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Pilot Flying J puts managers on leave, takes steps to repair relationships

6:47 PM, Apr 22, 2013   |    comments
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Video: Pilot Flying J

Pilot Flying J CEO Jimmy Haslam addressed the recent federal investigation into his company.

On Monday, Pilot Flying J C.E.O. Jimmy Haslam met with reporters to update the public on the ongoing investigation.

Once again, Haslam did not take questions from the media, but spoke from and elaborated on a prepared statement (complete text below) about the steps Pilot Flying J is taking to move forward during the investigation.

Haslam began by recounting that the time of the raid on his offices almost exactly one week ago through the time when the search warrants were unsealed was the "most painful 48 hours I've ever experienced in business."

He said it wasn't until Friday night that he was really able to delve into the documents outlining the investigation into him and his company.  He was especially disturbed by some of the conversations that were recounted, saying "we don't talk that way" about people. He said he was embarrassed at the language and lack of respect shown by some of his managers in those recorded conversations.

Haslam said he slept very little Friday night, after examining all those documents, and he began Saturday morning trying to repair some of those damaged relationships with the customers mentioned in the documents, including Morehouse Trucking and Titan Transfer.

He recounted a little of his conversation with Curt Morehouse, which he described as professional but not cordial, quoting Morehouse as saying, "I just want my damn money."  He said the company is working with Morehouse to reconcile the account.  He said he has a meeting scheduled with Tommy Hodges of Titan this week.

Haslam then outlined 5 steps the company will take in light of these allegations:

1.  Internal audit 

The company has called its field audit team to Knoxville to begin a review of all 3300 contracts with trucking company customers.  He said he directed those managers to determine if there were any instances where they might have unfairly overcharged a client, and any opportunities for other loopholes where irregularities could occur.

Haslam said he'd like this process to be done tomorrow, "no one wants to know more than me," he said.  But he said the process will take time, because they want it done right.  He's estimating a minimum of 4 weeks.

2. Employees on administrative leave

On Sunday, several members of the company's diesel fuel sales team were placed on administrative leave, pending further investigation.  He did not give any specific names.  Haslam called this "very painful."  He said he is not presuming these employees are guilty or not guilty of a crime. He said it's more because they failed to show the proper respect to customers.

3. Eliminate manual transactions

Haslam has directed that all diesel fuel customers be converted to electronic calculation and payment, as of June 30, to eliminate any future risk of abuse

4. Hire Chief Compliance Officer

He has asked outside counsel to help create a new position, a Chief Compliance Officer, that would deal with any other similar situations in the future.  No one was been hired for this position yet, but they'd like to have someone in the next 30 days.

5. Hire Independent Special Investigator

The board of directors voted at a special meeting on Sunday to hire an independent investigator to find out what "did or did not transpire."  That investigator would report directly to the board, not to Haslam.  He said this is one of the many "extraordinary steps" the company will take to repair any damage done to the company's reputation.  He said they have someone in mind for this position, someone that is well known nationally and whose reputation is above reproach.  He said that person asked for his name not to be released, but Haslam expected him to be on the job in the next month.

 

Full Statement by Pilot Flying J C.E.O Jimmy Haslam:

Thanks again for coming out today.

I want to continue to keep you informed of current events here at Pilot Flying J.

As was the case last week, as much as I would like to, I will not be able to take questions because of the ongoing federal investigation. I hope I will answer most of your questions in my remarks.

It still appears to us, based on all we know at this time, that this federal investigation is focused on a narrow slice of our business in which rebates on diesel fuel purchases are manually calculated and paid to a relatively small number of our 3,300 trucking company customers.

We are continuing to cooperate appropriately with investigators, but we are determined to understand on our own the questions they are asking and to do everything we can to make sure we are never in this position again.

To that end, I'm announcing today five steps that we taking to address the issues raised by the investigation. I'm going to take them one by one.

1) Immediately, we are bringing our field audit team to Knoxville to review all 3,300 contracts with our trucking company customers, not just the relative few implied in the federal affidavit, and to proactively address any miscalculations that we may find.

