Details have begun emerging in the general media about the April 15th raid of the Knoxville, TN, corporate headquarters of major truckstop operator Pilot Flying J by the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS).

The joint federal raid is seen as part of an ongoing fraud investigation into the company centered on allegations that customer rebates for diesel-fuel purchases went unpaid.

After the raid, Pilot Flying J CEO Jimmy Haslam said that two search warrants had been served on the company and several subpoenas issued, including some to members of the sales staff. He noted the firm has 23 sales representatives.

In a statement released this week, Haslam said that it “appears to us, based on all we know at this time, that this federal investigation is focused on a narrow slice of our business in which rebates on diesel fuel purchases are manually calculated and paid to a relatively small number of our 3,300 trucking company customers.

A news story by Alison Grant of The Plain Dealer (Cleveland, OH) updated online last evening, reveals the dual raid was nothing if not thorough as federal agents “retrieved records from file cabinets, cubicles, closets, even an employee's purse and a trash can…”

According to an inventory of items seized posted by the newspaper, FBI and IRS agents were after files, emails, spread sheets and other documents having to do with Pilot Flying J’s issuance of rebates for fuel purchases.

Per Grant’s report, the federal criminal investigation “centers on allegations that the nationwide chain of truckstops shorted what sales employees, in secretly recorded conversations, derided as ‘unsophisticated’ customers.”

The reporter also noted that the inventory of seized items included “contracts and pricing agreements with customers, information on employee sales commissions and ‘rebate spreadsheets.’ One item is described as ‘emails re: not disclosing info to customer,’ and another item is tagged ‘Be careful.’

In a secretly recorded conversation that was part of the FBI's search warrant affidavit, according to the news report, Pilot Flying J discount coordinator Lori McFarland’s discussion about how rebates work with an informant wearing a recording device has her saying "Sometimes the salesperson is kind of jackin' around with (the customer) and not wantin' em to know.”

Being under federal investigation is not the extent of Pilot Flying J’s legal problems. The truckstop chained has been sued in a class action filing by Atlantic Coast Carriers, a trucking firm based in Hazlehurst, GA.

The suit, filed in the Knox County, TN, Circuit Court on April 20th, alleges that Pilot Flying J has “benefited from inaccurate rebate procedures for certain clients, including Atlantic Coast and several other clients… [and] derived funds from a pattern of racketeering activity.”

The lawsuit also claims that Pilot Flying J “conspired to manually reduce the amount of rebate payments due to Atlantic Coast and numerous other customers in order to increase Pilot profits and increase sales commissions of its sales agents, without the consent or knowledge of affected customers.’’

While the aforementioned statement Haslam released on April 22nd does not comment directly on the federal raid or the class action suit, it certainly indicates that Pilot Flying J is in full damage-control mode.

“We are continuing to cooperate appropriately with investigators,” Haslam stated, “but we are determined to understand on our own the questions they are asking and to do everything we can to make sure we are never in this position again.”

Toward that end, he listed five specific steps being taken “to address the issues raised by the investigation”:

1.      “Immediately, we are bringing our field audit team to Knoxville to review all 3,300 contracts with our trucking company customers, not just the relative few implied in the federal affidavit, and to proactively address any miscalculations that we may find.”

2.      “Placed on administrative leave several members of our diesel fuel sales team and, on an interim basis, we are restructuring that team pending further investigation to get control of that operation and restore confidence to our customers.”

3.      “I have directed that all of our diesel fuel customers be converted to electronic calculation and payment eliminating future risks of any abuse that might be enabled by manual calculation and payment.”

4.      “I have asked our outside counsel to help us create and staff a position of Chief Compliance Officer to report to the company’s general counsel to deal with any similar questions or issues that might come up in the future.”

5.      “Lastly but very important, our board, in a special meeting, voted to hire an Independent Special Investigator to oversee and validate all of our internal inquiries related to the federal investigation.”

Haslam concluded by stating that “we have to take extraordinary steps to do whatever is necessary to repair any damage done to this company’s reputation and restore the full integrity on which this company was built.”

Click here to view a Pilot Flying J video of Haslam presenting his full statement to the media.