Pilot Flying J Charges Coming, But RICO Unlikely

Published in CSP Daily News

Traditional fraud convictions could still bring hefty prison terms, experts say

Jimmy Haslam

KNOXVILLE: Tenn. -- Charges against high-ranking employees are coming in the Pilot Flying J fuel rebate investigation, but not racketeering charges, according to a report by The Knoxville News Sentinel. Attorneys in and out of the Pilot Flying J case agree it is unlikely that federal authorities will pursue a criminal RICO prosecution against CEO Jimmy Haslam, his corporate executives or the company itself.

The Knoxville, Tenn.-based truckstop company has been the subject of intense scrutiny since April 15, when agents of the FBI and the IRS raided its headquarters and seized documents, emails and computer files related to the alleged scheme to cheat trucking-company customers out of rebates due to them for purchasing diesel fuel at the chain's more than 650 truckstops.

"I wouldn't think they would make it very complicated," veteran defense attorney James A.H. Bell told the newspaper concerning prosecutors in the U.S. Attorney's Office.

On the civil side, the Racketeer Influenced & Corrupt Organizations (RICO) Act allows treble damages, and on the criminal side, it gives the government tools to shut down a suspected racketeering firm long before any criminal prosecution is pursued.

"RICO is broadly written," University of Tennessee law professor Dwight Aarons told the paper.

Haslam has denied any knowledge of the rebate fraud, but has conceded in the civil litigation that customers were shorted. Earlier this month, he agreed to settle potential class-action lawsuits. But the proposed settlement has no bearing on whether the U.S. attorney's office in Knoxville seeks to indict top executives criminally, the report said. The office already has inked immunity agreements and plea deals with nine sales executives and staffers.

Nashville attorney Aubrey Harwell, who is representing Pilot Flying J in civil litigation, said in a recent interview that Haslam's admissions in the class-action settlement and in the media have no bearing on any potential criminal case.

"When Department of Justice officers executed the search warrant on April 15, they seized millions of pages of documents, and those documents reflect the proof of the matter being investigated," Harwell told the News Sentinel.

The standard, according to federal law, is pretty low. If the corporation benefited financially from the alleged scheme, it doesn't matter whether members of the firm's board of directors knew about it. And there is no need for a RICO charge to go after either the firm itself or its chief executive officers, said the report.

FBI Agent Robert Root, the lead agent in the case, does not try to make a RICO case in his search warrant affidavit. Instead, he cites federal crimes such as conspiracy to commit wire and mail fraud and money laundering.

Bell noted that a successful prosecution in the Pilot Flying J case on more traditional charges of conspiracy to commit wire and mail fraud could net the guilty prison terms just as hefty as under a RICO prosecution. "The loss calculation is going to be the big issue," he said.

In the Pilot Flying J case, none of the executives has criminal histories, and the underlying alleged crimes are not high on the sentencing totem pole. But if the feds can prove that executives participated in a trucking customer ripoff of up to $35 million, they could face 20 to 25 years in a federal prison.

Click here to view the full Knoxville News Sentinel story.

Meanwhile, if Jimmy Haslam were to step down from owning the Cleveland Browns because of the investigation, his father would take over the club, sources told Sports Business Daily.

The NFL and the Haslams developed a contingency plan in the aftermath of the federal raid, a move that fueled speculation Haslam might give up his team, which he bought last year for more than $1 billion.

There are currently no indications that Haslam is stepping down, temporarily or otherwise. Haslam's father, Jim Haslam II, 83, founded Pilot in 1958, seven years after playing on the University of Tennessee's first national championship football team. He ceded day-to-day control of Pilot to his son in 1997, and is chairman of the $30 billion-a-year business.

The elder Haslam, whose day-to-day dealings with the company are limited, has not been linked in any way to the scandal.

The Browns declined to comment.

NFL spokesperson Brian McCarthy said in a statement, "To our knowledge, no decision to step back has been made, so looking into who would take over is purely speculative. Jimmy is the best judge of how to keep the focus of the Browns on football and the fans."

Questioned about the contingency plan crafted by the NFL and the Browns, McCarthy responded, "We are not commenting on any potential scenarios."

Click here to read the full Sports Business Daily story.