Jan. 12–CHATTANOOGA, Tennessee — Federal prosecutors Thursday gave jurors a peek at what they said was the driving force behind a massive rebate fraud at Pilot Flying J: commissions and bonuses for sales employees.
Claudeane Whaley, a payroll executive with the company, told a jury in U.S. District Court that commissions ballooned for sales executive Scott Wombold and account representatives Heather Jones and Karen Mann from 2008 through 2012, the years that authorities say the scheme took place.
Wombold, Jones and Mann, along with former president Mark Hazelwood, are accused of conspiring to defraud unsuspecting trucking companies out of tens of millions of dollars in a rebate scheme.
Cleveland Browns owner Jimmy Haslam owns Pilot Flying J. He has not been charged in the case, and he has denied knowledge of the scheme.
In court records, federal prosecutors said the rebate scheme’s purpose was two-fold: to increase the profitability of Pilot Flying J and to increase the commissions of the diesel sales staff.
The scheme targeted unsuspecting trucking companies, siphoning tens of thousands of dollars a month in agreed-upon rebates from the companies. The more the trucking companies bought from Pilot Flying J, the greater the rebates should have been. But several sales executives returned only a fraction of the rebates to the companies, a move to gain greater commissions, according to court records.
In court Thursday, Francis Hamilton, an Assistant U.S. Attorney, spent more than an hour questioning Whaley about the commissions of Wombold, Jones and Mann, showing the jurors the increases in each of their commissions:
–Wombold’s commissions jumped from $129,996 in 2008 to $357,130 in 2012, Whaley testified. That’s a jump of more than 170 percent. Wombold’s total earnings, his base pay plus commissions, doubled: He made $522,887 in 2008; five years later, he earned $1.15 million.
–Jones’ commissions grew from $22,924 in 2008 to $61,283 in 2012, an increase of 167 percent. Her total earnings, nearly doubled: She made $68,328 in 2008 and earned $115,348 in 2012.
–Mann’s commissions jumped from $49,520 in 2008 to $67,790 in 2012, an increase of 37 percent. Her total earnings went from $92,076 in 2008 to $117,373 in 2012.
Whaley testified that Hazelwood earned $13.9 million in 2008 in bonuses and pay, with a base salary of $398,036. In 2012, the year before federal agents raided Pilot Flying J’s offices, Hazelwood made $26.9 million in bonuses and pay, with a base salary of $418,083.
His increase in pay and bonuses amounted to 94 percent jump since 2008.
Whaley said the bonuses for Hazelwood stemmed, in part, from the company’s growth in the past several years. In 2010, Pilot purchased Flying J fueling centers, which pushed the company to become the nation’s largest travel center business.
A spokeswoman for the company said that the business is paying the legal fees of the four former employees as part of their employment agreements.
The irony in commissions
When it was time for the defense to question Whaley, the attorneys became irate over the insinuations that there was a connection between commissions and fraud.
They quickly pointed out, for example, that sales executive Vincent Greco, who became an informant for the FBI and IRS, supervised employees who had earned some of the highest monthly commissions. They called that ironic. Greco will not be charged.
Defense attorneys also said the commissions were hardly accurate. A former employee named Vicki Borden handled the calculations of the sales’ executives’ commissions. Borden has pleaded guilty to fraud charges last summer. She has not been sentenced.
They brought up a 2010 email that Borden sent to a sales executive in which she apologized for failing to get commission figures to him.
“Sure sorry about that,” Borden said in the email. “[The figures] are so ‘made up’ right now that it is scary.”
In another email to Jones, Borden wrote: “I got sidetracked trying to change all these commissions.”
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