CHATANOOGA, Tenn. — The prosecution in the Pilot Flying J fraud trial against truck stop executives and sales representatives says the rebate scam was an “infection of fraud” at the truck stop company while attorneys for the plaintiffs told the jury the executives shouldn’t be found “guilty by association.”
The scam caused the company to pay a $85 million settlement to jilted customers and a $92 million penalty to the government. Pilot is controlled by the family of Cleveland Browns owner Jimmy Haslam and Tennessee Gov. Bill Haslam, who have denied any prior knowledge of the scheme and have not been charged.
Defense attorneys presented their opening statements on behalf of former Pilot President Mark Hazelwood, former vice president Scott "Scooter" Wombold and two former saleswomen, Heather Jones and Karen Mann, on the second day of the trial Tuesday. Federal prosecutors have said some of the 14 former employees who pleaded guilty will testify against their onetime Pilot colleagues.
"What motivates them on the witness stand?" said Wombold attorney John Kelly. "It used to be money; now it's something a lot more important."
Kelly said his client did not participate in the scheme, and even saw his professional prospects dim as others who were directly involved in the fraud rose to positions of prominence within Pilot.
Wombold may have had knowledge about the illegal practices, but did not engage in them, Kelly told the jury.
"He didn't like it, didn't do it, didn't encourage it," Kelly said.
Assistant U.S. Attorney David Lewen told jurors in his opening statement that the four defendants participated in a widespread scheme to undercut competitors, boost company profits and reap the rewards in terms of personal compensation.
Lewen said the case will show that the sales team set out to target unsophisticated trucking customers they deemed unlikely to recognize they weren't receiving their negotiated fuel rebates, and to furnish them with manipulated invoices if they started asking questions.
The goals could be summarized as "identify, cheat, lull," Lewen told the jury. Leaders of the sales team trained junior staffers on how to participate — and shielded off colleagues who they suspected of not being on board, he said.
"There was an infection of fraud within the sales department," Lewen said, adding that the case will illustrate "the power of pennies," in which slight adjustments to negotiated rebates for unwitting customers resulted in huge windfalls for the company.
The trial, which is expected to last up to six weeks, follows a 2013 raid by federal agents on the Knoxville headquarters of privately-held Pilot.
The company's former president and three members of the sales team are being tried in Chattanooga, about 100 miles (160 kilometers) southwest of Pilot's headquarters.
Pilot was founded by family patriarch Jim Haslam, a former University of Tennessee football player, with a single gas station in 1958. By the time of the raid, the company had grown to become the country's largest diesel retailer, with annual revenues of $31 billion.
In a surprise development last month, Pilot announced that it was selling a major share — and ultimately a majority stake — in the business to Warren Buffett's Berkshire Hathaway. At the time of that announcement, Pilot said it had $20 billion in annual revenues.
The Haslam family will keep its controlling stake until 2023, when Buffett's company will take over 80 percent of the company.