If Jimmy Haslam eventually relinquishes control as owner of the Browns because of the federal investigation into Pilot Flying J, his father, Jim Haslam II, would take over the team, Daniel Kaplan of SportsBusiness Journal reported Monday, citing unnamed sources.
The FBI and Internal Revenue Service raided the headquarters of Pilot Flying J April 15 in Knoxville, Tenn., and an affidavit alleges that Jimmy Haslam knew about fuel rebate fraud that cheated trucking-company customers out of millions of dollars. Jimmy Haslam, Pilot Flying J’s CEO, has repeatedly denied knowledge of the scheme. Seven former Pilot Flying J employees have pleaded guilty to federal charges thus far.
Aside from the ongoing criminal investigation, about 20 trucking companies have filed civil lawsuits against Pilot Flying J. Eight of them have reached a preliminary class settlement agreement, and Jimmy Haslam has sent checks to several other businesses in an attempt to make restitution.
Jim Haslam II, 82, founded Pilot Oil Corp. in 1958 when he bought a gas station in Gate City, Va., for $6,000. He eventually turned the day-to-day operations of the business over to his sons. In 1995, his oldest son, Jimmy, 59, became CEO, and his youngest son, Tennessee Gov. Bill, 54, became president, a role he left in 1999.
Jim Haslam II has not been linked to the fraud scandal.
The NFL and Jimmy Haslam developed a contingency plan in the aftermath of the raid, but there are no indications at the moment he is stepping down, according to SportsBusiness Journal. He struck a deal last August to buy the Browns from Randy Lerner for about $1 billion, and NFL owners unanimously approved his purchase Oct. 16.
Jimmy Haslam addressed local reporters July 25 when the Browns opened training camp at their headquarters in Berea and tried to alleviate concerns that he could be forced to sell the team. He insisted there are no cash-flow issues to fear, and he’s “very optimistic” about the outcome of the investigation.
“We’re committed to owning the Browns for a long period of time,” Jimmy Haslam said July 25. “I understand in Cleveland there’s a great deal of uncertainty because of past history, but the fans should not worry. Our family is going to own this asset for a long, long time. We’re excited and we feel [it’s] a privilege to own not just an NFL team, but to own the Cleveland Browns with all the heritage and history it has.”
In a statement sent to the Beacon Journal, NFL spokesman Brian McCarthy said: “No decision to step back has been made, so looking into who would take over is purely speculative. Jimmy is the best judge of how to keep the focus of the Browns on football and the fans.”
When asked for a comment about the report, Pilot Flying J spokesman Tom Ingram told the Beacon Journal, “Jimmy has no plans to step down, so the question is irrelevant.”
The Browns, meanwhile, declined to comment on the report when reached by the Beacon Journal.
SportsBusiness Journal reported that it is not believed the NFL would require an increase in Jim Haslam II’s equity ownership if he takes control of the team. According to the report, the elder Haslam owns part of the Browns but not enough to meet league rules governing how much of a team the general partner must own — the threshold is 30 percent, though less is required when combined with other family members.
Jim Haslam II would not be viewed as a general partner but essentially an executive whose owner has designated him authority and voting rights, according to the report.
There is precedent for an NFL owner ceding control to a family member. In 2000, Youngstown native Eddie DeBartolo Jr. surrendered ownership of the San Francisco 49ers to his sister, Denise DeBartolo York, after pleading guilty in 1998 to a felony charge of failing to report that former Louisiana Gov. Edwin Edwards allegedly extorted $400,000 from him in exchange for a riverboat gambling license. The league suspended DeBartolo for his role in the scandal.
NFL Commissioner Roger Goodell visited the Browns’ headquarters Thursday and issued strong public comments in support of Jimmy Haslam.
“Jimmy Haslam is a man of great integrity,” Goodell said. “We’re proud to have him as an owner in the NFL and think he’s going to be a great owner for the Cleveland Browns and their fans here.
“He’s as disappointed as anybody in what happened at Pilot J. He’s working hard to fix it and correct those issues, both from a structural standpoint and to make amends. He’s kept me very much involved. I think, as he tells me, I was one of his first calls to inform me what was happening after he learned about it, and he’s been great at keeping us informed.”
Goodell also repeatedly sidestepped questions about what the league’s course of action would be in the event Jimmy Haslam is indicted.
“We’re not going to play the hypothetical game,” Goodell said. “Right now, he’s addressing the issues. We’re confident he’s going to deal with it properly.”
Goodell said he asked Jimmy Haslam about whether he was aware of the fraud scheme.
“Yes, absolutely [I asked him if he knew about the fraud],” Goodell said. “And he’s been very clear that he’s had no knowledge of that, and he’s been clear publicly and clear with you all.”
Born in Detroit, Jim Haslam II attended the University of Tennessee on a football scholarship. He was an offensive lineman for Tennessee’s 1951 national championship team and named a captain the following year.
Seven years after he established Pilot, it had 12 locations in Virginia, Tennessee, and Kentucky, and the rise of an empire was underway. Pilot merged with Flying J in 2010. The company is the largest operator of travel centers and travel plazas in North America, running more than 650 in the U.S. and Canada. According to the Wall Street Journal, Pilot generated $30.8 billion in revenue in 2012.
Jim Haslam II, otherwise known as “Big Jim,” has often attended Browns practices and games with his son since he bought the team last year.
During an interview with the Beacon Journal in September at Pilot Flying J’s headquarters, Jimmy Haslam called his father, “a great leader, big picture guy.”
Nate Ulrich can be reached at email@example.com. Read the Browns blog at http://www.ohio.com/browns. Follow him on Twitter at www.twitter.com/NateUlrichABJ and on Facebook www.facebook.com/browns.abj.