Cleveland Browns owner's company in trouble with FBI
Browns owner's company in trouble
Updated: April 19, 2013
ESPN.com news services
According to an FBI agent's affidavit, Browns owner and Pilot Flying J CEO Jimmy Haslam knew about rebate fraud at the truck stop chain.
NASHVILLE, Tenn. -- A Pilot Flying J employee told investigators that CEO Jimmy Haslam, also the owner of the Cleveland Browns, knew about rebate fraud at the truck stop chain his family owns, according to an FBI affidavit unsealed Thursday.
The 120-page document filed in federal court in Knoxville, where Pilot is based, alleges that members of the company's sales force preyed on smaller trucking companies by reducing the amount of rebates they were owed for buying certain amounts of fuel.
Special Agent Robert H. Root alleged a "conspiracy and scheme to defraud executed by various Pilot employees to deceptively withhold diesel fuel price rebates and discounts from Pilot customers ... for the dual purposes of increasing the profitability of Pilot and increasing the diesel sales commissions of the Pilot employees participating in the fraud."
The affidavit was filed to secure the search warrants used in Monday's raid on the Pilot Flying J headquarters.
Browns owner Jimmy Haslam knew of a fraud scheme at his travel center company, according to documents released in federal court on Thursday.
One employee identified only as a confidential source told investigators that the rebate scheme was discussed during sales meetings attended by Haslam and Pilot president Mark Hazelwood.
The informant said the practice was known by a variety of euphemisms ranging from "manual rebates" to "screwing."
Haslam denied wrongdoing in a news conference earlier this week. He said in a statement Thursday that "the foundation of this company is built on its integrity and that any willful wrongdoing by any employee of this company at any time is intolerable."
He said the company would continue to cooperate with authorities and conduct its own investigation.
Informants secretly recorded conversations among Pilot employees holding frank -and often profane -- discussions about the rebate scheme, and agents interviewed current and former members of the sales team.
The investigation began after agents were contacted in May 2011 by a confidential informant who said they had been told about the scheme by a Pilot Flying J employee. The investigation continued through this month. Jimmy Haslam bought the Browns in a $1 billion deal last summer.
Haslam was in Cleveland on Thursday to help prepare for next week's NFL draft. League spokesman Greg Aiello declined to weigh in on whether the investigation would affect Haslam's role as team owner.
"We must respect the process of a federal investigation and decline comment," Aiello wrote in an email.
Pilot Flying J, a privately held company with annual revenues of $29 billion, is the nation's No. 1 retailer of diesel fuel. It is mostly owned by Haslam; his brother, Tennessee Gov. Bill Haslam; their father and company founder, Jim Haslam; and other family members.
When Pilot bought its nearest competitor Flying J out of bankruptcy in 2009, federal trade officials worried the combined entity owned by the powerful Haslam family could corner the market on diesel fuel.
To alleviate "competitive concerns," the Federal Trade Commission in 2010 required Pilot to sell some truck stops to a competitor, Love's, and share its fuel purchase technology before it could merge.
When asked earlier this week whether the probe was related to the FTC's previous concerns about unfair competition, Haslam replied: "We would not think so." An FTC spokesman declined to comment.
According to the IRS, it is common for fuel stops to hand out monthly rebates on purchased fuel. Rebates should be reported as income, as a reduction of expense, or as a reduction to the cost of the new asset.
Not all customers doing business with Pilot are on the rebate program.
Pat Marsh, chairman of Shelbyville, Tenn.-based Big G Express, said his trucking company had a rebate program set up when it was a client with Flying J. Since the Pilot takeover, that system has been replaced with pre-negotiated prices paid at the pump with swipe cards. It tracks the mileage on trucks, the identity of the driver and the amount of fuel purchased
"The more we buy, the cheaper the price is," Marsh, who is also a Republican state representative, said in an interview before the affidavits were released. "We negotiate our price talking to the corporate people and the sales people and by how many gallons we purchase."
Marsh said he was surprised to see the Pilot Flying J headquarters raided.
"We've had nothing but a great relationship with those guys," he said. "They treat us fairly."
Several trucking companies are named in the affidavit as having not received their negotiated rebates from Pilot. None immediately responded to messages from The Associated Press seeking comment.
While the federal investigation continues, Browns CEO Joe Banner said Haslam has jumped right back into his football job. Cleveland has the sixth overall pick in the NFL draft.
"This is the first year Jimmy has really owned the team and has the chance to put his imprint on it, so I think he's excited in general," Banner said. "We're glad to have him here. He asks good questions. He's a good asset to have as an owner.
"Jimmy isn't in there, watching film [of potential draft picks], but he's very involved with our entire process."