U.S. District Judge James M. Moody approved a $84.9 million settlement in the Pilot Flying J fuel rebate scandal in a Little Rock, Arkansas courtroom Monday.
KNOXVILLE, Tenn. - Jimmy Haslam has been the face of Pilot Flying J as it responds to a federal investigation, but one of the CEO's top lieutenants also plays a significant role in an affidavit released by federal agents.
According to the affidavit, a confidential informant that works at Pilot told the FBI that rebate fraud had occurred at the company with the knowledge of Haslam and Pilot President Mark Hazelwood.
As the owner of the Cleveland Browns and the brother of Tennessee's governor, Haslam is the company's most prominent leader, but Haslam's voice did not appear in the affidavit's numerous transcripts of secretly recorded conversations.
Hazelwood, on the other hand, appears twice, including a February meeting at which company officials — according to the affidavit — discussed the potential for a two-tiered pricing structure that would impose higher prices on less-sophisticated customers.
Among other things, the conversation about two-tier pricing appeared to highlight the potential for raising freight costs for certain customers, prompting Hazelwood to say: "Sure. Customer A, Customer B. Customer A looks at every orifice you have; Customer B doesn't even know you have an orifice."
The affidavit doesn't specifically allege that such a plan would be illegal, although it does say that Hazelwood compared the A-B plan — which he dubbed "Aunt Bea" — to the manual rebate program at the center of the controversy.
The idea was later abandoned, according to the affidavit.
Glen Sokolis, who heads a Pennsylvania-based fuel management company that assists trucking companies, said he didn't think the two-tier pricing structure would be illegal.
Pilot Flying J, he said, wasn't transparent anyway about the freight rate — a fee that covers its cost of fuel transport — that it charges to trucking companies.
Sokolis cited a hypothetical example in which Pilot and Love's Travel Stops & Country Stores had truck stops across the street from each other, but the cost at Pilot was higher. " ‘Our freight's a little bit more expensive there.' That's all (Pilot would) have to say," Sokolis said.
Hazelwood is a longtime Pilot employee whose promotion to company president was announced in September, when Pilot introduced ex-PepsiCo President John Compton as Pilot's next CEO. Compton later was removed from that post when Haslam decided to return as CEO.
Haslam said this week that several members of the company's diesel fuel sales team had been placed on indefinite leave. Asked if Hazelwood had been placed on leave, a spokeswoman said the company has decided not to identify those employees.
According to a biographical statement printed by the Georgia Motor Trucking Association, Hazelwood started at Pilot in 1985 as a district manager overseeing the company's fuel center division, and previously worked at Lykins Petroleum and TravelCenters of America.
The bio traced his work in the truck stop business to age 13, when he started washing dishes for his mother, who was the restaurant manager at a truck stop in Eaton, Ohio.
The affidavit also said that on Nov. 20, Hazelwood was making a presentation at a meeting that also included Haslam and CFO Mitch Steenrod.
The affidavit said Hazelwood was interrupted by someone who made reference to a previous deal in which a Pilot executive allegedly was caught shorting Nashville-based trucking company Western Express on rebate money due to the company.
"Yeah," Hazelwood said, according to a transcript. "Well, we're going to introduce him to a guy by the name of Manuel" — allegedly a reference to the manual rebate program that Pilot employees used to defraud customers.
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