3 more Flying J Pilot execs plead guilty in fraud case

Nate Rau | The Tennessean

NASHVILLE -- Three more Pilot Flying J employees pleaded guilty on Tuesday in a scheme to defraud trucking companies out of rebates as a federal investigation continues to unfold into the country's largest truck stop company.

One of the employees was a sales manager who helped set up a training session to teach others how to carry out the fraud. Another was a sales manager who was secretly recorded bragging about his role in shorting customers. A third was an account representative based in Knoxville who helped handle the reductions.

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Jay Stinnett, senior regional sales manager for Pilot who helped set up the training, faces up to 20 years in federal prison and a $150,000 fine and restitution

Regional sales manager Kevin Clark faces up to five years in prison and a $250,000 fine. Clark and Stinnett, along with account representative Holly Radford, all pleaded guilty to conspiracy to commit mail fraud.

With those agreements in place, the federal government has garnered five total plea deals since its investigation became made public when agents raided the Pilot's Knoxville headquarters April 15.

The affidavit filed by the U.S. Attorney's Office in April made clear that investigators have top Pilot executives in their crosshairs, but just how far up the corporate ladder the rebate scheme went remains unclear.

Pilot is led by CEO Jimmy Haslam, who is the lead owner of the Cleveland Browns and whose brother is Gov. Bill Haslam. The company, started by their father, is the source of wealth for the Haslam family.

The rebate scheme involved Pilot executives singling out trucking companies and manually reducing the fuel rebates they were owed on diesel purchases. They chose customers that they thought would not catch the discrepency.

Clark and Stinnett participated in conversations recorded by an FBI informant where they discussed the rebate scheme. In one recording, Stinnett and Vice President of Sales John Freeman seek approval from Pilot's president Mark Hazelwood to teach breakout sessions on the "manual rebate" program. Stinnett was also present at what appears to be a key Florida meeting recorded by the FBI informant, who worked for Pilot, in which top sales executives discuss with Hazelwood a two-tier pricing scheme.

No charges have been brought against Freeman or Hazelwood yet.

At the Feb. 18 meeting in Florida, Freeman is recorded saying he wished Pilot had a two-tier pricing scheme – one for sophisticated clients and a separate one for those that wouldn't notice their rebates were being reduced.

"Have a set of racks for those companies that don't close-watch, don't optimize, and then another set of racks where you have to get in that optimizing close-watch game," Freeman said according to the transcript in the affidavit.

Stinnett responded to Freeman by asking, "Why don't we do that?"

Later in the same conversation, Hazelwood is recorded as saying, "Sure. Customer A, Customer B. Customer A looks at every orifice you have, Customer B doesn't even know you have an orifice," according to the transcript in the FBI affidavit.

The affidavit also describes Clark, who was based in Missouri, being directed by Freeman to change the discount owed Schrock Trucking's without alerting the company.

Three weeks ago northeast regional sales manager Arnold Ralenkotter and account representative Ashley Judd became the first executives to reach plea deals.

Pilot spokesman Tom Ingram said the company was "disappointed in the actions of these employees towards our customer."

"We assure our customers that our five-step plan to correct any wrongdoing and to make certain these actions do not happen again is ongoing, and that our customers' confidence in the vast majority of our 23,000 team members nationwide remains well-placed," he said.

WBIR-TV in Knoxville contributed to this story.