A former Pilot Flying J fuel salesman who said he felt bad about cheating customers and the man promoted to company president in a shakeup were among the key witnesses testifying Wednesday as a federal fraud trial resumed in Chattanooga.
Kevin Clark is among 14 former Pilot employees who have pleaded guilty and are cooperating with federal prosecutors as they pursue fraud charges against former president Mark Hazelwood and three other ex-employees.
Clark worked in suburban Kansas City, selling diesel fuel in the 2010s to Pilot trucking customers. He pleaded guilty in 2013 - relatively early in the government's investigation - to being part of a company scheme to cheat some fuel customers of rebates they'd been promised.
Clark testified he knew what he was doing was wrong - and he felt bad about it.
"I felt like I needed to do it to keep my job," he said, his voice welling with emotion when asked why he took part in the alleged scam.
Clark is awaiting sentencing, expected to happen after the federal trial concludes here in Chattanooga.
Clark also testified that then-Pilot President Hazelwood and Pilot CEO Jimmy Haslam knew sales staff were promising some trucking customers one rebate rate and giving them another. While Hazelwood is on trial facing charges, Haslam has said he had no knowledge about such a plan - called a manual rebate - and he faces no charge.
The government alleges Pilot made millions by cheating some companies out of rebates. Testimony also has shown the business of fuel sales is rough and tumble and often cutthroat.
On cross-examination, Clark was unable to offer specific dates in which he said he and Hazelwood explicitly agreed they were ripping off some trucking companies. He testified that during profit and loss discussions, they talked about situations where customers were getting one deal but thought they were getting another.
The crimes were understood, he said. Clark said he felt uncomfortable about it.
"I never specifically told Mark I was cheating a customer," he said.
Clark testified he also had expressed reservations with his supervisor, Vincent Greco, who ended up cooperating secretly with federal investigators, about the rebate plan.
Secret recordings made by Greco show some former Pilot execs boasted their customers didn't even know what kind of rebates they actually were getting. Pilot has paid a $92 million penalty for the alleged fraud as well as civil settlements of more than $80 million following lawsuits by trucking companies.
The prosecution also called Pilot's current president, Ken Parent, who was promoted months after Hazelwood left the company in 2014.
Prosecutors Trey Hamilton and David Lewen used Parent's testimony to show just how much money was involved in the diesel sales business.
For example, after reviewing figures, Parent testified Pilot made about $420 million from diesel sales in 2008. By 2012, that figure had climbed to about $830 million. Those figures don't include other moneymakers such as food sales.
Hazelwood played a major role in leading diesel sales for Pilot during that time, and became president in October 2012, testimony has shown.
The government alleges the rebate scheme went on for at least five years, from 2008 until April 2013 when federal agents raided the Bearden company headquarters.
Wednesday's testimony also included recorded evidence of Hazelwood and other former Pilot employees being present when racially charged remarks were made at a social gathering in October 2012.
Defense attorneys for all four defendants sought to keep out the secret recordings, which included a song in which the N word frequently was uttered. Hazelwood's defense attorney has argued the recordings do not reflect his client's character or contributions to Pilot.
Pilot reiterated its disgust Wednesday at the content of the recordings and said none of those who were present during the October 2012 gathering now work for the company.
Previous story: The defense attorney for the former president of Pilot Flying J sought a mistrial Wednesday, arguing that secret conversations presented to a jury in an ongoing fraud trial were so prejudicial his client couldn't get a fair proceeding.
HISTORY: Previous Pilot Flying J stories
Government prosecutors presented transcripts and secretly recorded conversations that involved former president Mark Hazelwood and several other Pilot employees during a casual, social meeting in October 2012.
During one of the conversations, Hazelwood could be heard asking about a song by David Allan Coe with racially charged lyrics. In other parts of the conversation, recorded at the Rockwood lake home of John Freeman, a former Pilot Flying J vice president, the men present could be heard disparaging the Cleveland Browns and the people of Cuyahoga County, Ohio, in which Cleveland is located, among others.
U.S. District Judge Curtis Collier has not ruled on attorney Rusty Hardin's motion for a mistrial. Last month, Collier acknowledged before the evidence was presented that it contained highly offensive content.
The song referred to by Hazelwood can be heard playing in the background during the gathering, and the lyrics repeatedly refer to an epithet for black people.
Pilot Flying J on Wednesday reiterated statements that it was "appalled" and "disturbed" by the comments made in 2012. The company immediately acted after learning about the comments, according to the statement.
No current Pilot employee was present when the song was played and remarks made, the statement reads.
