CHATTANOOGA, Tenn. — The former president of the largest U.S. fuel retailer has been sentenced to 12 ½ years in prison and fined $750,000 in a scheme to defraud trucking companies.
The Knoxville News Sentinel reported U.S. District Judge Curtis Collier sentenced former Pilot Flying J President Mark Hazelwood to 150 months on Wednesday.
Hazelwood was convicted earlier this year of conspiracy, wire fraud and witness tampering.
The jury heard secret recordings of Hazelwood using racial slurs and profanely criticizing his board of directors and his boss’s football team and fans. Hazelwood apologized for his language.
“The motive was hubris — his competitiveness … his desire to capture more market share for Pilot,” Collier said, according to the newspaper report. “The defendant improperly took it upon himself to use the Pilot name and reputation … This degree of commandeering … the court is not aware of any reported case where such a situation has happened.
“Mr. Hazelwood abused the trust of Pilot and the trust placed in him,” Collier continued. “The participants (in the fraud scheme) laughed and joked about it. They used extreme and offensive language. They used Pilot’s email … cellphones … financial management system. They talked openly of this criminal activity … He violated the law on a constant and repeated basis for half a decade.”
Collier is allowing Hazelwood to remain free through November while the U.S. Bureau of Prisons determines in what facility he will be housed. He will remain under conditions of house arrest imposed after his conviction in February.
Hazelwood was convicted after a four-month trial of conspiracy to commit wire fraud, wire fraud and witness tampering.
He was the highest-ranking member of Pilot Flying J who was convicted in the plot. Two subordinates were convicted of varying crimes alongside him, and 14 others pleaded guilty. Two were granted immunity. Pilot Flying J’s board also admitted criminal responsibility.
Court documents showed Hazelwood was earning $26.9 million at the height of the fraud plot — double his pay when the scheme began in earnest.
Even after his indictment in 2016, Hazelwood continued to make money from the trucking industry. He heads a trucker recruitment firm; a trucking consulting firm and markets himself as an agent for truckers — all while under house arrest.
Trial testimony showed Hazelwood and his subordinates used a diesel fuel discount program Hazelwood created that was supposed to allow small trucking companies the same type of breaks on diesel fuel granted much larger firms.
But, court records show, Hazelwood and his subordinates shaved pennies off those discounts — with the trucking firms unaware. Prosecutors Trey Hamilton and David Lewen argued the fraud plot not only netted money from the thievery itself but, more importantly, lured trucking firms to do business with Pilot.
The Knoxville newspaper reported that defense attorney James Walden argued Hazelwood wasn’t “preying on old ladies.” Walden said the trucking companies barely suffered — if at all.
“They are not mom and pop stores,” Walden said, according to the newspaper’s report, “They’re corporations … You’ve never heard from a representative of even one of these customers … The victims have come forward in droves to support (Hazelwood).”
At least four trucking company owners who were listed as victims of the fraud plot — which involved at least 78 firms — filed letters of support on behalf of Hazelwood.
Walden argued Hazelwood revolutionized the trucking and truck stop industry and has used his wealth and his time for good deeds after working his way up from “humble beginnings.”
Hazelwood denied guilt in his remarks to Collier on Wednesday.
“I’m devastated I’m having to stand before you today,” the newspaper said he told the judge before sentencing. “I will be appealing my conviction. I do proclaim my innocence. We should have had policies and procedures to prevent this. We didn’t. I’m truly sorry.”
Pilot Flying J paid Hazelwood $40 million to settle his employment contract when Pilot Flying J CEO Jimmy Haslam fired him — a year after the April 2013 raid on Pilot Flying J headquarters in Knoxville that unraveled the scheme.
Pilot Flying J is also paying Hazelwood’s legal bills as part of the contract settlement.
Lewen noted all that money Pilot has shelled out when he urged Collier to hit Hazelwood with a fine in addition to a prison term.
“Mr. Hazelwood is not being required to pay one red cent to one victim in this case … because the company Pilot Flying J has already paid restitution to the victims in this case,” Lewen said.
Collier described Pilot Flying J as a victim, too, of Hazelwood’s fraud plot.
“Pilot had a good brand, but as a result of the defendant’s actions … Pilot suffered harm,” Collier said.
Pilot Flying J is controlled by the family of Jimmy Haslam and Tennessee Gov. Bill Haslam. The Haslams haven’t been charged with any wrongdoing. The governor hasn’t been involved in the company in recent years.