Browns owner Jimmy Haslam's truck-stop empire, Pilot Flying J, announced today it has reached an agreement with the federal government and will not be prosecuted for fraud, provided it meets the terms of the deal.
Under the two-year agreement, Pilot Flying J must pay a penalty of $92 million and fully cooperate with the government’s investigation of fraudulent conduct within the company’s diesel fuel sales discount programs.
The agreement offers no protection from prosecution to any individual, including Haslam, who has not been charged.
NFL spokesman Greg Aiello made it clear that the league would not levy an additional penalty against Haslam. "There have been no allegations of any personal conduct that is in violation of NFL policy," Aiello wrote in an email.
Below are news releases from Pilot Flying J and the U.S. Attorney’s office, Eastern District of Tennessee.
Pilot Flying J release:
KNOXVILLE, TN -- Pilot Flying J has reached an understanding with the U. S. Attorney’s office, Eastern District of Tennessee, and the U. S. Department of Justice, that the company will not be prosecuted, assuming it follows the terms of the agreement, including paying a monetary penalty over the next two years and fully cooperating with the federal government’s investigation of fraudulent conduct within the company’s diesel fuel sales discount programs.
“We, as a company, look forward to putting this whole unfortunate episode behind us, continuing our efforts to rectify the damage done, regaining our customers’ trust, and getting on with our business,” said CEO JimmyHaslam. “We’ve been committed from the beginning of this to doing the right thing, and that remains our commitment.”
“The past 15 months, since the federal government served a search warrant on the company’s headquarters, have been very trying for all involved,” said Aubrey Harwell, Pilot Flying J’s attorney. “The company has cooperated fully with the government and will continue to do so. As to its customers, the company has gone to extraordinary lengths to understand and identify any wrongdoing and make it right.”
“Under the terms of the agreement,” Harwell added, “the company has certain obligations, which it fully intends to fulfill. We appreciate the diligence the U. S. Attorney’s office has shown in this matter. It certainly has been no less diligent than our own internal investigation. I believe this agreement is the result of the good intentions of both sides to do the right thing.”
The agreement, titled a “Criminal Enforcement Agreement,” is neither an indictment nor a finding of guilt. It clearly states that the company will not be prosecuted under any current circumstances so long as the company complies with the terms of the agreement. However, individuals may still be prosecuted.
Under the agreement, Pilot Flying J also acknowledges and accepts full responsibility for any criminal conduct committed by its employees, including some personnel involved with the operation and oversight of its direct diesel fuel sales group, an approximately 90-member division of the company, which overall has 23,000 employees and 650 retail locations nationwide.
Over the two year term of the agreement, in addition to paying the monetary penalty, which the government has set at $92 million consistent with the United States Sentencing Guidelines, the company also commits to keep the government advised of the status of its internal compliance program, which it voluntarily initiated immediately following the execution of the warrant last year.
To learn more about Pilot Flying J’s actions regarding the investigation, please visit the company’s Rebate Education site: http://rebateeducation.pilotflyingj.com/.
U.S. Attorney's Office release:
KNOXVILLE, Tenn. – Pilot Travel Centers LLC, d/b/a Pilot Flying J (Pilot), has entered into a Criminal Enforcement Agreement with the United States for the purpose of resolving the company’s criminal liability for its employees’ fraudulent conduct in deceptively withholding diesel fuel price discounts from hundreds of customers.
As stated in the attached agreement, Pilot has accepted legal responsibility for the criminal conduct of its employees, which caused more than $56 million in loss to its customers, and agreed to pay full restitution to every victim of the fraud. Pilot further acknowledged the gravity of its employees’ criminal wrongdoing by agreeing to pay the United States a $92 million monetary penalty – an amount within the fine range recommended by the U.S. Sentencing Guidelines. The agreement also expressly states that it provides no protection from prosecution to any individual, and moreover, imposes a continuing obligation on Pilot to provide complete cooperation with the ongoing federal investigation of current and former Pilot employees relating to fraudulent conduct involving the sale of diesel fuel. Pilot must also periodically report to the United States what it has done to ensure that a system of internal accounting controls and other compliance procedures have been established to prevent fraudulent conduct from occurring again in the sale of diesel fuel. In the event Pilot materially breaches its obligations under the agreement, Pilot has agreed that the United States may file the criminal information, attached to the agreement, and will not contest the allegations in that charging document.
“The terms of this agreement, including the significant monetary penalty and the very serious consequences if Pilot fails to comply, demonstrate quite clearly that no corporation, no matter how big, influential, or wealthy, is above the law,” said U.S. Attorney Bill Killian. “In addition, the company’s agreement to fully cooperate with the United States, including its obligation to identify its employees’ criminal conduct, will assist the ongoing federal investigation. The agreement ensures that Pilot’s extensive remediation efforts will continue until all trucking company victims have received full restitution and until Pilot has demonstrated to the United States that it has implemented sufficient internal controls to prevent this kind of fraudulent conduct from ever occurring again,” continued Killian.
Following a lengthy joint-investigation by the FBI and the IRS-Criminal Investigation into allegations of fraudulent conduct at Pilot, on April 15, 2013, search warrants were executed at multiple locations, including Pilot’s headquarters in Knoxville. Since that time, 10 Pilot employees, including those with supervisory responsibilities, agreed to cooperate with the ongoing federal investigation and entered guilty pleas to mail and wire fraud charges arising from their involvement in the fraudulent reduction of diesel fuel price discounts owed to Pilot customers.
In the agreement, Pilot confirmed that fraudulent conduct involving diesel fuel price discounts was prevalent within its Direct Sales group and carried out with the knowledge and participation of employees responsible for the operation and oversight of Direct Sales. Pilot further confirmed that supervisory employees encouraged participation in discount fraud for the company’s benefit. For example, during a November 19 and 20, 2012, annual sales training meeting at Pilot’s headquarters in Knoxville, a Pilot supervisor encouraged and taught Direct Sales employees how to deceptively reduce the rebates paid to some customers for the purpose of making targeted accounts more profitable for the company.
Pilot also confirmed that the discount fraud was executed generally in one of two ways: either by fraudulently reducing the amount of monthly rebate amounts to targeted customers or by deceptively reducing the off-invoice discounts of targeted customers. Pilot acknowledged that its employees emailed spreadsheets among each other that documented their fraudulent reductions, and that in some cases, its employees fabricated “back up” documentation sent to customers to justify fraudulently reduced rebate or discount amounts.
Additionally, Pilot confirmed that in February 2013 certain Pilot employees involved with Direct Sales expressed an intent to expand the scheme to defraud by having Direct Sales personnel identify and target Pilot’s off-invoice customers that were considered to be too unsophisticated to carefully monitor diesel pricing data in conjunction with their periodically received fuel invoices. As set forth in the agreement, certain Pilot employees involved with the operation and oversight of Direct Sales referred to this new aspect of the fraud as “cost plus B plan” – named after having two tiers of cost pricing for different types of customers: tier “A” and tier “B.” Pilot further acknowledged that certain employees involved with the operation and oversight of Direct Sales planned not to inform the targeted unsophisticated customers of their placement in the higher-priced tier, and these employees occasionally referred to these targeted customers as “Customer Bs.”
The FBI’s and IRS-Criminal Investigation’s joint investigation is ongoing. Assistant U.S. Attorneys F. M. (Trey) Hamilton III and David P. Lewen, Jr. are representing the United States.