Blog / For Businesses

Federal Judge OKs Multiple Cases Against Pilot Flying J for Fraud

March 25, 2015 / Chip Cooper

Columbus, Ohio – Trucking companies represented by Cooper & Elliott in cases against Pilot Flying J for alleged fraud, breach of contract, and negligent misrepresentation will be allowed to continue their lawsuits. U.S. District Judge Amul Thapar rejected Pilot Flying J’s request to dismiss these claims. Requests by Jimmy Haslam (CEO of Pilot Flying J) and other executives to dismiss RICO conspiracy claims asserted against them in companion cases were also denied.

Pilot Flying J has already paid out nearly $85 million to settle an initial class action suit and another $92 million to the federal government that spared the company from criminal charges. However, not all trucking companies damaged by Pilot Flying J were part of this initial settlement.

These additional cases now move to the discovery phase, where the trucking companies can obtain emails and company documents from Pilot Flying J and require current and former employees and executives to give sworn testimony.

In April 2013, Pilot Flying J’s headquarters were raided by the FBI, which had investigated claims that the company deliberately withheld rebate payments from trucking companies and lied to the companies about how much they were owed.  To date, ten Pilot employees have pleaded guilty to mail and wire fraud charges arising from the long-running scheme, including Pilot’s former national sales director.

Pilot Flying J’s illegal rebate scheme – referred to within its sales force as “jacking the discount” – is yet another example of large-scale corporate greed.  Pilot Flying J is the largest seller of over-the-road diesel fuel in the United States, and its size and market share gave the company the chance to commit massive fraud.

According to court documents, in a recording made by an undercover informant, Pilot Flying J’s former vice president of sales indicated that CEO Jimmy Haslam knew of the scheme.

Trucking companies trusted that a company with Pilot Flying J’s size and reputation would deal honestly and fairly with them. Their trust was violated in the worst way. In an excerpt from undercover recordings made by the FBI, Pilot’s director of national sales was caught on tape explaining and teaching the fraud to other salespeople, including how to target less savvy trucking companies:

“Some of ‘em, some of ‘em don’t know what a spreadsheet is.  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 the other competitors and he’s gettin’ daily prices from us, don’t jack with his discounts, ’cause he’s gonna know, okay?… There’s guys that I move a penny, there’s guys that I move 15 cents.  I mean, it’s an art, it’s a feel, it’d do what you do.  It’s not do more, don’t, you know, don’t ever expose yourself…

I ask myself, is this a customer that I send a daily price fetch to?  Does he buy from anybody else?  Does he have any idea what cost-plus-4 means to his business?  Nope.  Has no clue.  Absolutely know [sic] idea.  Well, do I want to pay him $25,000?  Maybe… I look at my P&L, and my P&L says, ‘Huh.  I’m payin’ him $25,000 and we made $25,000 on it.  That’s not a very good deal for me.’  I’ll probably cut this one down to like 21.  This customer is not a very sophisticated buyer and he doesn’t know what we’ve done here, right?”

“The financial consequences to a small business dealing with a corrupt partner can be devastating,” said Chip Cooper of Ohio business litigation law firm Cooper & Elliott. “Standing up to big corporations like Pilot Flying J sends a strong message that they can’t get away with fraud just because they’re an industry leader or think their customers are too naïve to detect the fraud or too intimidated to cry foul.”

Cooper & Elliott has a long history of successfully representing small businesses against much bigger opponents. “The contingency fee-based representation we offer has allowed many small companies to take action, even though they may lack the resources to pursue behemoths like Pilot Flying J,” said Cooper.

The outcome of any client’s case will depend on the particular legal and factual circumstances of the case.

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