Cleveland Browns owner Jimmy Haslam, the subject of what the FBI calls "rebate fraud" in the sale of diesel fuel at his 650 Pilot Flying J truck stops, has reached out directly to at least one of his customers and pledged to make things right.
FBI investigators say Pilot executives and salespeople working under Haslam cheated their customers by refunding only a fraction of discounts they promised to their customers for each gallon of fuel purchased. In one example of the scheme described in a 120-page FBI sworn statement that summarized the investigation, Pilot officials failed to pay more than $146,000 of discounts they had promised to W.N. Morehouse Truck Line, Inc., an Omaha, Neb.-based firm that employs 130 people and operates 100 trucks.
Curt Morehouse, a member of the family that has operated the trucking firm for four generations, said Haslam called him Saturday and tried to resolve the situation.
"Then, after the FBI raided Pilot and described the investigation, I did another calculation and found that Pilot owed us a total of $157,000," Morehouse said.
Morehouse said Haslam, in his phone call Saturday, "did not express any guilt" and promised that "if he owed us the money, he would send all of it."
Haslam insists that "I haven't done anything wrong," and has suspended several of his sales managers, has hired an independent investigator to analyze the situation and has tried to placate customers.
The FBI sworn statement from Special Agent Robert H. Root asserts that Haslam knew of the scheme, stating that the "rebate fraud has occurred with the knowledge of (Haslam) due to the fact that the rebate fraud-related activities have been discussed during sales meetings in Knoxville in which Haslam has been present."
Morehouse's story of Pilot's failure to pay promised discounts and rebates fits the pattern described in the sworn statement that the FBI filed in federal court in Knoxville, Tenn.
The detailed statement, known among lawyers and judges as an affidavit, was the basis for FBI raids on Pilot's corporate headquarters in Knoxville and on the homes of Pilot executives in Nashville, Tenn.; Hebron, Ky.; and Bettendorf, Iowa. Agents seized dozens of computers and an enormous quantity of documents. The raid included a search of Haslam's personal work space.
The raids came nearly two years after the FBI, responding to a tip from a person with knowledge of Pilot and its rebates, began its investigation. The sworn statement filed in court describes only a portion of the probe, but it lists at least two former employees and one current executive who are cooperating with the federal agents, and includes transcribed excerpts of recorded conversations with 35 current and former Pilot employees.
The statement cites numerous sales meetings that were recorded on tape by a cooperating Pilot employee, with Pilot executives and sales managers discussing methods for short-changing customers on their discounts. Their efforts are based on the premise that many of their customers are "not sophisticated enough to know" that the rebate checks should be higher, according to the statement.
Morehouse was one of the rare customers who discovered the apparent fraud. Other companies described in the FBI sworn statement suffered even greater losses. According to one recorded conversation, Western Express, a trucking firm with 6,500 trailers and 2,500 trucks and nearly $500 million in annual revenue, was short-changed nearly $1 million. Paul Wieck, the president of Western Express, has not responded to calls from ESPN.com. The reaction of executives of other trucking firms across the nation ranged from surprise to fury and disgust.
"Until now, I considered Jimmy Haslam a friend," said Tommy Hodges, owner of Titan Transfer, Inc., and a former chairman of the American Trucking Association, in an interview with the Nashville Tennessean. "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."
Hodges is certain that his company was a victim of the scam described by the FBI. "We feel like they got us," he said.
The FBI sworn statement includes recorded conversations among Pilot sales executives in which they discuss numerous ideas for covering up their thefts when they are caught. They discuss the use of "computer glitches" and ways of sending confusing data on the prices at the Pilot fuel pumps that would prevent customers from learning their true discounts.
The Browns owner, who closed the purchase of the team in October 2012 when the FBI investigation of his company was already in its 16th month, was not happy with the obscenity-laced language of his executives in the FBI-recorded conversations and meeting.
"Candidly, the color, if you will of the comments were certainly not how we conduct ourselves here at Pilot Flying J," Haslam said in a media statement.
According to the statement filed by the FBI, as recently as March, Pilot executives were recorded discussing a new billing procedure that would facilitate their scheme and make it easier to persuade customers that they were being paid their promised rebates.
Then, early this month when someone at Pilot realized the FBI was investigating, the sales force suddenly was paying full rebates and passing the checks through the office of the company's top lawyer, the statement said.
In addition to the raids on Pilot offices and executives' homes, federal agents have done extensive surveillance of Pilot's headquarters, have interviewed dozens of trucking executives whose firms purchased fuel from Pilot, and have even interviewed Federal Express drivers who have delivered large quantities of documents to Pilot offices and to employees' homes.