loved it,” jurors heard a subordinate claim Tuesday in a secret recording.

“He knew – absolutely,” former Pilot Flying J vice president of sales John "Stick" Freeman said of Haslam in a recording played for jurors in U.S. District Court in Chattanooga on Tuesday.

Haslam has denied any knowledge of the fraud scheme and is not charged. After the day's testimony, the company reissued a statement saying: “As we have said from the outset, Jimmy Haslam was not aware of any wrongdoing.”

A transcript of the recording was released by federal prosecutors shortly after the company was raided in April 2013. But this was the first time the recording had been heard in public.

Freeman said in the recording – secretly made by subordinate Vincent Greco at the behest of the FBI and IRS Criminal Investigation Division – former Pilot Flying J president Mark Hazelwood also knew about the fraud.

A mole records

Hazelwood is standing trial along with former subordinates Scott Wombold, Karen Mann and Heather Jones on charges including conspiracy to commit wire and mail fraud in a scheme to promise trucking firms big discounts but shorting them instead.

Freeman, along with 13 other former executives and employees of the truck-stop giant, has pleaded guilty and is expected to testify against Hazelwood and the three others. Greco and a second former Pilot Flying J employee were granted immunity.

Assistant U.S. Attorney Trey Hamilton on Tuesday played for jurors a recording Greco made in a hotel lobby in February 2013 – two months before the Knoxville headquarters of the nation’s largest diesel fuel retailer was raided.

Salesman Chris Andrews testified he was learning the ropes from Greco and Freeman when the recording was made. Neither he nor Freeman knew Greco was wearing a wire. Andrews has pleaded guilty, too.

‘I called Jimmy’

In the recording, Freeman explained that “we’ve all had cases where we’ve gotten busted,” meaning situations in which a trucking company discovered they were being shorted. Freeman told the pair he got caught by Western Express in Nashville to the tune of $1 million. To soothe Western Express, Pilot Flying J bought a broken-down airplane from the firm for $1 million.

“What does Mark (Hazelwood) and Jimmy (Haslam) say about (expletive) like that?” Greco asked.

Freeman said both Hazelwood and Haslam knew. He told them, he said.

“(Expletive),” Freeman said. “I mean, I called Jimmy and told him I got busted at Western Express … He knew – absolutely. I mean, (Haslam) knew all along that I was cost-plussin’ (code for the fraud scheme) this guy. He knew it all along. Loved it. We were making $450,000 a month on (Western Express).”

Freeman boasted that although his deceit cost Pilot Flying J $1 million, the truck stop giant was still making nearly $6 million in its deal with Western Express.

Freeman said on the recording that “it wasn’t a secret” at Pilot Flying J that the firm’s manual rebate system was being used to defraud trucking companies.

‘No negotiation’ at Flying J

Pilot Flying J’s board of directors has confessed criminal responsibility and agreed to pay $92 million as punishment. It has settled lawsuits by trucking companies to the tune of $85 million and is paying for the defense of Hazelwood, Wombold, Mann and Jones.

The trial is expected to span at least six weeks. Tuesday was the sixth day of the trial, which is being held in Chattanooga because that’s where U.S. District Judge Curtis Collier holds court.

Andrews worked his way up the corporate ladder at Flying J before that truck-stop chain merged with Pilot in 2010. Freeman hired Andrews.

Andrews told jurors Flying J did not allow its sales staff to negotiate discounts or decide whether those discounts would be honored. Instead, Flying J’s corporate leaders fashioned discount offers based solely on how many gallons of diesel a trucking firm bought in a month.

“There was no negotiation,” Andrews said. “You could not deviate in any way.”

Learning the ropes

Andrews said he was schooled on the art of fraud soon after joining Pilot Flying J in mid-2010 by the salesman whose accounts he was taking command of – Jay Stinnett. Stinnett, too, has pleaded guilty.

“He told me … the logistics of how it worked,” Andrews testified.

Andrews said he got caught shorting Honey Transport of Florida – twice. The first time, he said, he convinced the owner she wasn’t being shorted. But when she again discovered a discrepancy a short time later, Andrews said he blamed it on an accounting mishap and forked out just more than $10,000 to appease her.

Andrews said he still recalls receiving a call from Honey. He was in a parking lot in Alabama with Freeman as the two were preparing to lobby a company for business.

“(Freeman) said it sounds like you just got busted,” Andrews told jurors.

Collier is shutting down the trial until Monday because of a previously scheduled commitment he has. Jurors are not being sequestered, which means they go home each night. But Collier has barred them from reading, listening or doing research about the case.