(WBIR - Knoxville) Former Pilot Flying J President Mark Hazelwood has received a "target letter" – the official form federal prosecutors send to let someone know that they are the target of an investigation and that prosecutors have substantial evidence linking them to the crime – according to multiple sources.
He is now the highest ranking current or former employee connected to the multi-million dollar diesel fuel rebate scheme to get one.
He received the letter in early August.
John Freeman, the company's former vice president of sales, received a letter last year as did Karen Crutchman, a senior accounts manager based out of the company's Knoxville headquarters.
CEO Jimmy Haslam has not received one, according to his attorney Tom Dillard.
Target letters are often the last step before an indictment.
"It's basically to get your heart beating," said Knoxville attorney Dennis Francis, who is not connected to the case. "The Department of Justice is investigating you and we are convening a grand jury."
Hazelwood, who joined the company in 1985 as a district manager, was terminated in mid-May.
The target letter he received is tied to a federal investigation that authorities publicly revealed in mid-April 2013 when dozens of FBI and Internal Revenue Service agents raided Pilot's West Knoxville-based headquarters and a number of other nearby offices, seizing thousands of documents and copying computer hard drives.
The firm – the nation's largest chain of truck stops and travel centers – is accused of preying on trucking companies, particularly those executives deemed too unsophisticated to notice or those who spoke English as a second language.
According to federal documents, the company since at least 2008 crafted a rebate fraud scheme to drive up profits, bump off the competition and increase commissions for its sales representatives and executives.
Trucking companies, under the reimbursement program, paid retail price for fuel and received a cut on monthly invoices, or a rebate check.
Hazelwood, according to secretly recorded conversations that were part of the affidavit the government released last year, appeared at two meetings – one in October 2012 and another in February 2013 – where company employees talked about the "two-tiered pricing structure that would impose higher prices of less sophisticated customers."
Throughout the FBI recordings, he can be heard talking about ripping off customers by paying them less than what they're owed. At one point he discussed manual rebates that customers receive at the end of the month. He called Hispanic customers targeted by the scheme "Manuel," and suggested that employees could blame the manual rebate problems on a language barrier.
He also described which customers to target by dividing them into two types: 'Customer A' who double-checks everything and 'Customer B' who does not.
He referred to type B as "Aunt Bea" comparing the group to the over-trusting character from the Andy Griffith Show.
Hazelwood hired a couple of big legal guns for his defense: Knoxville lawyer and U.S. Senate candidate Gordon Ball and Texas attorney Rusty Hardin.
Hardin also represents NFL running back Adrian Petersen. In addition, he got professional baseball pitcher Roger Clemens acquitted on charges he lied about using steroids.
Both Hardin and Ball declined to comment on Tuesday.
As of now, 10 people have pleaded guilty in U.S. District Court in Knoxville to various charges related to mail fraud and wire fraud.
They include: Arnold "Arnie" Ralenkotter, Northeast regional sales director; Ashley Judd, an account representative who addressed rebate concerns among the customers; Holly Radford, a regional account representative; Jay Stinnett, who worked with senior sales executives; Kevin Clark, regional sales manager out of Kansas City, Mo.; and Scott Fenwich, western regional sales manager out of Salt Lake City; Janet Welch, former Pilot senior account manager; Christopher W. Andrews, a regional sales manager based in Dallas, and Lexie Holden, a sales representative in Knoxville.
Brian Mosher, former director of sales for national accounts and the executive accused of holding the "breakout" sessions, pleaded guilty to conspiracy to commit wire and mail fraud. He is the highest ranked executive to plead.
All agreed to testify against others in the case.
At this point no sentencing dates have been scheduled for those who have pleaded guilty. But, based on federal sentencing guidelines, Mosher could face the harshest sentence – up to 10 years.
In July, the company agreed to cooperate with the ongoing criminal investigation into diesel fuel rebate fraud, and pay a $92 million penalty over the next two years.
Last year, the company reached an $85 million civil settlement with dozens of trucking companies, but six opted out of the settlement. It recently asked a federal judge to dismiss the lawsuits filed against it by five of them.