July 25–The man dubbed by the FBI as the architect of the diesel fuel rebate scam by executives of the nation’s largest truck stop chain has struck a deal to confess, court records show.
The former Pilot Flying J vice president of sales, John “Stick” Freeman, and three other Pilot Flying J ex-employees have agreed to plead guilty in the multi-million-dollar fraud and, according to language in the documents filed Monday, cooperate with federal authorities in the ongoing probe.
Freeman has been repeatedly described in an FBI affidavit and an indictment filed by Assistant U.S. Attorneys David Lewen and Trey Hamilton as the architect of the scam in which less sophisticated trucking companies across the country were promised certain rebates but paid much less.
Freeman is providing information to the FBI about Pilot Flying J and the diesel fuel rebate scam the corporation’s own board of directors has conceded ripped trucking firms off to the tune of millions in five years, pleadings filed Monday in U.S. District Court show.
Also striking deals to confess are: John Spiewak, a regional sales manager for Pilot Flying J; Vicki Borden, director of direct sales; and Katy Bibee, an account representative who worked directly with Freeman.
All four have struck what’s known as cooperating plea agreements.
Assistant U.S. Attorneys Lewen and Hamilton make clear in the plea agreements Freeman is a key player in their effort to show the rebate scam was pervasive as was the culture of greed that spurred it — and that former Pilot Flying J President Mark Hazelwood was looking to expand it.
For instance, the plea agreement shows that when Freeman verified Pilot Flying J’s technology department could handle the expansion, Hazelwood replied via an email, “Awesome.”
Pilot Flying J CEO Jimmy Haslam has not been charged, though the FBI, indicated in testimony and court records he was a suspect. Haslam denies any knowledge of the scheme.
Hazelwood now will stand trial with the remaining Pilot Flying J employees charged in the conspiracy — former vice president of direct sales Scott “Scooter” Wombold and staffers Heather Jones and Karen Mann. Trial is set to begin Oct. 31. The chance to plead has now passed.
Monday’s plea agreements bring to 14 the number of Pilot Flying J sales staff and executives who have agreed to confess and talk.
To escape prosecution, Pilot Flying J’s board of directors entered a criminal enforcement agreement with the U.S. Attorney’s Office and agreed to pay $92 million in restitution. The corporation has paid out $85 million so far in lawsuits.
The travel-center giant issued a statement Monday, saying the firm was “saddened by the news” of more guilty pleas in the case and noted it “made whole every customer negatively affected” and admitted criminal responsibility since its Knoxville headquarters was raided on tax day in 2013.
“It is Pilot Flying J’s commitment to be a great partner to trucking companies across North America, always focusing our undivided attention on the best interests of our customers, team members and business,” the company said in a statement.
Freeman came up with the idea of ripping off trucking companies by promising rebates higher than they were paid. He called it “Manuel,” a reference both to the Hispanic ethnicity of some of the owners of the small trucking firms the scheme targeted and the method by which the thievery was kept off the official books by using manual rebate calculations.
Secret recordings made by FBI moles, including a Pilot Flying J sales manager, and details in the plea agreements filed Monday show Freeman talked openly about the scheme, in graphic terms, and convinced Hazelwood to hold a training session in late 2012 for other sales folks so they could rake in more money.
“(Expletive) them early and (expletive) them often,” Freeman instructed. “I mean, (expletive), sell it to them the way they wanna buy.”
But he warned, “Don’t get too cute.”
After launching the scheme in 2008, Freeman wound up spending $1 million in Pilot Flying J’s money — with corporate approval — to buy an airplane from a firm he ripped off after a slip of the tongue revealed his trickery. Pilot Flying J sold the plane for junk.
Spiewak is admitting in his plea agreement that he ripped off trucking firms himself and filed regular reports on his thievery to Freeman and others. Borden is confessing she knew and participated in the scheme, even suggesting the need for a “rebate queen” to handle all the paperwork required to keep two sets of books.
Bibee was Freeman’s right hand. The plea agreements state Bibee’s job including lying to trucking firms if they got suspicious.
Hearing dates for the formal entry of the four new pleas in the case have not yet been set. The case is being handled by Senior U.S. District Judge Curtis L. Collier in Chattanooga. The 10 other staffers who have confessed guilt remain in limbo. Sentencing dates won’t be set until after they testify if called upon to do so.
Freeman’s plea agreement states Hazelwood was looking to expand the rebate scam to other, larger trucking companies, in talks recorded during a February 2013 corporate meeting in Orlando, Fla. Hazelwood, the plea agreement stated, had his own name for that: “Aunt Bea.”
It was a reference to mid-level trucking firms who would be the next targets, the agreement showed.
“Manuel does a hell of a job,” Hazelwood is quoted in the document. “Wonder what percentage of our volume’s on Aunt Bea?”
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