Two Pilot Flying J sales employees have pleaded guilty to conspiracy to commit fraud, in connection with a federal investigation into the Knoxville-based company.
According to court documents, Arnold Ralenkotter, who was a regional sales director in Pilot's direct sales division, and Ashley Judd, who was a regional account executive, have admitted to intentionally reducing rebates owed to some of Pilot's commercial customers over the course of several years.
Documents show Ralenkotter pleaded guilty to conspiracy to commit mail fraud and wire fraud.
His attorney, Ed Yarbrough, explained why his client chose to plead guilty. "After looking at the content of the affidavit of the search warrant and discussing it with Mr. Ralenkotter, he wanted to tell the truth about everything. He felt the case was basically indefensible, and that he wanted to be truthful with the agents and with the government. And we explored our options in that regard and determined that the plea agreement that was executed today was the best course of action for him. And that's why we did it.:
Ralenkotter, who is based in Hebron, Kentucky, admitted that he "caused and approved the sending of fraudulently reduced rebate checks and fraudulently determined invoice amounts by mail and commercial interstate carriers to certain targeted Pilot customers."
The documents show that the purpose of the conspiracy was to increase profits for Pilot and the commissions of the sales executives who represented those customers.
Ralenkotter admitted not only determining the amount of the money that was to be reduced from the rebate checks, but even to training other sales executives on how to do it. He even said he told a subordinate that if they were "not willing to deceptively reduce a customer's rebate" then he would take over the account.
As part of the deal, Ralenkotter could face up to 20 years in prison. A judge will sentence him at a later date.
His attorney says Ralenkotter will be willing to testify in other cases.
"I don't ever like to say that people testify against someone. He has agreed, under the plea agreement, to give truthful testimony in any court proceeding or any grand jury proceeding to which he is subpoenaed," said Yarbrough.
Judd entered a guilty plea to conspiracy to commit mail fraud.
According to her plea, Judd, along with other Pilot sales employees, changed "Pilot customers' monthly rebates without the customers' knowledge, to mail rebate checks that stated fraudulently reduced rebate amounts to customers that created and maintained the materially false pretense that the customer was receiving the full benefit of the agreed diesel price discount with Pilot, and to make false representations by way of material omission that Pilot was accurately, and honestly, determining the customer's rebate amounts based on the customer's agreed upon diesel discount price with Pilot."
The information plea said Judd, at the request of other Pilot direct sales employees, agreed to have conversations about the fraud by telephone and avoid using electronic spreadsheets to minimize electronic evidence.
The documents state that Judd, at the request of another sales employee, told a customer who challenged their rebate amount that it was caused by a "lapse in the numbers".
A spokesperson for Pilot Flying J issued this statement, "The statements released by the federal court today do not come as a surprise given what we've been learning in our own internal investigations, but are nonetheless disappointing. We want to assure our customers that we are taking every step to correct any wrongdoing that has occurred and to make certain that it does not happen again."
Company CEO Jimmy Haslam's attorney, Aubrey Harwell, said this news was not unexpected, given the raid on April 15 and the information in the affidavit.
"Obviously (it's) something that Mr. Haslam regrets, he regrets what apparently occurred, but that was a regret he experienced when he read the underlying affidavit," said Harwell. "It does not change a thing. We're still full speed ahead with all those things we committed to do and are doing, and this doesn't change anything, and as I say it didn't come as a surprise, okay?"