Pilot Flying J owner Jimmy Haslan spoke about the FBI raid on the company last week, describing it as the “most painful 48 hours of business” he’s ever seen. He outliined the company’s five-state plan to get back on track.
NASHVILLE, Tenn. — In the wake of last week’s FBI raid and an ongoing federal probe into a rebate scheme, Pilot Flying J CEO Jimmy Haslam on Monday announced changes the company is taking to rebuild the business and its relationships.
Haslam, who is the brother of Tennessee Gov. Bill Haslam, said that several members of the company’s sales team have been put on administrative leave. In addition, an outside investigator with a U.S. Department of Justice background would be hired to conduct an independent review.
Haslam, who also owns the NFL’s Cleveland Browns, also has ordered internal auditors to review the multibillion-dollar truck stop company’s direct billing process with each of Pilot’s 3,300 trucking clients.
“I more than anyone understand the damage to relationships,” said Haslam, adding that eight days ago, Pilot, the nation’s largest truck-stop operator, had the best relationships in the trucking industry with customers.
“We now have the worst. I understand that. We went to work Saturday to try to rebuild those relationships. We’re approaching it very humbly, hat in hand,” he said.
Pilot Flying J has more than 650 locations and 23,000 employees; last year, it reported $29.2 billion in sales. Forbes magazine last year ranked it as the sixth-largest privately held company in the U.S.
Haslam unveiled five steps Pilot is taking in response to the federal fraud investigation into an alleged rebate scheme conducted by the sales staff. Haslam, who expressed embarrassment at the tawdry details of the federal affidavit released last week explaining the rebate scheme, did not specify which or how many sales staffers were put on administrative leave or whether they would be paid.
Haslam also said the company would no longer conduct manual transactions, which were calculated by hand by sales staffers instead of through a computer program. According to the FBI affidavit, some sales staffers altered rebate agreements and paid trucking companies less than they were owed. Haslam also said the company would create a new chief compliance officer position and the new hire would begin work in the next 30 days.
The company plans to hire a special investigator, who will report to its board of directors and not Haslam, with a “Justice Department background and credibility beyond reproach” to lead Pilot’s internal review.
Haslam noted that after reading the affidavit, he barely slept Friday night. He said after reading an article from USA TODAY, he got on the phone Saturday to call Curt Morehouse, of W.N. Morehouse Truck Line Inc. of Omaha, Neb., who was quoted in the article.
He said the conversation with Morehouse was professional and he vowed that Pilot would pay back any money owed.
Haslam called the 48 hours after the release of the FBI’s affidavit justifying its search warrants of Pilot’s Knoxville, Tenn., headquarters “the most painful time of his 36 years with the company.
Under the rebate program, the FBI states that trucking firms who met certain minimum purchase levels were promised rebates, but those rebates were then reduced for certain customers.
The affidavit states that federal investigators had cause to believe that certain members of the Pilot sales staff “have conspired and schemed to engage in rebate fraud for many years.”
Though Haslam did not specify which executives would be put on leave, the affidavit contained recorded conversations that were especially blistering involving John Freeman, the vice president of sales, and Brian Mosher, the director of sales for national accounts.
The affidavit includes excerpts from secretly recorded conversations in which Freeman and other sales staffers discuss the rebate program and the method by which those promised rebates were reduced.
According to the court filings, Mosher’s Bettendorf, Iowa, home was one of the locations searched by federal agents last week. Mosher was supervised by Freeman, records show.
The federal investigation became public a week ago when federal agents went to Pilot headquarters and began the search for records. The 120-page affidavit backing up the requested search warrant was made public Thursday.
Contributing: G. Chambers Williams III, The Tennessean
- ^ FBI raid and an ongoing federal probe into a rebate scheme (www.tennessean.com)
- ^ http://www.usatoday.com/story/news/nation/2013/04/17/pilot-flyingj-ceo-downplays-federal-raid/2089909/ (www.usatoday.com)
- ^ https://www.tennessean.com/interactive/article/20130419/NEWS03/130419010/FBI-Affidavit-Pilot-Flying-J-case (www.tennessean.com)
- ^ Pilot (www.pilotflyingj.com)
- ^ USA TODAY (www.usatoday.com)