“All organizations at the end of the day flow to the people at the top, and we haven’t made good decisions along the way so we’ll accept the blame.”
Cleveland Browns owner Jimmy Haslam III said those words after the Browns went 1–15 in 2016, echoing his comments from a year earlier when the Browns went 3–13.
“The fact that this franchise has not done better … the blame lies squarely with me,” Haslam said after the 2015 season. “Because ultimately it’s the head person who’s responsible for everything.”
As the owner of the Browns, Haslam has been quick to accept the blame for his organization’s perennial underperformance. But as the CEO of Pilot Flying J, the truck-stop company where 17 former employees have pleaded guilty or been convicted in a fraud scheme worth more than $50 million, Haslam has taken a different tone.
“As I have said throughout this ordeal, I knew nothing about the misconduct of some of our former employees,” Haslam said in December 2016.
With the first and fourth overall picks in April’s NFL draft, the Browns are one of the biggest stories of the NFL offseason. Yet as the Browns begin a new chapter in their franchise, the team’s owner is attempting to turn the page on a scandal that makes Cleveland’s 0–16 season seem benign.
We previously broke down the Pilot Flying J scandal in November. Here’s a refresher that lays out the updates in the case.
What’s a Pilot Flying J?
Pilot Flying J is a Tennessee-based truck-stop chain. It sells more than 7 billion gallons of fuel per year and is the largest diesel-fuel retailer in America, reporting nearly $20 billion in revenue in 2016. The company is owned by the Haslam family. In October, Warren Buffett’s Berkshire Hathaway bought 38.6 percent of the company, and the family’s stake dropped from 77 percent to 50.1 percent. As part of the deal, by 2023 the family will have just 20 percent of the company and Berkshire Hathaway will become the controlling shareholder.
What did the company do wrong?
According to the U.S. Department of Justice:
“Evidence presented at trial proved a scheme to defraud certain Pilot Flying J trucking company customers through false and fraudulent representations and promises of diesel fuel discounts that were intended to induce victim customers to purchase diesel fuel from Pilot Flying J rather than a competitor. The scheme resulted in victim customers being cheated out of their promised diesel fuel discounts. The evidence at trial showed that the scheme’s goals were to increase Pilot’s market share of diesel fuel sales over its competitors, maximize Pilot’s profits, and maximize the scheme-participants’ potential for profit- and commission-based compensation from trucking companies targeted through the scheme to defraud.”
In English, Pilot Flying J offered trucking companies a certain amount of cents off of every gallon of gas purchased, but then paid a rebate less than the agreed-upon amount and hoped those companies wouldn’t notice. As former Pilot Flying J executive John “Stick” Freeman explained to other Pilot employees in a secretly recorded conversation in 2013, “I wasn’t tryin’ to fuck the guy but we were doin’ the math. … And if his discount was gonna end up bein’ 38 cents? Shit, I’d make it 29 cents. … I was sendin’ him a check for fuckin’ $900,000 … does he know it’s supposed to be $1.2 [million]?”
The scheme, which ran from at least 2008 to 2013, cost Pilot Flying J’s customers $56.5 million. The promise of artificially low prices also undercut competing truck stops. The company’s board of directors confessed criminal responsibility and agreed to pay $92 million in criminal penalties and $85 million in civil settlements with customers. Fourteen executives and staffers pleaded guilty, and three more were convicted for various roles within the scheme. The 17 of them are now facing sentencing, though the scheduling for those sentences is unclear.
How does Jimmy Haslam fit into this?
Great question. Haslam announced he would step down as CEO of the company in September 2012, but returned to the job in February 2013, two months before the company’s offices were raided. Haslam has not been charged with any crimes and denies knowledge of the scheme. Evidence uncovered in the investigation possibly contradicts that. Brian Mosher, a former Pilot Flying J executive who pleaded guilty, testified that he showed Haslam spreadsheets detailing the fraud, but then said he didn’t report to Haslam.
“The buck stopped at [former Pilot Flying J president] Mark Hazelwood,” Mosher testified. “We would have to report no higher up the chain than Mark Hazelwood.”
