Feb. 02–CLEVELAND, Ohio — The window of time is closing for federal prosecutors to charge additional people in the rebate fraud investigation against employees of Pilot Flying J, the family business of Browns owner Jimmy Haslam.
Prosecutors must file any new cases by April 15, the end of the five-year statute of limitations for the most serious charge against an individual in the investigation: conspiracy to commit mail fraud and wire fraud. Prosecutors could seek a waiver to extend the statute, but it is rarely used, according to lawyers who work in the field.
The clock in the case began running April 15, 2013, the day federal agents raided Pilot Flying J’s corporate offices in Knoxville. Since then, 18 people have been charged, with 14 pleading guilty. No one has been sentenced yet. Four are on trial in U.S. District Court in Chattanooga, Tennessee.
Haslam, who has not been charged, has denied knowing of the scheme. But Kevin Clark, a former Pilot Flying J sales executive from Kansas City, testified last month that Haslam was aware of it.
An FBI affidavit quoted an informant as saying that Haslam and Hazelwood attended sales meetings where the fraud was discussed.
Federal prosecutors have refused to comment on the case. U.S. District Judge Curtis Collier, who is hearing the trial, has placed a gag order on the attorneys involved in the case.
Haslam’s spokesman, Tom Ingram, has declined to discuss the investigation. Asked about the statute of limitations drawing near, Ingram said, “[April 15] is nothing more than a date on the calendar for us right now.”
Haslam’s attorney, Tom Dillard, confirmed, through Ingram, that Haslam never received a “target letter,” a notice that authorities say federal prosecutors in white-collar crime cases often send to a suspect that spells out that he or she is under investigation.
In the letter, prosecutors typically urge the person to obtain legal counsel.
In a statement, a spokesman for Pilot Flying J said, “the company and its chief executive officer and other principals have cooperated fully with the federal investigation since Day One.”
Haslam is the chief executive officer of the company.
Pilot Flying J is the nation’s largest operator of travel centers, catering to the fuel needs of over-the-road trucking companies. The scheme that rocked the trucking industry unfolded like this: Some members of Pilot Flying J’s sales staff targeted unsuspecting trucking companies, withholding tens of thousands of dollars a month in agreed-upon rebates.
The more fuel the trucking companies bought from Pilot Flying J, the greater the rebates should have been. But several top executives returned only a fraction of the money owed to the companies, a move to gain greater commissions, court records show. The fraud began in about 2008, prosecutors contend.
The company has paid an $84 million settlement to trucking companies shorted in the scam, and a $92 million penalty to the U.S. Justice Department.
Trial nearing an end
Clark’s testimony in January came during the trial of four Pilot Flying J sales employees: former president Mark Hazelwood, sales executive Scott Wombold, and account representatives Karen Mann and Heather Jones. Each is charged with conspiracy to commit mail fraud and wire fraud.
The trial began in November, but it has inched along, as jurors received a month-long break for the holidays and a week break in late January. The trial is expected to end in the next few weeks. Prosecutors finished their case Wednesday, and the defense called few witnesses to the stand. Closing arguments are set to begin next week.
The prosecutors do not have to wait until the end of the trial to bring new charges; any federal prosecutor in the U.S. Attorney’s office could take allegations regarding the rebate fraud to a grand jury, although attorneys Francis Hamilton and David Lewen have handled the case from the start.
On April 15, 2013, the day of the raids at Pilot Flying J, Lewen accompanied federal agents to search the home office of Brian Mosher, a sales executive at Pilot Flying J, who worked in Bettendorf, Iowa.
Mosher quickly agreed to cooperate with the agents. Lewen and the officers listened as Mosher recorded a call to Haslam. Mosher told Haslam that agents had unraveled the rebate scheme, according to testimony first reported by The Knoxville News Sentinel.
Mosher testified that he told Haslam, “We’ve been caught, Jimmy,” according to the newspaper. Haslam transferred the call to the company’s legal department, according to interviews that confirmed the newspaper’s account.
Attorneys in Cleveland who handle federal white-collar cases said it is rare for prosecutors to wait until the last weeks before the statute of limitations ends to file additional charges.
But it is not out of the question. They cited the complex nature of a financial crime investigation and the handling of other cases related to the investigation.
The way the current trial plays out in the Pilot Flying J case, such as whether there are a number of additional convictions, could affect how prosecutors proceed. For example, a person convicted at trial could seek to lessen his or her punishment by cooperating with prosecutors before sentencing, lawyers said.
If there are convictions at the trial, it is unclear when a sentencing date might occur.
The attorneys in Cleveland also said, in the extremely rare case, prosecutors could seek a waiver of the statute of limitations by obtaining an agreement with a person’s defense counsel that the statute can be extended.
That often occurs when suspects and investigators have been cooperating for long periods of time. For a defendant, the additional time to cooperate could bring a reduced charge and a lighter sentence for a person under investigation.
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