Company to pay $92 million penalty and cooperate in ongoing criminal investigation

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Pilot Flying J, the nation's largest chain of truck stops and travel centers, has reached an agreement with the federal government that the company won't be prosecuted, according to the U.S. Department of Justice.

However, that deal does not mean other former or current Pilot employees could not face charges.

The 25-page agreement also notes that Pilot will continue to cooperate with the ongoing criminal investigation into diesel fuel rebate fraud, and pay a $92 million penalty over the next two years.

Visit the Pilot Flying J page for more background and information

It also says that Pilot accepts legal responsibility for the criminal conduct of its employees, which cost its customers more than $56 million, and agreed to pay full restitution to every victim of the fraud.

Both sides ironed out the details to the plan on Friday, and released it Monday.

"The past 15 months, since the federal government served a search warrant on the company's headquarters, have been very trying for all involved," said Aubrey Harwell, Pilot Flying J's attorney. "The company has cooperated fully with the government and will continue to do so. As to its customers, the company has gone to extraordinary lengths to understand and identify any wrongdoing and make it right."

In a released statement, Pilot CEO Jimmy Haslam said: "We, as a company, look forward to putting this whole unfortunate episode behind us, continuing our efforts to rectify the damage done, regaining our customers' trust, and getting on with our business," said CEO Jimmy Haslam. "We've been committed from the beginning of this to doing the right thing, and that remains our commitment."

A Pilot spokesperson told WBIR 10News that under the agreement with the Department of Justice, the company and government would each issue a statement, but neither Pilot's CEO, Jimmy Haslam, nor family members directly involved in the company's operations would be able to comment further on the matter.

The agreement comes almost 15 months after dozens of FBI and Internal Revenue Service agents raided the Pilot's West Knoxville headquarters and a number of other nearby offices, seizing thousands of documents and copying computer hard drives.

Previous: Search warrants: Haslam knew about scheme to defraud customers

In depth: Interactive: Pilot Flying J timeline

The firm 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.

The system, though, was somewhat complicated and hard to follow for many customers, since the discounts weren't based on a single amount. Instead, the company used a number of variables to determine the rate, including where the truck stops were located and how many competitors operated in the vicinity.

In details released Monday, Pilot confirmed that the "fraudulent conduct" was prevalent within its "direct sales group," and that supervisory personnel encouraged participation "in discount fraud for the company's benefit."

For example, a Pilot supervisor during a November 2012 annual sales training meeting at the company's headquarters in Knoxville taught employees how to "deceptively reduce the rebates paid to some customers for the purposes" of making more money off "targeted accounts."

Pilot employees, under the scheme, would fraudulently reduce the amount of monthly rebate amounts to targeted customers or deceptively reduce the off-invoice discounts to the customers. Company officials would also email spreadsheets among each other, documenting the fraudulent reductions.

The company, according to the agreement, also confirmed that in February 2013 some employees wanted to expand the scheme to include "direct sales" staffers. The plan was to pay companies "considered to be too unsophisticated" a smaller amount in rebates than those companies that more carefully monitored the diesel pricing data.

Since the raid, ten former Pilot employees have pleaded guilty to taking part in the scheme.

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.

Previous: Five top Pilot execs out, two more on leave

Previous: Jimmy Haslam's lawyer expects more indictments at Pilot

Also, late last November Pilot reached an almost $85 million civil settlement in U.S. District Court in Arkansas with thousands of trucking customers who say they were ripped off in the alleged scheme. Pilot agreed to repay any amounts due, plus 6 percent interest and all legal fees.

Nashville-based trucking company, Western Express, settled with Pilot earlier this year. Western Express President and CEO, Paul Wieck said he is ready to move on.

"I'm excited for Pilot and the Haslam family. They are great partners of ours, they always have been," Wieck said by phone Monday.

"They did a great job before all this happened. [Haslam] had some folks in his organization that were doing some things they shouldn't have been doing. They have remedied that, those people are no longer at the organization. Not only did they remedy it, but they made it right by the people that got hurt, including us. And we're still 98 percent Pilot fuel moving forward and excited that they can just put this chapter behind them."

VIDEO: Fraud victims respond to Pilot-DOJ agreement

For those caught in the middle of the rebate fraud, they say they are just ready to move on. 7-14-14

A small number of companies, however, opted out of the settlement, and more than 20 of them are pursuing separate legal action.

The Criminal Enforcement Agreement between Pilot Flying J and the federal government, released Monday, does not protect individuals from future charges - only the company itself.

Pilot must also continue to provide "complete cooperation with the ongoing federal investigation of current and former Pilot employees relating to fraudulent conduct involving the sale of diesel fuel." They must also keep the government updated on their internal efforts to prevent this from happening again.

The DOJ said if Pilot breaches the agreement, it is prepared to charge the company with conspiracy to commit mail fraud and wire fraud "arising from the company's failure to pay agreed-upon diesel price discounts to its customers." In doing so, Pilot would also waive its right to indictment on this charge, as well as all rights to a speedy trial guaranteed under the U.S. Constitution.

More: Pilot CEO Haslam talks guilty pleas; maintains message

More: Pilot officials say they've paid back 95% of customers

"The terms of this agreement, including the significant monetary penalty and the very serious consequences if Pilot fails to comply, demonstrate quite clearly that no corporation, no matter how big, influential, or wealthy, is above the law," said U.S. Attorney Bill Killian. "In addition, the company's agreement to fully cooperate with the United States, including its obligation to identify its employees' criminal conduct, will assist the ongoing federal investigation. The agreement ensures that Pilot's extensive remediation efforts will continue until all trucking company victims have received full restitution and until Pilot has demonstrated to the United States that it has implemented sufficient internal controls to prevent this kind of fraudulent conduct from ever occurring again," said Killian.

The DOJ considered a number of factors before entering int o the agreement.

Officials noted that Pilot "has accepted responsibility for the criminal actions of its employees" and agreed to cooperate - as did the special committee set up by the company's board of managers that independently investigated the allegations brought against Pilot.

The government also said that charging the company - based on its size alone - could lead to "potential, unintended collateral consequences . . . upon the (Pilot's) innocent employees, diesel-purchasing customers and customers."

Pilot is the country's largest provider of diesel fuel to trucking companies, selling roughly 6 billion gallons of diesel fuel to more than 5,000 corporate customers annually. The company also has more than 560 retail locations in 44 states, and employs more than 23,000 people.

10News will have more on this developing story on 10News at 5 & 6 and on WBIR.com.

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