Pilot Corp. Suspected of Fraud in Diesel Rebates, FBI Agent Says

Pilot Corp. (7846), the truck stop service business whose headquarters was searched by the FBI on April 15, is suspected of withholding diesel fuel price rebates and discounts from customers to boost profits, according to a court document.

Federal Bureau of Investigation Special Agent Robert H. Root, in a 120-page affidavit unsealed yesterday by U.S. Magistrate Judge H. Bruce Guyton in Knoxville, Tennessee, told the court probable cause existed to search the headquarters in that city and other premises for evidence of a “conspiracy and scheme to defraud executed by various Pilot employees to deceptively withhold diesel fuel rebates and discounts from pilot customers.”

The withholding was done “for the dual purposes of increasing the profitability of Pilot and increasing diesel sales commissions of the Pilot employees participating in the fraud,” according to Root’s affidavit, dated April 11. The rebates were withheld without the customers’ knowledge or approval, the agent said.

Pilot Corp. Chief Executive Officer Jimmy Haslam, owner of the National Football League’s Cleveland Browns franchise, said in a statement that the company has been and will continue to cooperate in the federal investigation.

“I have read the affidavits and I now understand more clearly the questions the federal investigators are exploring,” Haslam said. “I maintain that the foundation of this company is built on its integrity and that any willful wrongdoing by any employee of this company at any time is intolerable.”

Warrant Requests

Affidavits were filed by Root in support of four different search warrant requests. Marshall Stone, supervising special agent of the FBI’s Knoxville office, said a search by his agency and the U.S. Internal Revenue Service was under way in an April 15 telephone interview.

Root said his information was provided by two confidential sources, including one who is a current Pilot employee, as well as a former employee and from recorded conversations.

“The rebate fraud has occurred with the knowledge of Pilot’s current President Mark Hazelwood and Pilot’s Chief Executive Officer James A. ‘‘Jimmy” Haslam, III, due to the fact that the Rebate Fraud-related activities have been discussed during sales meetings in Knoxville, Tennessee, in which Hazelwood and Haslam have been present,’’ according to the confidential source still in Pilot’s employ, Root said.

Rachel Albright of the Ingram Group in Nashville, a spokeswoman for Pilot, said via e-mail that she couldn’t immediately comment on the allegations concerning Haslam and Hazelwood.

Allegedly victimized customers include those who have bought diesel fuel for commercial use at Pilot stations and travel plazas, and those who purchased the fuel on credit and later paid invoiced amounts.

The cases are U.S. v. Pilot Flying J Inc., 13-mj-2028, 13- mj-2029, 13-mj-2030 and 13-mj-2033, U.S. District Court, Eastern District of Tennessee (Knoxville).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at

aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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