Former Pilot Flying J President Charged in Fuel-Rebate Scam
Former Pilot Flying J President Mark Hazelwood and seven other former company sales executives were indicted last week on federal charges related to an illegal multimillion-dollar diesel fuel-rebate conspiracy.
The charges against Hazelwood, outlined in a 58-page indictment unsealed Feb. 9, include mail and wire fraud and witness tampering.
All of the seven other former truck-stop chain executives also were charged with wire and mail fraud.
The indictment accused the executives of “attempting to lull targeted trucking companies into believing that Pilot was honestly and accurately applying represented cost-plus discounts” when they actually were not.
The seven others charged in the indictment are: Scott Wombold, a vice president; John Freeman, a vice president; Vicki Borden, a company director; John Spiewak, a regional sales manager; and regional account representatives Katy Bibee, Heather Jones and Karen Mann.
Wombold also was charged with lying to federal investigators.
All eight have entered pleas of not guilty during a Feb. 9 arraignment in U.S. District Court in Knoxville, Tennessee.
Neither Hazelwood nor his defense attorney, Rusty Hardin, returned phone messages seeking comment. The U.S. Attorney’s Office in Knoxville also did not return phone calls seeking comment.
Pilot Flying J CEO Jimmy Haslam, who has denied having any knowledge or part in the scheme, was not named.
“We’re obviously disappointed and saddened by today’s events but cannot comment further on any matters which are part of the ongoing investigation,” Pilot said it a statement. “We can say that since this unfortunate episode began, the company has put in place policies and procedures unparalleled in the industry to prevent anything like this from happening again.”
Pilot already has reached a $92 million settlement with federal authorities and an $84.9 million settlement to a class of as many as 5,500 customers whose fuel rebates were shorted.
Hazelwood, 57, joined the company in 1988 as a vice president, according to the indictment. He rose steadily at Pilot, a company with more than $31 billion in annual revenue that is the largest truck-stop chain in the nation.
He became president in 2012 and oversaw Pilot’s direct sales division, reporting directly to Haslam.
Hazelwood left Pilot in May 2014, after FBI and IRS agents raided the company’s Knoxville headquarters in April 2013.
Hazelwood most recently has been CEO of Professional Driver Agency, a Brentwood, Tennessee-based company he founded that assists truck drivers in finding jobs with motor carriers. Several employees contacted at the company declined comment.
While Hazelwood was at Pilot, his compensation was tied to the profitability of diesel fuel sales to all of the trucking company accounts managed by the direct sales division, the indictment said.
The document charges him with playing an oversight role in the conspiracy from 2008 through April 2013 to bilk some of Pilot’s regular customers on monthly rebates they received for purchasing diesel fuel at Pilot locations. The discounts and rebates to the motor carrier customers were a way for the company to stay competitive but at the same time were a drain on profits, a company manual said.
The goal of the conspiracy was to maximize Pilot’s profits and the conspirators’ potential for profit- and commission-based compensation, according to the indictment.
The scheme sought to identify trucking companies from Pilot’s pool of existing and prospective customers perceived to be unlikely to detect they were being cheated.
Prosecutors cautioned that indictments are not proof of criminal wrongdoing, but the charging document is laced with a number of serious allegations.
Hazelwood is alleged to have attempted to “further the conspiracy” in a meeting in Florida with members of his sales team by suggesting that they needed to keep a list of which customers were paying attention to their rebate amounts and those who were not.
Pilot had “two-tiered customers,” Hazelwood told the sales staff, calling the types of people, “Customer A and Customer B.”
“Customer A . . . looks in every orifice you have. Customer B doesn’t even know you have an orifice,” the indictment quoted Hazelwood as saying.
The indictment also claims that, in June 2014, Hazelwood attempted to “corruptly persuade” his administrative assistant, an FBI confidential informant known as Pilot Employee 1, to “hinder, delay and prevent” communication with law enforcement officers.
Dennis Francis, a Knoxville attorney who has litigated federal criminal cases for 42 years as a defense attorney, pointed out that 10 Pilot executives’ guilty pleas already have revealed the “severity of the government’s case.”
Francis said he is not convinced that federal prosecutors have gone “all the way up the food chain” to get to the top of the conspiracy.
“Federal prosecutors don’t indict from the top down. They indict from the bottom up,” Francis told Transport Topics. “I don’t think this case is over. I think if that was the case you would have heard the government say we’re all done and have a total of 18 people.”