Freeman said in a secretly recorded conversation with Pilot employees in February 2013 that Haslam was aware of the plot and the two had discussed it.
“I mean, I called Jimmy and told him I got busted at Western Express [a trucking company that discovered it was being defrauded]. … Oh he knew it — absolutely. I mean, [Haslam] knew all along that I was cost-plussin’ this guy. He knew it all along. Loved it. We were making $450,000 a month on [Western Express] … why wouldn’t he love it?”
In a secretly recorded November 2012 meeting that included Hazelwood and Haslam, Hazelwood detailed how to get more business with the scheme. According to the recording obtained by prosecutors, Haslam responded, “Sounds like Stick’s deal with Western.”
U.S. District Judge Curtis Collier made the unusual request for prosecutors to rank the Pilot Flying J coconspirators from most guilty to least guilty. Prosecutors instead chose to group the coconspirators by their level of power within the company, and Hazelwood was put at the top. Hazelwood, who reported directly to Haslam, was convicted in February of conspiracy to commit mail fraud and wire fraud, wire fraud, and witness tampering, and faces more than 20 years in prison.
Hazelwood was discharged from the company in May 2014, just over a year after the FBI and IRS raided the company’s headquarters. The Pilot Flying J board agreed to pay Hazelwood $40 million as part of a confidential settlement agreement, and the company has also paid his legal fees. Haslam said it is “traditional” for a company to pay the legal fees of employees until they are found guilty. Hazelwood is under house arrest after the judge agreed with U.S. attorneys that he was a risk to flee.
Is there any other ugliness in this scandal?
Oh yes. A colloquial nickname for the scheme was “Manuel,” a play on the “manual rebate” that Pilot Flying J owed and a reference to some of the Latino-owned trucking companies that were being defrauded.
“They’re not stupid, there is just … uh … there is a language barrier,” former regional sales director Kevin Hanscomb said in 2013, according to a transcript in the 2013 affidavit. “So you can get away with a little bit more because they know that they are not going to understand everything that you say.”
Those racial undertones became overtures when secret recordings released by a judge in March revealed Hazelwood making racist comments toward Cleveland Browns and Oakland Raiders fans in 2012. The comments begin with Hazelwood recounting a conversation he had with Haslam, who was not present.
“Who buys the Raiders shit? Niggers,” Hazelwood said he told Haslam on the tape. “You think they’re going to wear something that says the fucking ‘Browns’ on it?” Hazelwood went on to say that in Cleveland “it ain’t nothing but niggers.”
Haslam was asked about the remarks of Pilot Flying J’s former president in December, after a judge called the comments on the tapes “vile” but before the exact contents of the recordings were revealed publicly.
“I’ve said since the investigation began almost five years ago that we wouldn’t comment, but yesterday’s remarks that came out of the courtroom I think justify comments,” Haslam said. “That’s not how we act and do things. Those kinds of remarks are intolerable.”
Will any of this affect the Browns?
Probably not. Though Haslam purchased the Browns in October 2012, six months before the FBI and IRS raided Pilot Flying J’s headquarters, the NFL has not indicated any interest in pursuing discipline.
“No prosecuting authority has found reason to bring charges against Mr. Haslam … so that’s where we leave it,” an NFL official told CBS’s Jason La Canfora in December.
If Haslam does become entangled in the legal case, he could face a range of actions from the league. The NFL could find him in violation of the wide-ranging personal conduct policy, though the maximum fine against the billionaire owner would be $500,000. A more significant move would be convincing Haslam to sell the team, or giving voting and decision-making power to an interim owner, potentially his father, Jimmy Haslam II, until the case is resolved. If Haslam remains out of the legal fray, however, league action is unlikely, and he’ll remain the controlling owner of the Browns and the CEO of Pilot Flying J.
On December 31, after the Browns finished 0–16, Haslam was asked about rumors he might sell the team.
“That really aggravates me. Nothing could be further from the truth,” Haslam said. “Our execution might not be very good, and I’ll take all the grief for that, but commitment you can’t question.”