pilothdqtrs.jpg

Pilot Flying J's Jimmy Haslam addresses trucking executives about investigation into fuel rebate fraud

(Plain Dealer file)

INDIANAPOLIS -- Pilot Flying J's Jimmy Haslam, addressing trucking company executives this morning, said he had no knowledge of deliberate fuel rebate shortages to some of the Knoxville truck stop chain's customers.

"Absolutely not. I will say absolutely not," Haslam told a capacity audience of hundreds of transportation industry officials. "I was not aware of any of this."

Haslam said a review under way by auditors shows that about 250 trucking companies out of 400 that were on a "manual" fuel rebate program may have problems with their rebates. That's out of about 5,000 trucking company customers served by Pilot Flying J. He called the initial assessment "a little fluid" because auditors are still digging into what transpired.

Haslam initially was not on the agenda for the two-day seminar held by Scopelitis, Garvin, Light, Hanson & Feary in Indianapolis.

But he accepted the firm's invitation to address trucking officials about claims that Pilot Flying J, the nation's biggest diesel fuel retailer, cheated customers out of rebates on bulk fuel purchases.

Scopelitis handles transport-related legal issues exclusively. It collected questions from clients and forwarded 18 to Haslam, all of which he addressed this morning.

"I apologize for the actions of our people. And I want to look everyone in the eye and say we'll do everything we can to make things right," Haslam said.

The Pilot CEO, who bought a majority share of the Cleveland Browns last year -- and was said then to be a leader expected to be closely involved with the team's operations -- said in a brief interview after his address that "Unfortunately, there were some things that happened a couple of levels below me" at Pilot Flying J that he missed.

"It's a blip. It may be a substantial blip, but it in no way jeopardizes our ownership of the Browns, No. 1, or our commitment to the Browns."

During his 40-minute presentation, Haslam answered questions screened by his lawyers. Scopelitis President Gregory Feary said he didn't want to put Haslam in the position of answering on-the-spot questions because of the federal investigation. Feary said he was waiting to see how Pilot Flying J resolved any rebate issues with his trucking company clients, rather than filing a lawsuit.

"He's been awfully forthright and candid in his communications," he said. "As long as that continues, we see no need to get into a litigation situation."

FBI and IRS agents who descended on Pilot Flying J's headquarters in Knoxville, Tenn., on the morning of April 15 were looking for evidence of rebate fraud that took place at the company for more than five years, according to a search warrant affidavit used in the raid.

Haslam released a statement later in the day saying he believed there was no wrongdoing.

Then U.S. Attorney William Killian took the unusual step of ordering the search warrant affidavit unsealed. It showed that inside informants secretly recorded conversations among Pilot employees who brazenly discussed a rebate scheme, known by terms such as "trimming," "cost-plussing" and "screwing."

An embarrassed Haslam said that his company had been sullied by the claims, and he called for a series of changes in the way Pilot Flying J does business.

The affidavit indicates rebate fraud was widespread and used to boost sales commissions and company profits. It lists 35 current or former Pilot employees that it said are or were involved in supervising or supporting the sale of diesel fuel.

It doesn't suggest that all them were involved in illegal activity. But it says Haslam and Pilot President Mark Hazelwood knew about shortchanging customers because they attended sales meetings where it was discussed.

Haslam has said he had no knowledge of cheating and said "any willful wrongdoing" was "intolerable."

Rich Bren of Phoenix-based CMS, which provides technology services for trucking firms, said "It's sad to think that someone would be so abusive to their customer base."

But Bren said of Haslam, "Give the man a chance. I would hope that everything's done right, to make restitution."

The owner of a southern Indiana trucking company with annual revenues of $50 million said he was "shocked, as the rest of the world was."

The executive, who did not want his name published, said his company did a "spot audit" after the FBI aired and didn't identify any rebate problems.

Among the trucking companies the affidavit said were defrauded are Chicago-based JKC Trucking Co. and W.N. Morehouse Truck Line Co. of Omaha, Neb. Neither sent representatives to Indianapolis.

"I've been getting so many calls from so many places, I wish we hadn't been mentioned," said Michael Kucharski, JKC vice president.

Kucharski said several people from Pilot Flying J have recently contacted his company. He declined to say what was discussed.

Curt Morehouse said Haslam called and settled up by paying about $150,000 his business was owed.

"We got all our money. I got a news sales rep," Morehouse said this week. FBI and IRS agents are scheduled to visit his company tomorrow, he said.

Meanwhile, five trucking firms have called Morehouse looking for tips on how to detect rebate shortages. It would be difficult detective work because they don't have software that tracks fuel prices, Morehouse said.

His advice to the companies: Check bills, find a few examples of questionable rebates and then call Pilot and ask them to finish going over their payment history. Haslam has said Pilot has a team of internal auditors reviewing every one of the company's 3,300 contracts with trucking customers.

"Make them do the work," Morehouse said.