Predictably, Browns owner Jimmy Haslam denies wrongdoing by the company he runs, Pilot Flying J, in connection with customer discounts and rebates. Even more predictably, the FBI and IRS wouldn’t have descended on company headquarters on Monday without evidence to support the allegations.
The evidence seems extensive, and much of it in the form of secretly recorded conversations. Those conversations include an admission from a key employee of the company that Haslam was aware of the practice of shorting customers.
The 120-page affidavit was posted by the Cleveland Plain Dealer after being filed in court on Thursday. We’ve read the entire thing.
The affidavit explains at paragraph 6 that a confidential informant contacted the FBI on or about May 4, 2011 to report that another employee of Pilot Flying J had confided “that certain Pilot employees had been intentionally defrauding some of Pilot’s Customers by deliberately charging these Customers a higher price than the contractually agreed upon price, and then concealing the fact and nature of this increased price from these victimized customers.”
The informant recorded conversations with the other employee, who then agreed to cooperate in the investigation. The second employee, after entering into a non-prosecution agreement, provided information about the fraudulent practices -- and began recording conversations with other Pilot Flying J employees.
The affidavit contains excerpts from numerous conversations and meetings. For example, at paragraph 63 of the affidavit Pilot Flying J V.P. of Sales John Freeman had this to say during an October 25, 2012 Regional Directors meeting at Freeman’s lake house: “Hey this is a game. We’re playin’ f--kin’ poker with funny money, and it’s liar’s poker with funny money because of all this cost-plus stuff. So, you know, I’m not, I don’t want to get into a moral or ethical conversation, because I believe that if a guy’s gonna butt-f--k you then we got to go to butt-f--kin’ him harder. . . . Some people are tits and some people ass guys and some people want their discount managed through the system and some people like a big check. I mean, f--k, sell it to ‘em the way they want to buy. And understand, the f--ker’s got the ability to know what the hell you’re doing to ‘em. Okay?”
Freeman said later in the meeting, “F--k ‘em early and f--k ‘em often.”
Freeman referred repeatedly to having to “buy an airplane” when Western Express, a trucking company, realized what was happening. Specifically, instead of paying Western Express $1 million to rectify the situation, Pilot Flying J bought an airplane from Western Express that was on the books for $7 million, and on which Western Express owed $1 million.
At paragraph 81 of the affidavit, a recorded conversation contains an admission from Freeman that Haslam knew about the Western Express situation. “[H]e knew all along that I was cost-plussin’ this guy,” Freeman said. “He knew it all along. Loved it. We were makin’ $450,000 a month on him why wouldn’t he love it?. . . Did it for five years, cost us a million bucks. I mean, we made $6 million on the guy, cost us a million bucks.”
The recorded conversations potentially represent the tip of the evidentiary iceberg. The affidavit was submitted to justify the search warrants that the FBI and IRS executed on Monday. The company’s files and computers (including email chatter) possibly will contain many more references to the alleged scheme.
In the interim, Pilot Flying J should prepare to buy more planes. While the company allegedly preyed on unsophisticated trucking companies by shorting them on discounts and rebates, those unsophisticated trucking companies are likely sophisticated enough to hire lawyers who will sue Pilot Flying J for a full refund, plus punitive damages.
Likewise, Pilot Flying J can now count on its competitors aggressively trying to convert customers by printing off the affidavit, highlighting some of the comments from Freeman, and asking those customers if they really want to continue doing business with a company like Pilot Flying J.
While these are only allegations and both the company and its employees are entitled to the presumption of innocence, the contents of the affidavit paint a picture that can get ugly for Haslam, in multiple ways. As to the biggest question -- whether Haslam will face criminal liability -- the most important witness of them all could end up being John Freeman.
If Freeman flips and gives persuasive testimony against Haslam, Jimmy could be going down.