NASHVILLE (AP) — The federal investigation into the truck stop chain owned by the family of Tennessee Gov. Bill Haslam and Cleveland Browns owner Jimmy Haslam led to its first convictions last week and threatens to widen against employees at Pilot Flying J.
Court documents allege sales teams were being trained on how to scam the company’s customers out of rebates and get away with it.
Pilot’s regional sales director and regional accounts representative both pleaded guilty Wednesday to conspiracy to commit mail fraud. The pleas were entered in U.S. District Court in Knoxville. Prosecutors have offered to recommend a much lighter sentence for both employees provided they cooperate with federal investigators and reveal the extent of how many people in the company knew about the fraud.
The Knoxville-based chain is run by CEO Jimmy Haslam, the brother of Tennessee Gov. Bill Haslam. Pilot Flying J, the country’s largest diesel retailer with annual revenues of $31 billion, was founded by their father.
Jimmy Haslam has denied any wrongdoing and has suspended several members of the sales team, but he has declined to identify exactly who has been suspended. An affidavit unsealed last month shows a Pilot employee was secretly recorded saying Jimmy Haslam knew what sales people were doing, though he has denied knowing of any fraud.
He also has said an internal review suggested about 5 percent of the company's customers received less rebate money because of manual adjustments by Pilot employees.
“The statements released by the federal court today do not come as a surprise given what we've been learning in our own internal investigations, but are nonetheless disappointing,” Pilot Flying J spokesman Tom Ingram said in a statement. “We want to assure our customers that we are taking every step to correct any wrongdoing that has occurred and to make certain that it does not happen again.”
Regional sales director Arnold Ralenkotter and regional accounts representative Ashley Smith Judd pleaded guilty to scamming the company’s customers out of rebates, a practice well-known among both sales staff and executives as “jacking,” according to court documents. Conviction on the charge carries a maximum 20 years in prison.
Court documents in Ralenkotter’s and Judd’s cases show fraud was well-known among sales staff and that Pilot’s national account sales director taught employees how to defraud trucking companies out of rebate money without getting caught. The national account sales director was not named in the plea agreements Wednesday, but an affidavit unsealed in April alleged national sales director Brian Mosher trained employees on how to get away with the fraud.
Court records say it was often difficult for trucking companies to track how much money they were entitled because there were so many variables in the company’s diesel price discount program.
Documents indicate people both higher and lower than Ralenkotter were aware of the fraud. Ralenkotter even threatened to take a customer account away from a subordinate if the worker did not go along with the deception, court documents say.
Court documents in Judd’s case show there may have been more than 50 companies defrauded by Pilot.