FBI raid on Pilot Flying J stems from unpaid cash rebates, CEO says

Posted: Wednesday, April 17, 2013 8:00 pm

KNOXVILLE — The FBI raid on Pilot Flying J is part of a federal criminal probe into claims the truck stop chain failed to rebate cash to truck lines that bought fuel, company CEO Jimmy Haslam said on Tuesday.
Haslam provided his first public response to the Monday raid that locked down the Knoxville head office of the 30,000-employee company once connected to powerful Memphians including R. Brad Martin and Frederick Smith.
Jimmy Haslam, lead owner of the National Football League franchise in Cleveland, this winter returned as chief executive officer of the chain founded by his father, Jim Haslam, more than 50 years ago. The CEO’s brother, Bill Haslam, is the Republican governor of Tennessee and was once president of the company.
U.S. Attorney Bill Killian confirmed Tuesday that four search warrants had been executed. He gave no details and did not identify the location where the warrants were served.
Knoxville-based Pilot Flying J’s 600-plus travel centers produced sales of $29.3 billion in 2011, making the business one of the largest private firms in the nation. Pilot, the company started by the Haslam family, acquired bankrupt rival Flying J in 2010.
Haslam met with reporters Tuesday at the Pilot headquarters in Knoxville. He said he thinks the federal investigation centers on a few truck lines owed rebates that were never paid.
“We, of course, disagree,’’ he said.
He explained the rebate system like this: If a trucking company buys 50,000 gallons of gas from Pilot Flying J, it would receive so much of a rebate from Haslam’s business. If it buys 100,000 gallons, it would receive another amount. Pilot Flying J deals with 3,300 companies. He said he was unsure how much money was in question.
He said he did not have any idea of the number of customers involved in the probe, saying “we believe it to be a low number.’’ He also said the rebate issue has not come up before. He said no stores were affected by the raids and all remain open.
Haslam said he didn’t know what documents were seized Monday by agents from the FBI and Internal Revenue Service. He said some sales people were subpoenaed. He wouldn’t say who. Haslam said he had not been subpoenaed and insisted the probe was not focused on taxes. No arrests have been made so far.
In a statement released before the press conference, Pilot Flying J provided reporters with a series of questions and answers about the investigation. The statement offered little new information, although it raised the issue of political motivation. The answer was: “That’s not for us to say.’’
The probe occurs as the truck stop chain completes a recent change in control at the top of the company.
Jimmy Haslam stepped down as CEO of Pilot Flying J in 2012 after buying the Cleveland Browns. He returned as CEO this February after John Compton abruptly left after less than a year as chief executive.
Compton came to Pilot Flying J in 2012 from PepsiCo, where he was president of the nation’s No. 2 beverage and snack food maker.
Compton is a University of Tennessee graduate. The Haslam brothers are major supporters of the university, where their father played on the 1951 national championship football team.
Compton separately joined the board of a premier Memphis corporation, First Horizon National Corp., owner of First Tennessee Bank, the state’s largest homegrown lender.
Also serving on the bank board are Jimmy Haslam and Brad Martin, the former chairman of luxury retailers Saks Inc.
Martin, a Memphis investor selected on Tuesday as interim president of the University of Memphis, was seated on the Pilot board as recently as 2010. FedEx founder Fred Smith also was a Pilot board member at that time. Martin in turn served on the FedEx board.
In American corporations, the board of directors oversees broad policy and can hire and fire the chief executive officer.
On Tuesday, Gov. Haslam said he has not had an active day-to-day management role in Pilot Flying J in 15 years.
He defended keeping his unspecified holdings outside of the blind trust he established for his other investments after he was elected governor in 2010.
“The point of a blind trust is to say, ‘I don’t know that I own that,’ ” Haslam said. “As I said at the time, it felt a little disingenuous to say I don’t know if I own Pilot or not.”
The governor has never revealedhis earnings from Pilot. He contends releasing the figures would reveal proprietary and personal information about the income of family members who are not in public office.
The Knoxville News Sentinel, The Commercial Appeal and the Associated Press contributed to this report.

Published in The Messenger 4.17.13

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