The Star Beacon; Ashtabula, Ohio

Local News

November 25, 2013

Fairness hearing set on Pilot Flying J settlement

LITTLE ROCK, Ark. — Parties in a $70 million truck-stop rebate scandal linked to a company owned by the governor of Tennessee and his brother, who owns the Cleveland Browns, are to gather in court today for a federal court hearing that could end in approval of a settlement.

About 50 customers of Nashville-based Pilot Flying J opted out of the proposed settlement and have filed their own lawsuits. But the bulk of the 6,000 companies due rebates, plus interest, under the proposal have signed on to the deal.

Lawyers started filing lawsuits in April against the nation’s largest diesel retailer, which is owned by Cleveland Browns owner Jimmy Haslam and Tennessee Gov. Bill Haslam. Lawyers for the company say upper management didn’t know about the scheme that cheated customers out of promised rebates, starting in 2005.

The company has annual revenues of about $30 billion.

Jimmy Haslam has denied any personal wrongdoing. Gov. Bill Haslam holds an undisclosed ownership amount in Pilot Flying J, is not involved with its operations.

The parties are to go before U.S. District Judge James M. Moody on Monday for a fairness hearing, at which the judge is to evaluate the terms of the settlement, for which he earlier granted preliminary approval.

Attorney Aubrey B. Harwell Jr. of Nashville, Tenn., who represents the company, said the settlement is a fair one, even though it excludes punitive damages.

Of the 6,000 customers affected, only about 1 percent opted out of the settlement so they can file their own lawsuits.

“There are lots of customers and their lawyers who find this to be fair to the point of being generous,” Harwell said in a phone interview.

Court filing show that about $70 million wasn’t paid to customers due rebates. Harwell said $45 million to $50 million has been paid out to customers, based on audits conducted by Pilot Flying J.

Harwell said that number is expected to grow to $50 million to $55 million if the settlement is approved. He said it is unclear how much money is at stake among companies that opted out of the settlement, adding those accounts are still being audited.

Harwell said any wrongdoing was confined to a limited number of people.

“It appears that there were certain people in the company that acted inappropriately. It also appears ... that senior management knew nothing about this, absolutely nothing, and moved to act in a very constructive fashion the minute they learned about it on April 15. They’ve acted responsibly,” Harwell said.

Seven employees have pleaded guilty to criminal charges and two others are cooperating with the government in exchange for immunity from prosecution.

Prosecutors alleged in court documents that the scheme to cheat customers out of rebate and discount money was well-known among sales staff. Plea agreements allege that sales staff took part in a training session that taught employees how to defraud trucking companies without getting caught.

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