Our goal is to understand the entirety of that part of our business, not just the manually processed contracts. If we find an underpayment, we will encourage the affected customer to review our finding, test with their own audit if they like, and if we owe them money, we will write them a check immediately.

We will be communicating this plan directly to our trucking company customers and moving through this process as quickly as possible. I hope this process won't take more than four to eight weeks, but the important thing is that we get it right.

I've already spoken personally to several of our customers, including Curt Morehouse with Morehouse Trucking and Tommy Hodges with Titan. We are working with Curt to reconcile his account, and I will be going to Tommy on Wednesday.

2) Yesterday, we placed on administrative leave several members of our diesel fuel sales team and, on an interim basis, we are restructuring that team pending further investigation to get control of that operation and restore confidence to our customers.

Placing members of our team on leave is very painful. For years, we have been a trusting, proud family here at Pilot Flying J focused on providing honest, forthright services to our customers. We have had relatively few personnel issues, but we cannot ignore the content of the federal affidavit released last Thursday evening.

We are not judging the guilt or innocence of the team members placed on administrative leave. We are addressing actions and words that fail to show proper respect to our customers and that violate the character, values and principles that have been core to this company since it was founded 54 years ago.

As a private company, we have dealt with these members privately and will not release their names publicly.

3) I have directed that all of our diesel fuel customers be converted to electronic calculation and payment eliminating future risks of any abuse that might be enabled by manual calculation and payment.

This process will fully eliminate manual processing at Pilot Flying J and place all of our customers on electronic direct bill. I expect this process to be completed by June 30.

4) I have asked our outside counsel to help us create and staff a position of Chief Compliance Officer to report to the company's general counsel to deal with any similar questions or issues that might come up in the future.

The establishment of a position of Chief Compliance Officer is important, because had we had one before, perhaps some team member would have raised a question about manual rebates internally before anyone would ever have gone to federal investigators.

If we had discovered any irregularities on our own, we would have fixed them on our own. That would have been good business, and it would have been the Pilot Flying J way - always do what is right first.

I expect this person to be on the job within 30 days.

5) Lastly but very important, our board, in a special meeting yesterday, voted to hire an Independent Special Investigator to oversee and validate all of our internal inquiries related to the federal investigation.

Because there is a federal investigation now, we have to take extraordinary steps to do whatever is necessary to repair any damage done to this company's reputation and restore the full integrity on which this company was built.

We will find the best person in America to come into this situation and oversee and make certain that any and all of our own investigations into these matters are thorough and correct and help us ensure that what happened to this company last week never happens again.

I expect this person to be on the job within 30 days.

We know this process is going to be difficult and probably will last for a while, but we are not going to sit by idly in the meantime. We are going to diligently and aggressively figure out for ourselves what's going on, and if we find anything amiss, we are going to make it straight right away.

In closing, we have received tons of expressions of support from our friends here in Knoxville and Cleveland, our customers, our suppliers and vendors, and I cannot tell you how much that means to our family and our team members at Pilot Flying J.

Last week was very tough, and it's not over, but we are back to business as usual, we are dealing aggressively with this situation, and we all believe we will come out of this adversity stronger than ever as individuals and as a company.

Thank you very much.



Previous story

 

Pilot Flying J CEO Jimmy Haslam plans to make a statement to the media at 3 pm on Monday.

It's been a week since federal agents raided the Pilot Flying J headquarters in West Knoxville.  Later, we learned that the company was being investigated for defrauding some commercial customers by cutting their promised fuel rebates.

According to a press release, Haslam will make a statement but will not take questions.  The release says "his statement about the actions the company plans to take is significant and should help to answer the media's questions."

The press release also says live satellite trucks will not be permitted on the property, but WBIR plans to stream Haslam's remarks live on WBIR.com.

In a similar press event called Friday, Haslam maintained that the investigation was focused on a small portion of the company's business, and that he had no plans to step aside during the investigation because he had done nothing wrong.

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