Pilot Flying J, Federal Gov't Reach Pact

KNOXVILLE, Tenn. -- More than a year after allegations of fraud surfaced against Pilot Flying J, the locally based truck stop operator has reached an agreement with the U.S. Attorney's office which will allow it to avoid prosecution.

Pilot Flying J reached the understanding with the U. S. Attorney's office, Eastern District of Tennessee, and the U. S. Department of Justice. Under the terms of the pact, the company will not be prosecuted, assuming it follows the terms of the agreement, including paying a monetary penalty over the next two years and fully cooperating with the federal government's investigation of fraudulent conduct within the company's diesel fuel sales discount programs.

"We, as a company, look forward to putting this whole unfortunate episode behind us, continuing our efforts to rectify the damage done, regaining our customers' trust and getting on with our business," said CEO Jimmy Haslam. "We've been committed from the beginning of this to doing the right thing, and that remains our commitment."

The agreement, titled a "Criminal Enforcement Agreement," is neither an indictment nor a finding of guilt.  It clearly states that the company will not be prosecuted under any current circumstances so long as the company complies with the terms of the agreement. However, individuals may still be prosecuted, according to Pilot Flying J's release.

"The past 15 months, since the federal government served a search warrant on the company's headquarters, have been very trying for all involved," said Aubrey Harwell, Pilot Flying J's attorney.  "The company has cooperated fully with the government and will continue to do so.  As to its customers, the company has gone to extraordinary lengths to understand and identify any wrongdoing and make it right."

According to the agreement, Pilot Flying J also acknowledges and accepts full responsibility for any criminal conduct committed by its employees, including some personnel involved with the operation and oversight of its direct diesel fuel sales group, an approximately 90-member division of the company, which overall has 23,000 employees and 650 retail locations nationwide.

"Under the terms of the agreement," Harwell added, "the company has certain obligations, which it fully intends to fulfill.  We appreciate the diligence the U.S. Attorney's office has shown in this matter.  It certainly has been no less diligent than our own internal investigation.  I believe this agreement is the result of the good intentions of both sides to do the right thing."

Over the two-year term of the agreement, in addition to paying the monetary penalty, which the government has set at $92 million consistent with the United States Sentencing Guidelines, the company also commits to keep the government advised of the status of its internal compliance program, which it voluntarily initiated immediately following the execution of the warrant last year.

The agreement stems from an April 15, 2013 raid on the company's Knoxville headquarters by the FBI and the Internal Revenue Service in an investigation into fraud allegations in its fuel rebate program. Since then, 10 former Pilot Flying J officials have pleaded guilty to charges that they deliberately reduced promised rebates to many trucking firms throughout the country. In addition, as CSNews Online reported on May 20, Pilot Flying J President Mark Hazelwood abruptly left his post.

Under a class-action settlement agreement with several trucking companies, Pilot Flying J agreed to pay $85 million to resolve several of the subsequent lawsuits brought against the company.

"The terms of this agreement, including the significant monetary penalty and the very serious consequences if [Pilot Flying J] fails to comply, demonstrate quite clearly that no corporation, no matter how big, influential or wealthy, is above the law," said U.S. Attorney Bill Killian. "In addition, the company's agreement to fully cooperate with the United States, including its obligation to identify its employees' criminal conduct, will assist the ongoing federal investigation. The agreement ensures that [Pilot Flying J's] extensive remediation efforts will continue until all trucking company victims have received full restitution and until Pilot has demonstrated to the United States that it has implemented sufficient internal controls to prevent this kind of fraudulent conduct from ever occurring again."