Mosher testifies he showed Haslam master plan on how to steal money from Pilot's customers
Jimmy Haslam knew about the fraud going on at his company, Flying Pilot J, according to Brian Mosher, former National Sales Manager of Pilot. Mosher testified yesterday that he showed Haslam the company's master plan on how to steal $56 million from its customers.
Pictured above is Brian Mosher.
Mosher's Direct Sales Unit was "responsible for 25 per cent of Pilot's annual profit", according to the U.S. Justice Dept. Pilot has annual sales of $20 billion. Pilot paid Mosher a half a million dollars a year.
Mosher's testimony was heard in a criminal trial against four former key executives at Pilot Flying J. One defendant is Mosher's former boss, Mark Hazelwood, who as Pilot's former President, earned $30 million a year.
The trial is being held this month in the U.S. District Federal Court in Eastern Tennessee, Chattanooga. It is in its fourth week and is anticipated to continue to the end of the year. The trial continues Thursday.
Mosher testified, “Early on (in developing the scam), I would explain the way the spreadsheet was laid out, But later on we (Mark Hazelwood and Jimmy Haslam) would just look at the bottom line.”
For the first time during the Hazelwood criminal trial, the voice of Jimmy Haslam was heard in the courtroom. It was on tape from an FBI informant wire. It was taken during one of Mosher's mandatory sales training sessions. The meetings detailed Mosher's master plan on how Pilot's sales force could make money cheating its customers. The entire training session was taped by the FBI.
Haslam was at the meeting. He was talking about Western Express, one of Pilot's customers. The courtroom heard Haslam saying on tape, “Sounds like Stick’s deal with Western". "Stick" is a nickname for John Freeman, former V.P. of Pilot's Sales Division. Freeman reported to Hazelwood.
Western discovered they were shortchanged on their earned rebates. They thought the amount was one million dollars. Western sold Pilot a grounded airplane that was unable to fly in exchange for the money.
However, Western was shortchanged.
According to court records, they should have received $7 million in rebates. Pilot kept the difference until a private settlement was made after the FBI raided Pilot's headquarters in Knoxville, Tennessee. The FBI needed 200 agents to complete its search and seizure of criminal evidence in two states.
Pilot admitted in writing they stole $56 million from 5500 customers, cooked the books, and used oral rather than written contracts to make theft easier.
Pilot paid $186 million in fines, restitution, interest, good faith estimates of claims, and forensic audit costs. These were the amounts paid pursuant to U.S. Justice Dept. claims against Pilot.
Haslam's company also paid more money in law suits for money. One of Pilot's largest customers, Western Trucking in Nashville claimed losses of $75 million. Attorney fees have yet to be disclosed.
Mosher has plead guilty to mail and wire fraud. He has admitted stealing $20 million from 250 customers. Mosher is facing maximum jail time of 30 years for mail fraud, and 20 years for wire fraud.
The U.S. Post Office and other interstate delivery companies were used to send customers rebate checks in "deceptively fraudulent reduced amounts", according to the U.S. Justice Dept.. "Wire" or use of the internet "over state lines" was used to send "fraudulently reduced amounts" through fabricated spreadsheets. The scam made Pilot, its Direct Sale Unit, and sales representatives more money.
Hoping to reduce his jail time, Mosher is testifying this week against Pilot's former President, Mark Hazelwood.
Hazelwood is on trial for tampering with a witness, fraud, and conspiracy.
Three other former Pilot key executives are in the same trial with Hazelwood. They are accused of fraud and conspiracy. Their pictures are highlighted in yellow in the flowchart at the end of this article. They are:
- V.P. of National Accounts Scott Wombold (top left under the date)
- Regional Sales Representative Heather Jones (bottom second photo to the left
- Regional Sales Representative Karen Mann (bottom left of center under the word "Pilot")
Hazelwood's picture is at the top in yellow left of center next to Jimmy Haslam, Pilot's CEO.
Pilot has annual sales of $20 billion. It sells more diesel fuel, seven billion gallons a year, than any other company. Pilot owns 750 rest stops in the U..S. and Canada. It makes more money in its convenience stores selling food, truck repairs, and other items.
The main purpose of the rebate scheme was to create a monopoly for Pilot.
In exchange for agreeing to a "loyalty agreement", Pilot's customers were promised the lowest priced fuel and rebates in exchange for buying fuel exclusively from them. As a result, Pilot was taking away business from its competitors, making it easier for Pilot to expand its business. It was also putting its competitors out of business.
Pilot has been adding 50 new locations a year since 2008, the year the rebate scam was concocted. This is a growth rate experienced by no other company in the truck stop business. Pilot sells more diesel fuel than any other company. It sold six billion gallons of fuel in 2013. Now it sells seven billion. Yes, BILLION. Pilot had 563 locations in 2013. Now it has 750.
Pilot offers "rebates that are outrageous and impossible to compete against,'' said Burt Newman, the vice president of Professional Transportation Partners.
At current rates, Pilot's diesel fuel prices are eight cents a gallon lower than other truck stops.
This case has nothing to do with the Cleveland Browns, another company owned by Haslam.
Haslam has no pending charges and has never received immunity. He can still be charged.
Linked below is a 120-page FBI affidavit in support of a search warrant of six locations of Pilot Flying J dated April 18, 2013: