Fuel company Pilot Flying J recently entered into an agreement with the Justice Department where it confirmed its employees, including supervisors, schemed to withhold diesel rebates from many of its trucking customers. As a result, the company is paying millions in fines, and its employees face criminal prosecution. But how did they actually hide the rebate?
Pilot Flying J employees (Pilot) is facing heat from the U.S. Department of Justice after employees of the fuel company deceptively withheld diesel-fuel rebates from hundreds of customer trucking companies.
The company has entered into an agreement with the DOJ to resolve its criminal liability for its employees’ fraudulent conduct, according to a July 14 announcement from the government agency.
Pilot has accepted legal responsibility for the criminal conduct of its employees, which caused more than $56 million in financial loss to its customers, and agreed to pay full restitution to every victim of the fraud, the DOJ said. Pilot also agreed to pay a $92 million monetary penalty to the federal government over the next two years.
The agreement provides no protection from prosecution to any individual, and it obligates Pilot to cooperate with the ongoing federal investigation of current and former Pilot employees relating to fraudulent conduct. Pilot also must continue to demonstrate its internal accounting controls and other compliance procedures can prevent similar fraudulent conduct from occurring.
“The terms of this agreement, including the significant monetary penalty and the very serious consequences if Pilot fails to comply, demonstrate quite clearly that no corporation, no matter how big, influential, or wealthy, is above the law,” U.S. Attorney Bill Killian said in a statement. “The agreement ensures that Pilot’s extensive remediation efforts will continue until all trucking company victims have received full restitution and until Pilot has demonstrated to the United States that it has implemented sufficient internal controls to prevent this kind of fraudulent conduct from ever occurring again
The issue came to light following a lengthy joint criminal investigation by the FBI and the IRS into allegations of fraudulent conduct at Pilot. Search warrants were executive in April 2013 at multiple locations, including Pilot’s headquarters in Knoxville, Tenn. Since then, 10 Pilot employees, including those with supervisory responsibilities, agreed to cooperate with the ongoing federal investigation and entered guilty pleas to mail and wire fraud charges arising from their involvement, according to the DOJ.
In the agreement, Pilot confirmed the fraudulent conduct was occurring and that supervisory employees encouraged participation in discount fraud for the company’s benefit. As an example, the DOJ noted that during an annual sales training meeting in November 2012 at Pilot’s headquarters, a Pilot supervisor encouraged and taught direct-sales employees how to deceptively reduce the rebates paid to some customers for the purpose of making targeted accounts more profitable for the company.
Pilot confirmed the discount fraud occurred either by fraudulently reducing the monthly rebate amounts to targeted customers or by deceptively reducing the off-invoice discounts of targeted customers. Pilot employees also emailed spreadsheets among each other that documented their fraudulent reductions. In some cases, the employees fabricated “back up” documentation sent to customers to justify fraudulently reduced rebate or discount amounts.
In February 2013, certain Pilot direct sales employees expressed their intentions to expand the scheme and target Pilot’s off-invoice customers that were considered to be too unsophisticated to carefully monitor diesel pricing data in conjunction with their periodically received fuel invoices. They planned not to inform those customers, dubbed “Customer Bs,” of their placement in the higher-priced tier.
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