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Trucking company execs outraged at alleged Pilot Flying J fraud

Tommy Hodges, former American Trucking Associations chairman

The Trucker Staff

4/22/2013

Though Pilot Flying J CEO Jimmy Haslam said that FBI affidavits unsealed Thursday regarding rebate fraud in the company cover a “very narrow band” of customers, that group of trucking company executives included in that “narrow band,” are making their feelings clear – and rather bitterly, during interviews with The Tennessean newspaper in Nashville.

“Until today, I considered Jimmy Haslam a friend,” said Tommy Hodges, owner of Shelbyville, Tenn.-based Titan Transfer Inc., and a former chairman of the American Trucking Associations. “But when someone you count as a friend lets you down, it kind of puts a knot in your stomach. We’re still buying fuel from them today, but we’re looking at other options.”

Pilot Flying J is a member of the ATA and the organization has yet to publish anything about the situation on its daily digest.

Knoxville-based Pilot Flying J, the nation’s largest truck-stop operator, is majority-owned and controlled by the family of Tennessee Gov. Bill Haslam, whose brother, Jimmy Haslam, is chief executive officer, The Tennessean reported.

The company, which has been under fire after a raid last week on the company’s headquarters, is facing accusations that millions of dollars were withheld from trucking companies involved in the rebate program.

Hodges said his company, which operates 375 over-the-road trucks, is among the victims of the alleged scam, in which trucking firms were paid less than promised in rebates they were supposed to be earning by sending their trucks to Pilot Flying J locations for refueling.

“We feel like they got us,” Hodges said to The Tennessean. “We fit the profile of exactly what they were doing. We were in the rebate program, and we always had a tough time reconciling the checks we were getting with our records of fuel purchases.

“Sometimes when we were expecting $50,000, we would get only $35,000, and when we would call, we never got a straight answer about the discrepancy. When we would get a check, nothing would come with it explaining it.”

Hodges said his company finally went to Pilot’s president and they “just started giving us the discount right at the pump.”

It’s a familiar story for Brad Morehouse, president of W.N. Morehouse Truck Line Inc. of Omaha, Neb., one of the companies named as a victim in FBI reports.

 “We caught them, and they finally put us on a discount right at the pump,” Morehouse said. “It’s all disgraceful. It was very difficult to track the rebates because they had different prices at different truck stops. We trusted them, and now, if they’re guilty, I hope they all go to jail.”

However, if the company shut down, it could mean serious repercussions in the trucking industry, as other fuel companies are not prepared to immediately fill that gap, said Tom Kloza, chief oil analyst for the Oil Price Information Service, or OPIS.

Pilot Flying J has more than 650 locations and 23,000 employees; its annual sales total about $29.2 billion. Love’s truck stops is in second place, with about 290 locations, 10,000 employees and $17 billion in sales, according to The Tennessean.

Although truckers are making an effort to buy fuel at other locations, because of the sheer number of Pilot Flying J’s, sometimes it’s the only option.

Kloza added the company buys from “virtually every refinery in the country.”

“All the suppliers are in a state of shock right now to see these accusations,” Kloza said. “I imagine all of them are probably huddling with their legal departments to see if there are any implications for the future here, including how this might affect Pilot’s ability to pay its suppliers. It’s always been a very creditworthy company.”

Morehouse said the outrage over the fraud should not end at the trucking companies.

“It runs up shipping prices,” Morehouse said. “People buying produce at the grocery store are probably paying more because of our higher fuel prices.”

Pilot Flying J employees commented in the FBI affidavit that the company targeted companies that were “too unsophisticated,” to catch the fraud.

 “It’s quite troubling to read the affidavit and hear what some of the employees were saying, especially the language and arrogance,” said Joe Herman, president of Danny Herman Trucking in Mountain City, Tenn., and chairman of the Tennessee Trucking Association.

“We don’t do business based on sophistication, we do it based on trust,” he added.

Pilot was founded in 1958 by James Haslam, father of Jimmy and Bill Haslam. Gov. Haslam has not been involved in company operations for more than a decade, but he remains a stockholder, The Tennessean reported.

Information for this article was provided by The Tennessean, http://www.tennessean.com/

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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