Attorneys for Hazelwood's three co-defendants, Scott Wombold, Heather Jones and Karen Mann, have objected to the evidence, arguing that even though their clients weren't present when the remarks were made that they still could suffer for it in the eyes of the jury.
The jury was told several times that the government only wanted to introduce the evidence to show another side of Hazelwood's character.
Wednesday marked the first day of testimony in a month.
Collier acknowledged that the trial has moved at a slow pace and that he'd like to see that pick up.
The trial is set to go through the end of this week and continue two days next week.
However, proceedings have tentatively been scheduled to stop the week of Jan. 22 because a juror has a time conflict.
Also, Collier announced Wednesday that another juror has gotten a new job that will require her to move to Knoxville and drop off the panel in early February.
PREVIOUS STORY: After a one-month hiatus, the criminal trial of four former Pilot Flying J employees, including the ex-president, resumes Wednesday in Chattanooga.
Federal prosecutors are still calling witnesses and introducing evidence. It's not clear when they plan to wrap up, but they've only called a handful of the 14 former Pilot employees who have pleaded guilty and agreed to cooperate with the prosecution.
Jurors, picked from the Chattanooga area, have yet to work a full, five-day week. The trial began the week of Nov. 5.
U.S. District Judge Curtis Collier announced last summer he planned to hold court Mondays through Thursdays and give the jury Fridays off.
But this week the schedule calls for the trial to be held Wednesday through Friday.
Next week, the schedule calls for the jury to hear testimony Wednesday and Thursday. Monday is a federal holiday to honor the Rev. Martin Luther King Jr.
Related: Employees plead guilty to scheme
Former president Mark Hazelwood, Scott Wombold, Karen Mann and Heather Jones are accused of defrauding some trucking company customers of promised rebates.
The government's case has focused on two key areas so far: testimony from ex-employees who have pleaded guilty and secret recordings made by an employee of conversation with Pilot execs.
Among those who have testified is former sales exec Brian Mosher, who spent several days on the stand. Yet to be called is John "Stick" Freeman, a former Pilot vice president who was considered a leader in the scheme to rip off some trucking customers.
According to the government, sales staff schemed to short some customers of promised rebates included in a plan dubbed "cost-plus" or "manual."
Some Pilot execs boasted that customers didn't understand the process, didn't know what they really were entitled to and were just happy to be told they were getting a discount competitive to what was being offered by other fuel sellers.
Related: Trial set to start
"I’m sending cost-plus pricing to a guy that has absolutely no idea what cost-plus pricing is," a Pilot exec told staffers in one secretly recorded meeting that the government has. "He’s heard it, he doesn’t have a clue what it means to him…He doesn’t know what it means and he’s not going to take the time to know what it means because frankly he’s lazy and he doesn’t care. But he’s heard the buzzword long enough to know this is valuable and 'I should have cost-plus pricing.' "
Prosecutors allege the company made tens of millions of dollars in the scheme. Pilot has paid a $92 million penalty and also paid firms more than $80 million to settle lawsuits.
A former Pilot employee, Vincent Greco, secretly recorded Pilot meetings at which sales personnel talked about duping some customers out of their rebates. The recordings were made months before an April 2013 federal raid on Pilot Flying J's Bearden headquarters.
Personnel also warned salesmen to be careful about what they were doing. If they got caught, they risked angering a customer, the recordings showed.
"Don’t ever be foolish -- and be extremely cautious -- when you’re doing something of this nature," an executive warned Pilot Flying J employees at a secretly recorded meeting. "But at the same time you’ve got to know your customers to be able to do this.”
In a separate secret recording, Greco asked Freeman what happened if a customer caught a salesman and the salesman "can't talk your way out of it.."
Freeman replied, “Then you pay up," and joked that the company had to buy an airplane, a reference to an incident in which Freeman was caught shorting Nashville customer Western Express. Pilot ended up arranging to buy an old airplane from Western Express to placate it.
Greco also asked Freeman what "Jimmy" and "Mark" -- a reference to CEO Jimmy Haslam and Hazelwood -- thought about his cost-plusing efforts. Freemand replied that Haslam knew about it and approved of it.
Haslam and the company, however, have repeatedly said Haslam knew nothing about any criminal activity among the sales staff. Haslam is not charged in this case.
The government has more recordings that it's expected to introduce.
Before the December break, a question arose about one secret recording in which Hazelwood could supposedly be heard make racially charged remarks. Jurors have yet to hear that recording.
The trial is being held in U.S. District Court in Chattanooga rather than Knoxville because of extensive pre-trial publicity. The case hasn't garnered as much attention in Chattanooga.
Before the trial began, prosecutors and defense attorneys estimated they each would need three to four weeks to present their cases.