Judge to Weigh Bid to Depose Pilot CEO by Georgia Fleet in Rebate Fraud Lawsuit

This story appears in the Aug. 19 print edition of Transport Topics.

A judge in Knoxville, Tenn. has scheduled an Aug. 22 hearing to consider whether to allow a Georgia motor carrier to take a sworn deposition from Pilot Flying J CEO Jimmy Haslam and three other executives of the truck stop chain in connection with a rebate-discount fraud lawsuit.

Attorneys for Atlantic Coast Carriers, which filed a lawsuit in April, told Pilot in July that it would take the depositions, Atlantic’s co-counsel Drew McElroy told Transport Topics.

However, McElroy said those depositions never took place after Pilot filed a motion to block the deposition. In a court filing, Pilot called Atlantic Coast’s proposed depositions “entirely premature and improper.”

Pilot asked the court to stay the proceedings and quash Atlantic Coast’s deposition until it finalizes a settlement agreement with law firms representing trucking clients.

In the settlement filed July 16 in U.S. District Court in Little Rock, Ark., Pilot agreed to pay customers 100% of what they are owed, plus 6% interest and all legal costs.

Fleets have until Oct. 15 to join the class and become a part of the settlement agreement.

So far, more than 20 motor carriers have filed lawsuits, and some have not yet agreed to join the settlement.

Last week, Dalton, Ga.-based Cedar Creek Trucking Inc. became the latest to file a lawsuit against Pilot. The fleet also is seeking to depose Haslam in October.

Also last week, a lawsuit originally filed jointly June 25 in state court by New Jersey motor carriers National Retail Transportation Inc. and Keystone Freight Co. was transferred to federal court.

Mark Tate, a Savannah, Ga.-based attorney who is co-counsel for Atlantic Coast and Cedar Creek, said the settlement agreement “caps the recovery at a ridiculous amount of money.”

Tate continued, “And the amount of interest that they’re collecting for their clients in the settlement is 6%, which is incredibly ludicrous for an intentional criminal act to steal money. There haven’t been any fairness hearings on this settlement, there has been no discovery, there have been no depositions taken. Nothing’s happened, and here they are ready to settle.”

“This is just another in a line of anticipated suits,” said Rachel Albright, a Pilot spokeswoman. “We’ll defend appropriately.”

In its Aug. 12 lawsuit filed in Knox County Circuit Court, Cedar Creek alleged that Pilot “regularly, purposely and intentionally understated the amount owed to Cedar Creek and other similar companies, promised by Pilot sales representatives as a rebate for purchase of their diesel fuel.”

Cedar Creek, which owns about 45 trucks, said that as a result of being shortchanged, it was “forced to restructure debt and financing it would otherwise not have had to do.”

In addition to Haslam, Cedar Creek also is seeking to depose other Pilot officials, including President Mark Hazelwood, John Freeman, vice president of national sales, and Tom Ingram, a public relations consultant.

The lawsuit referenced a 120-page FBI affidavit that said an informant had taped conversations discussing the rebate fraud scheme in a meeting of Pilot executives.

Haslam has denied any knowledge of the rebate fraud.

Since the investigation became public after an FBI raid on Pilot’s Knoxville, Tenn.-based headquarters in April, seven Pilot executives have pleaded guilty to participating in the scheme.

Cedar Creek said that it recently asked Pilot to turn over an internal audit so the trucker could determine how much it was owed by the truck stop chain.

Pilot told Cedar Creek that it had not completed any internal audit of former customers and did not anticipate having it done until “this fall or thereabouts,” the lawsuit said.

Earlier this month, a panel of federal judges denied a motion to consolidate a dozen federal fuel-price fraud lawsuits against Pilot.

Pilot, which has opposed the consolidation, said it hoped the panel’s ruling “is another step in assuring any customers who are potentially owed monies the opportunity to recover 100% of what they are entitled to in the most timely, cost-efficient manner possible.”

Meanwhile, Mitch Steenrod, Pilot’s chief financial officer, said the company may be losing volume to its competition, “but not much.”

The company is “exceptionally strong from a financial perspective,” he said.

“Our second quarter held up pretty well despite the situation we are managing,” Steenrod said. “We were down approximately 0.5% in diesel volume in the second quarter versus our budgeted diesel volume.”

Steenrod also said Pilot’s debt is “substantially less than reported in the news media.”