From SCDigest's On-Target E-Magazine
- April 23, 2013 -
Logistics News: Have a Corporate Fuel Account with Pilot Flying J? Might Want to Check the Math
Carriers and Private Fleets: Might be Time to Lawyer Up
SCDigest Editorial Staff
In a bizarre case, the government is alleging that dozens of employees at truck stop chain Pilot Flying J fraudulently changed the numbers to reduce the amount of rebates that corporate freight carriers and private fleets received versus what the contract amounts should be.
The prime target, the government says: Less sophisticated corporate customers that didn't have the systems to detect they were being cheated.
SCDigest Says: |
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| UPS put lots of pressure on the rail carriers to tighten up performance to be more dependable like truck service is, with a goal of 99.5% on time delivery. |
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What Do You Say?
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Adding to the drama, which included government raids on some of the company's locations, Pilot's CEO is Jimmy Haslam III, who is also majority owner of the football's Cleveland Browns, and his brother Bill Haslam also owns a part of the chain - who just happens to be the governor of Tennessee. CEO Haslam is alleged to have been aware of the practices.
The FBI and Internal Revenue Service agents conducted a raid on Pilot's headquarters in Knoxville, TN a little more than a week ago, as well as raids on at least three private residences of Pilot employees. The FBI then later released an affidavit from an FBI agent seeking a warrant for the raids that detailed the numerous allegations of fraud.
Pilot has a huge presence in the industry, with some 3,300 corporate customers, mostly carriers but a good number of private fleets as well. As yet, beyond the raids, no charges have been filed against the company or any individuals. However, in the affidavit, several dozen Pilot employees are listed as being connected to the allegations in one way or another (either as alleged participants or providers of information). They involve lower level to more senior-level executives, especially in the sales organization at Pilot, and include the fact that CEO Haslam understood the internal company jargon associated with the practices.
In summary, the investigation stems from a call the FBI received from an unidentified Pilot employee.
"On or about May 4, 2011, CHS-1 [confidential source] contacted the FBI to report his/her knowledge of fraudulent activity by certain Pilot employees directed at Pilot's customers," the affidavit says. "CHS-1 advised that a current Pilot sales employee, CHS-2, had confided to him/her that certain Pilot employees had intentionally had been defrauding some of Pilot's customers by deliberately charging these customers a higher price than the contractually agreed upon price, and then concealing the fact and nature of this increased price from these victimized customers."
The allegations are basically this: that some Pilot employees would manually manipulate spreadsheets to reduce the amount of rebates owed to customers. The goal: improve Pilot's profitability and sales commissions.
If these rebate errors were identified by customers, account managers were instructed to say the mistakes were simply the result of a "computer glitch."
The fraudulent activity is alleged to have started in 2008, when the trucking industry was starting to contract significantly along with the rest of the economy.
(Transportation Management Article Continued Below)
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Among the claims from the FBI officer that authored the affidavit: "Sales employees discussed the potential for "a new internal Pilot two-tiered pricing structure that would impose higher prices on less sophisticated customers" unable to detect they weren't getting the correct rebates."
