Defense Attacks Images of Star Witnesses in Pilot Flying J Fraud Trial
Jurors in the ongoing Pilot Flying J fraud trial haven’t yet seen the government’s two star witnesses, but the attorney for the truck stop giant’s former president is already painting portraits of the pair as a ruthless corporate climber and a jealous snitch.
“I want to see if we can give the jury a flavor of Pilot,” attorney Rusty Hardin said as he used a large pad of paper and a Sharpie to draw jurors’ attention to what he wanted them to see as he posed questions Nov. 9 to another Pilot Flying J ex-executive.
Hardin, a Texas attorney whose client roster has included high-profile athletes, corporate raiders and the late husband of a one-time Playboy Bunny, is defending – on Pilot Flying J’s tab – the firm’s former president, Mark Hazelwood, in U.S. District Court in Chattanooga, Tenn.
Bring in the informants
Hazelwood is the highest-ranking Pilot Flying J employee to face charges of conspiracy to commit wire and mail fraud in a scheme to defraud trucking companies that spanned five years. Three others also are standing trial – former vice president of sales Scott Wombold and regional account representatives Heather Jones and Karen Mann.
Pilot Flying J’s board of directors has confessed criminal responsibility in the fraud. Fourteen former employees have pleaded guilty. Two others have been granted immunity.
RELATED: 'Greed and power' fueled Pilot Flying J praud, prosecutor says
RELATED: Testimony - Pilot Flying J execs tell sales staff their customers are ignorant, deserve rip-off
Hardin and partner Andy Drumheller have been weaving their defense throughout the government’s case since the trial began Nov. 6, namely that Hazelwood was so busy building Pilot Flying J into the truck stop giant it became that he was oblivious to the widespread fraud scheme. The attorneys have repeatedly told jurors that description fits Hazelwood’s boss, Pilot Flying J CEO Jimmy Haslam, too. Haslam, like Hazelwood, denies knowing about the fraud scheme. He is not charged.
Assistant U.S. Attorneys Trey Hamilton and David Lewen have two key witnesses in their bid to show Hazelwood enforced the fraud scheme and planned to grow it – former vice president John “Stick” Freeman and salesman Vincent Greco.
Greco secretly recorded Freeman, Hazelwood and other sales executives after the FBI showed up on his doorstep in 2011. Freeman is captured on those recordings repeatedly boasting about the fraud scheme, and Hazelwood’s voice is captured on those recordings talking about the mechanics of it. Haslam’s voice is never heard on any recordings revealed so far.
Thirst for power, money
Hardin used his questioning of former director of sales Arnie Ralenkotter to attack the credibility of the two men.
“There were some pretty strong personalities here, wasn’t there?” Hardin asked Ralenkotter. “It’s fair to say there was some competition there.”
Ralenkotter answered, “Yes, sir.”
Using the theme Lewen presented in opening statements Nov. 6 of “greed and power” as the driver of the fraud scheme, Hardin asked Ralenkotter to explain to jurors how executives’ cut of the fraud profits climbed as they clawed their way up the corporate ladder.
As a supervisor, Ralenkotter not only made money from the scheme by pocketing some of the fuel discounts he promised truckers but also garnering a cut of the proceeds of his subordinates’ fraud. Greco and Freeman, Ralenkotter agreed, were two hard-charging salesmen who wanted a piece of that supervisor compensation.
Hardin noted Ralenkotter himself had an eye on a vice president slot – a job that instead went to Freeman, whom Ralenkotter said was a buddy of Haslam.
“I thought about it,” Ralenkotter said. “(But) I was of the opinion that the position needed to be someone who lived in Knoxville, and I had no desire to move to Knoxville.”
Ralenkotter lived in and worked from Kentucky. Supervisors and salesmen were assigned regions of the country and worked remotely. Pilot Flying J’s headquarters are in Knoxville. That’s where Hazelwood and Haslam worked.
“When Mr. Freeman became vice president was Mr. Greco upset about that?” Hardin asked.
Ralenkotter answered, “It appeared so.”
Fleeced or fleecers?
Ralenkotter also confirmed what independent truckers have alleged since the FBI and IRS Criminal Investigation Division raided Pilot Flying J’s headquarters on Tax Day 2013 – their bosses sometimes fleeced them, too.
“A lot of these drivers were independent contractors that worked for these companies,” Hardin said in one discussion with Ralenkotter about why trucking firms sometimes wanted an “off-the-books” fuel rebate arrangement rather than automatic billing. It was a “manual” method that was at the heart of the fraud scheme.
The independent truckers who bought their own fuel and then were reimbursed by the firms that hired them should have received those discounts but sometimes didn’t, Ralenkotter conceded.
It was the firms – not the independent truckers – who won settlements from Pilot Flying J after the fraud scheme was exposed.
The trial continues this week and is expected to stretch into at least late December.
