(Jan. 27, 2014) Three former Pilot Flying J sales executives were in federal court Monday, pleading guilty to charges relating to a Pilot rebate scheme.
Brian Mosher, Pilot's former national sales director, pleaded guilty to a felony charge of wire fraud and mail fraud. According to his plea deal, Mosher worked for Pilot for more than ten years, and was working remotely from Iowa at the time of the rebate scheme.
He admitted in court to altering spreadsheets that contained customer rebates to increase company profits and his commission, and to managing others who did. He also said he taught other employees how to do this during a training conference in Knoxville in 2012. He claimed several members of Pilot Flying J's "senior management" were in attendance at that conference.
In Mosher's plea agreement, he admits his participation in the scheme caused more than $7 million in losses, affecting as many as 250 victims.
The charge carries a maximum of 20 years in prison and a $250,000 fine. Mosher will spend at least 10 years in prison as a result of the plea.
10News legal analyst and Inside Tennessee panelist, Dennis Francis, said getting information from Mosher is key for federal officials. Francis is not involved in the Pilot Flying J case.
"If you look at the flow chart, the depth chart for Pilot Flying J-- there are only two or three people ahead of him," Francis said. "And my question would be, who instructed him to teach this class? His plea agreement doesn't say it was his idea, somebody instructed him to do it."
Mosher was mentioned by name by at least one victim of the Pilot rebate scheme, Morehouse Trucking in Omaha, Nebraska. President Curt Morehouse said Mosher was the sales rep who originally set up the system to short-changed the trucking company more than $130,000 on rebates.
"[Mosher] is the guy that I was waiting to hear because I think he's the guy that came up with the whole scheme. We were too trusting. He took advantage of that. Now he's going to pay the consequences for doing so. When you do someone wrong, it's going to come back and get you. Today it got him," said Morehouse.
Lexie Holden, a 28-year-old UT graduate, pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. She started with the company in 2008 as an administrative assistant and has served as a regional account representative in Pilot's direct sales division since 2009.
On Tuesday, she told the judge, "I was directed by my superiors to make changes to the rebates 'to a "lesser amount.'"
She said she would put all the information together in a spreadsheet and email that file to Mosher. Holden said he would then make changes to the trucking companies would receive a reduced amount. Her plea agreement states she attended required training where other Pilot employees encouraged and taught her how to defraud customers.
In court, Holden said the "scheme" was going on before she started working at Pilot Flying J, and she agreed to help the government with their case.
When she is later sentenced, Holden's plea agreement states she will be held responsible for a maximum of $1 million in losses, with fewer than 50 victims.
She faces a maximum sentence of five years and a $250,000 fine.
Former Pilot sales manager Christopher Andrews pleaded guilty to one count of conspiracy to commit wire fraud and mail fraud. The charges carry up to five years in prison and a $250,000 fine. He pleaded by way of information and waived a grand jury.
Andrews told the judge he was hired in 2010 as a regional sales manager in Florida. He claimed he inherited a number of rebate accounts and was instructed to continue adjusting them. He told the judge he found the rebate reductions to be a part of Pilot's culture and that they were openly discussed throughout the company.
Andrews said he avoided any email discussions of rebate reductions because he found them "shady."
His plea agreement describes how he and another Pilot employee deceived Honey Transport, a trucking company in Florida, by reducing the company's rebate amounts. When Honey Transport caught the discrepancy and questioned Pilot, Andrews helped draft a response that included a false explanation and a rebate payment of about $10 thousand, which was less than owed.
WATCH: Dennis Francis analysis of Pilot sales exec pleas
Three additional Pilot employees pleaded guilty Monday to charges in connection with a fuel rebate scheme. That brings the total of guilty pleas to 10, and the investigation still continues. 1-27-14
Francis said each new plea deal is part of a much greater, quickly-changing landscape.
"Now all of a sudden, people that might have been on the bubble waiting to see if they were going to plea, or enter a cooperation agreement, all of a sudden they might find compelling reasons for them to do that," he said.
Seven other former Pilot executives have pleaded guilty since the federal investigation began last April. Pilot has settled several multi-million dollar lawsuits related to the alleged scheme, and are still fighting others.
Following Monday's plea agreements, Pilot Flying J released the following statement:
"As before, we're disappointed and saddened to learn of any team members admitting to knowingly and intentionally acting in a manner detrimental to the best interests of our customers.
"We reiterate that Pilot Flying J remains committed to doing the right thing, including repaying all affected customers with interest; providing an independent auditor to review all audited accounts; working with an external team of experts to implement additional compliance programs; increasing team member training; and cooperating with the Board's independent special investigator. Pilot Flying J is making great progress on all of these fronts and looks forward to full restoration of our customers' trust and confidence, which continues to be of paramount importance to our company."
The defendants will likely know in April when they are to be sentenced.
Jan 27, 2014, 11 PM: The fuel rebate scheme that has dogged that company for nine months takes another turn with three new one-time employees admitting they took part in a scheme to rip-off fuel customers.