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Government bombshell: Prosecutors want to drop criminal case against former Pilot president, vice president, sales employee

Mark Hazelwood, Scott Wombold and Heather Jones got their convictions tossed after an appeals court found evidence was improperly introduced against them.

KNOXVILLE, Tenn. — Federal prosecutors in Knoxville sought Tuesday to dismiss all remaining charges against Pilot's former president and two other former employees in the nearly decade-long criminal investigation into a sales scheme to cheat some trucking customers of promised fuel rebates.

The abrupt announcement in the case of Mark Hazelwood, Scott Wombold and Heather Jones came in a filing in U.S. District Court in Knoxville before Senior Judge Curtis L. Collier.

Acting U.S. Attorney Trey Hamilton said in his motion that the circumstances of some previously cooperating witnesses had changed and that the passing years of the investigation had made it harder to put on a case, in addition to "the challenge of presenting those facts and circumstances through cooperators who have completed their sentences, some of whom it has been proffered to the government by defense counsel, have made statements since sentencing that would negatively affect the credibility of their testimony..."

Some people who previously pleaded guilty and agreed to help the government in the fuel fraud case may have "an inclination to withhold further assistance to the government..." Hamilton's motion states.

More than a dozen former Pilot employees have pleaded guilty to assorted charges, often in exchange for helping the government and for minor punishment terms. They now are the only people to be convicted in the case.

Jim Walden, part of the legal team that has represented Hazelwood, told WBIR his client was innocent and grateful the government saw fit to drop the case against him. Hazelwood and his family were "thrilled beyond imagination" Tuesday, he said.

"When you have a client who is innocent and they don’t give up and they show perseverance and show their own creativity and you’re a lawyer and you listen to them, the results are going to be better than a march to guilt," Walden told WBIR. "Here, Mr. Hazelwood and his family convinced us that he was innocent. We believed it, and thankfully he’s now vindicated."

Walden said he couldn't talk about issues in the case that aren't on the record, "but what I can say is that I understood full well what the government was saying. There were witnesses that I think felt a great deal of pressure that no longer felt that pressure. We interviewed, ourselves, a number of witnesses that confirmed Mr. Hazelwood’s innocence, and I think that’s all part of the package that you saw delivered to the court today."

Walden said the move to dismiss would mean such charges can't be brought again against his client.

Jones is represented by attorney Cullen Wojcik of Knoxville and Ben Vernia of Washington.

Wojcik issued the following statement Tuesday on behalf of Jones and Vernia: "Heather Jones has maintained her innocence since the beginning of this ordeal over eight years ago. She is deeply gratified by the government’s motion to dismiss the indictment, and she looks forward to the court ruling on it so that she can finally put this whole case behind her and move on with her life. It has been an honor for my co-counsel Ben Vernia and me to represent Ms. Jones, and we could not be happier for her."

Wombold is represented by a team that includes attorney John Kelly.

Kelly said in a statement to WBIR: "We are thrilled for Scott Wombold and his family based on the decision by the U.S. Department of Justice to drop the one remaining count against Mr. Wombold from the original trial. This case has been a massive cloud hanging over Mr. Wombold and his family for more than nine years. Mr. Wombold has maintained his innocence from the first day we met him, and we have believed in him every step of the way. We are grateful the government made the right decision today to walk away from this case, and we look forward to Judge Collier ruling on the motion. Now, Mr. Wombold and his family can move forward in peace, rebuild their lives, and put this challenging time behind them.”

A spokesman on behalf of Pilot Co. told WBIR: “The company is not a party to these proceedings and has no additional comment.” 

Attorneys for Hazelwood, Wombold and Jones had vowed to aggressively go after the government's case as a retrial was being prepared for February. They'd already signaled they wanted a new judge and a new place to hold the trial -- if it had to happen.

Hazelwood, the former president who rose through the ranks while working for decades in the Haslam family-owned fuel and retail giant, Wombold, a former vice president, and Jones, a former Pilot sales employee, were convicted in February 2018 of taking part in an inside scheme to short some trucking customers of promised fuel rebates.

But the Chattanooga jury that heard the case didn't give the government all it sought. Hazelwood was convicted on several counts that would have sent him to prison for 12 1/2 years, but jurors declined to convict Wombold and Jones of several charges.

The jury also acquitted another former Pilot employee.

The defendants, however, swore even before the trial ended that they'd be seeking to overturn any convictions.

They argued that the government improperly -- with Collier's approval -- introduced secretly recorded  prejudicial audio tapes of Hazelwood that never should have been allowed.

In the recordings, made by a confidential witness helping the government in October 2012, Hazelwood can be heard making racist and crude remarks at a private gathering about Black people. Neither Wombold nor Jones were on the tapes. Hazelwood later apologized for the contents of the recordings and said they don't reflect who he is.

A federal appeals court panel in a 2-1 decision last year threw out the trio's convictions, arguing the tapes were so prejudicial no jury could ever get beyond the tainted impression they created of Hazelwood, nevermind Wombold and Jones.

Earlier this summer it appeared trial preparations were beginning to move forward, with the defense pressing its case and federal prosecutors seeking more time to respond. The government just wrapped up a weeks-long trial that looked into drug distributions in East Tennessee by gang members.

Now, the government proposes to end the entire case against the Pilot defendants. 

In waving the white flag, Hamilton acknowledged the Cincinnati appeals court's observations about the case, including that the government's proof was neither "ironclad" nor "overwhelming" and that jurors had declined to convict on some of the original counts.

Further, Hamilton wrote, "The government has determined that a retrial in this case will require the testimony of (an unnamed) cooperator whose personal circumstances (1) cause the government to conclude that it would be inappropriate to compel her testimony and (2) in any event, prevent the government from being confident in the reliability of the witness' recollection of significant facts and circumstances."

In April 2013, federal agents raided Pilot headquarters in Bearden. It was a shocking development for the privately held company, which has been closely operated by the Haslam family for generations. Pilot's origins date to 1958 when Jim Haslam acquired the first gas station in Gate City, Va.

A year after the raid, the company agreed with the U.S. Department of Justice to pay a $92 million fine. It also subsequently paid millions more in court settlements with current and former customers.

Mega-businessman Warren Buffett and Pilot revealed several years ago plans for his Berkshire Hathaway investment firm to acquire majority ownership in Pilot by 2023. By agreement the Haslam family is to retain a 20 percent ownership in the company and continue to be involved in its operation, according to Pilot.

Scott Wombold