Pilot Flying J Enters Into Criminal Enforcement Agreement

Monday, July 14, 2014

Pilot Travel Centers LLC, d/b/a Pilot Flying J (Pilot), has entered into a Criminal Enforcement Agreement with the United States for the purpose of resolving the company’s criminal liability for its employees’ fraudulent conduct in deceptively withholding diesel fuel price discounts from hundreds of customers.

Pilot has accepted legal responsibility for the criminal conduct of its employees, which caused more than $56 million in loss to its customers, and agreed to pay full restitution to every victim of the fraud.

  Pilot further acknowledged the gravity of its employees’ criminal wrongdoing by agreeing to pay the United States a $92 million monetary penalty – an amount within the fine range recommended by the U.S. Sentencing Guidelines. 

The agreement also expressly states that it provides no protection from prosecution to any individual, and moreover, imposes a continuing obligation on Pilot to provide complete cooperation with the ongoing federal investigation of current and former Pilot employees relating to fraudulent conduct involving the sale of diesel fuel.  Pilot must also periodically report to the United States what it has done to ensure that a system of internal accounting controls and other compliance procedures have been established to prevent fraudulent conduct from occurring again in the sale of diesel fuel.  In the event Pilot materially breaches its obligations under the agreement, Pilot has agreed that the United States may file the criminal information, attached to the agreement, and will not contest the allegations in that charging document. 

“The terms of this agreement, including the significant monetary penalty and the very serious consequences if Pilot 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’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.”
Following a lengthy joint-investigation by the FBI and the IRS-Criminal Investigation into allegations of fraudulent conduct at Pilot, on April 15, 2013, search warrants were executed at multiple locations, including Pilot’s headquarters in Knoxville.  Since that time, 10 Pilot employees, including those with supervisory responsibilities, agreed to cooperate with the ongoing federal investigation and entered guilty pleas to mail and wire fraud charges arising from their involvement in the fraudulent reduction of diesel fuel price discounts owed to Pilot customers. 
In the agreement, Pilot confirmed that fraudulent conduct involving diesel fuel price discounts was prevalent within its Direct Sales group and carried out with the knowledge and participation of employees responsible for the operation and oversight of Direct Sales.  Pilot further confirmed that supervisory employees encouraged participation in discount fraud for the company’s benefit.  For example, during a Nov. 19 and 20, 2012, annual sales training meeting at Pilot’s headquarters in Knoxville, a Pilot supervisor encouraged and taught Direct Sales employees how to deceptively reduce the rebates paid to some customers for the purpose of making targeted accounts more profitable for the company.
Pilot also confirmed that the discount fraud was executed generally in one of two ways: either by fraudulently reducing the amount of monthly rebate amounts to targeted customers or by deceptively reducing the off-invoice discounts of targeted customers.  Pilot acknowledged that its employees emailed spreadsheets among each other that documented their fraudulent reductions, and that in some cases, its employees fabricated “back up” documentation sent to customers to justify fraudulently reduced rebate or discount amounts.

Additionally, Pilot confirmed that in February 2013 certain Pilot employees involved with Direct Sales expressed an intent to expand the scheme to defraud by having Direct Sales personnel identify and target Pilot’s off-invoice customers that were considered to be too unsophisticated to carefully monitor diesel pricing data in conjunction with their periodically received fuel invoices.  As set forth in the agreement, certain Pilot employees involved with the operation and oversight of Direct Sales referred to this new aspect of the fraud as “cost plus B plan” – named after having two tiers of cost pricing for different types of customers: tier “A” and tier “B.” 

Pilot further acknowledged that certain employees involved with the operation and oversight of Direct Sales planned not to inform the targeted unsophisticated customers of their placement in the higher-priced tier, and these employees occasionally referred to these targeted customers as “Customer Bs.”

The FBI’s and IRS-Criminal Investigation’s joint investigation is ongoing.  Assistant U.S. Attorneys F. M. (Trey) Hamilton III and David P. Lewen, Jr. are representing the United States.

Latest Hamilton County Jail Booking Report

Here is the latest jail booking report from Hamilton County: ADAMS, BRANDON ALEXANDER  7600 MEADOW STREAM LOOP CHATTANOOGA, 37421  Age at Arrest: 21 years old Arresting Agency: Chattanooga DRIVING UNDER THE INFLUENCE (2ND) FAILURE TO MAINTAIN LANE DRIVERS TO EXERCISE DUE CARE --- BASILIS, JOB EMMANUEL  10445 SCENIC VIEW DRIVE OOLTEWAH, 37363  ... (click for more)

20,676 Cast Ballots In First 4 Days Of Early Voting In Hamilton County

In the first four days of early voting in Hamilton County, 20,676 have already cast ballots. That includes 1,900 ballots received by mail. There were 5,157 who turned out at early voting sites on Wednesday and 5,083 on Thursday. The total on Friday was 5,011, and it was 3,818 on Saturday. Sites: Brainerd 1,084, 1080, 1,030, 816 Election Office 1,848, 1,731, ... (click for more)

Where Is The Speed Control On Our Highways? - And Response (2)

I am teaching my 15-year-old to drive in the North Georgia and Chattanooga area. I have warned her of the dangers of exceeding the speed limit both as a hazard to herself and in terms of receiving a ticket. What a liar I am.  Have you driven on the local freeways and highways recently? I never see any highway patrolmen helping to reduce speeding or pulling over those who ... (click for more)

Roy Exum: A Vol Is Worth $521,854

The definition for the term “fair market value,” this from the IRS tax code, “is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” So a recent article in Business Insider has just revealed a University of Tennessee scholarship ... (click for more)

UTC Women Fall To UNCG 1-0 To End Regular Season

 The University of Tennessee at Chattanooga women’s soccer team fell 1-0 at UNCG Sunday afternoon to close out the regular season. The Mocs end the year at 6-10-2 overall and 4-4-1 in the Southern Conference and tie the Spartans (7-10-2, 4-4-1 SoCon) for fifth in the standings.   “It was another tough result,” Chattanooga head coach Gavin McKinney said. “We did, however, ... (click for more)

Notre Dame Draws Top Ranked Greeneville, CCS Opens With Madison Magnet

For the second year in a row, Notre Dame drew the top ranked Greeneville in the opening round of the TSSAA Class A/AA state tournament.  Notre Dame is scheduled to play Greeneville on Wednesday at 7 p.m. in Murfreesboro. CCS will play Madison Magnet in the first round. CCS and Greeneville played in the state championship game last year with Greeneville winning 4-1.  ... (click for more)