Affidavit: Haslam knew of fraud

Plain Dealer

CLEVELAND

Cleveland Browns owner Jimmy Haslam’s travel center company for “many years” engaged in a fraud scheme to keep millions of dollars owed to customers as gas rebates, according to documents filed Thursday in federal court.

The documents further say Haslam knew about the fraud committed by top sales officials at his family business, Pilot Flying J, in which employees fleeced unsophisticated trucking companies through a company-wide rebate program, the documents say.

A 120-page affidavit for a search warrant filed in U.S. District Court in Knoxville, Tenn., says Pilot Flying J sales employees withheld fuel-price rebates and discounts from certain companies to boost the profitability of the company and increase their sales commissions. The affidavit says FBI and IRS agents are investigating charges of conspiracy, mail fraud and wire fraud.

The document says “the rebate fraud has occurred with the knowledge of Pilot’s current President, Mark Hazelwood, and its Chief Executive Officer, James A. “Jimmy” Haslam III, due to the fact that the rebate fraud-related activities have been discussed during sales meetings in Knoxville, Tenn., in which Hazelwood and Haslam have been present.”

One employee, the company’s regional sales manager, told a confidential informant that his role in the rebate fraud cost customers $70,000 to $90,000 a month, the affidavit says. The document says several employees were linked to the scheme.

In a meeting three to four years ago, the affidavit says, Haslam thanked an employee who was part of the scheme for saving the company money. The affidavit does not specifically cite whether Haslam was referring to the so-called rebate scheme.

FBI and IRS agents used the affidavit to obtain a judge’s permission to search four buildings at Pilot Flying J and two homes belonging to sales people.

The company is the nation’s largest chain of truckstops and travel centers and the sixth-largest privately owned company in America.

The document’s unsealing came as Haslam visited the Browns’ training facility in Berea. He did not meet with reporters. In a statement, Haslam said: “I read the affidavits and I understand more clearly the questions the federal investigators are exploring. I maintain 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.

“We will continue to cooperate with the federal investigation and continue our own investigation in these allegations. I value the relationships we have with our customers, our vendors and our team members across this country and regret that they have to go through this with us, but I trust and believe their faith in this company and its principles has never been misplaced.”

A spokesman for the NFL declined to comment on Haslam.

On Tuesday, Haslam, meeting with reporters, said the company disagreed with the government’s allegations.

On Thursday, the unsealing of the document stunned the trucking world, Cleveland and its football fans.

The document, written by an FBI agent who specializes in public corruption and white-collar crime, said the investigation began May 4, 2011, when a source told the FBI that Pilot employees had been fleecing some companies who were “too unsophisticated to catch that their agreed-upon deal with Pilot was being changed to benefit Pilot without the knowledge of those customers.”

The affidavit says Brian Mosher, director of sales for national accounts, spoke with employees during a sales meeting in November. The meeting was recorded by a cooperating witness for the FBI. Mosher stressed dealing with unsophisticated companies in the scheme.

“Some of ’em, some of ’em don’t know what a spreadsheet is,” Mosher said. “I’m not kiddin’. So, again, my point is this: Know your customer. If the guy’s sophisticated, and he truly has gone out and gotten deals from other competitors and he’s getting daily prices from us, don’t jack his discounts, ’cause he’s gonna know, okay?”

The document said that if a customer was due a $10,000 rebate, Mosher would cut it to $7,500. An informant said Mosher cut the rebates to customers “because it made more money for Pilot, and it increased the commission that Mosher and any other Pilot sales person responsible for the customer would receive.