3 guilty in fuel rebate swindle
A federal jury on Thursday convicted the former president of the nation’s largest diesel fuel retailer of a plot to rip off truckers to boost both his own bottom line and that of his employer — Pilot Flying J.
A five-woman, seven-man jury in U.S. District Court in Chattanooga deemed former Pilot Flying J President Mark Hazelwood guilty of conspiracy to commit wire and mail fraud, one count of wire fraud and witness tampering.
The same jury acquitted former Vice President Scott “Scooter” Wombold of the conspiracy charge, of lying to the FBI and two counts of fraud. The jury instead convicted Wombold of a single count of wire fraud.
Former Pilot Flying J account representative Heather Jones was convicted on the conspiracy charge but acquitted of four individual acts of fraud.
The jury set former Pilot Flying J account representative Karen Mann free entirely, acquitting her of the sole conspiracy charge she faced.
The quartet had been standing trial since November on charges they — along with at least 16 other former Pilot Flying J sales executives and staffers — conspired to boost Pilot Flying J’s market share and profits, as well as their own cut of those profits, by luring trucking companies to do business with the truck stop giant with discounts on diesel fuel they never intended to fully pay.
FBI agent Duke Speed and IRS Criminal Investigation Division agent Kevin McCord spearheaded the probe, which began in 2011 and culminated with a bold daytime raid of Pilot Flying J’s Knoxville headquarters on Tax Day 2013. Assistant U.S. Attorneys Trey Hamilton and David Lewen headed the prosecution effort.
Testimony showed Hazelwood not only helmed the five-year fraud
scheme but planned to grow it. When Pilot Flying J’s headquarters were raided, Hazelwood was earning $26.9 million — double the earnings he posted in 2008 when the plot began in earnest.
Hamilton cited Hazelwood’s wealth when he made a surprise move Thursday to have Hazelwood jailed pending sentencing, which is set for June 27. White-collar defendants are rarely detained before sentencing.
“Mr. Hazelwood has a plane at his disposal,” Hamilton said in arguing Hazelwood might use his wealth to flee. “He has homes outside the country and outside Knoxville. … The United States is requesting Mr. Hazelwood be detained.”
U.S. District Judge Curtis L. Collier set a hearing Friday before U.S. Magistrate Judge Bruce Guyton on whether Hazelwood should be jailed but did not order him into custody pending that hearing.
Hazelwood’s lead attorney, Rusty Hardin, said outside court that he will appeal the convictions and fight detention.
“He’s not a flight risk,” Hardin said. “He’s stayed around for five years [since the raid].”
Jurors had been deliberating the case, which involved a total of 14 counts, for more than four days.
Mann, as the sole defendant to win an outright acquittal, wept at the news.
“I’m a little speechless,” she said.
Attorneys Jonathan Cooper and Sara CompherRice, both of Knoxville, had argued Mann was essentially a secretary who was repeatedly told by her bosses there was nothing wrong with shortchanging trucking firms. Cooper noted in his closing arguments there was no proof Mann ever lied to a trucking firm or participated in any of the fraud talk captured on secret recordings made by a former Pilot Flying J sales executive turned mole.
“We’ve been looking forward to this day for over four years,” Cooper said outside the courthouse Thursday. “It was clear Karen was innocent of the charge against her.”
Wombold’s defense team had painted Wombold as a reluctant supervisor being pushed out of the direct sales division by fraudster heavy-hitters Brian Mosher and John “Stick” Freeman and who tried to encourage other sales staffers to reject committing fraud. Mosher and Freeman have already pleaded guilty.
Attorney John Kelly praised the jury’s work on behalf of Wombold.
“We’re obviously very pleased that on six of seven counts, he was vindicated,” Kelly said, adding Wombold’s legal team would “explore” whether to appeal the one fraud count of which he was convicted.
Jones’ defense team left the courthouse without comment.
Collier set a June 27 sentencing hearing for Hazelwood, Wombold and Jones. Wombold and Jones remain free pending that hearing.
Pilot Flying J’s board of directors confessed criminal responsibility in the fraud scheme and shelled out $92 million in criminal penalties and an additional $85 million in lawsuit settlements. The board also has been picking up the legal defense tab for Hazelwood and his accused subordinates.
Pilot Flying J Chief Executive Officer Jimmy Haslam, who also owns the Cleveland Browns, has denied knowledge of the fraud scheme and is not charged.
Pilot Flying J issued a statement within minutes of the announcement of the verdicts Thursday in which the firm noted it had repaid trucking firms, accepted criminal responsibility, “cooperated fully with the government’s investigation and made policy, procedure and staff changes to make certain nothing like this ever happens again.”
“At Pilot Flying J, we remain committed to being a great partner to trucking companies across North America and serving our customers, team members and business partners,” the statement reads.
Jurors heard roughly 20 days of testimony by 26 witnesses, viewed hundreds of exhibits, including incriminating emails, and listened to secret recordings that not only captured fraud talk but also caught Hazelwood and his salesmen making racially offensive comments, using racial epithets and mocking the Browns, the team’s fans and Pilot Flying J board members.
Mark Hazelwood, Scott Wombold and Heather Jones are scheduled to be sentenced June 27.
U.S. District Judge Curtis L. Collier set a hearing Friday before U.S. Magistrate Judge Bruce Guyton on whether Hazelwood should be jailed pending sentencing but did not order him into custody Thursday.
“At Pilot Flying J, we remain committed to being a great partner to trucking companies across North America and serving our customers, team members and business partners.” – PILOT FLYING J STATEMENT