April 21, 2014

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Federal judge approves $84.9M settlement from Pilot Flying J to 5,500 trucking companies

Motorists stop for fuel at a Pilot Travel Center near North Little Rock, Ark. (AP Photo/Danny Johnston)

Motorists stop for fuel at a Pilot Travel Center near North Little Rock, Ark. (AP Photo/Danny Johnston)

LITTLE ROCK, Ark. — A federal judge in Arkansas approved a settlement Monday that pays $84.9 million to 5,500 trucking companies that were cheated out of promised rebates by Pilot Flying J, the nation’s largest diesel retailer.

The settlement doesn’t put to rest a federal investigation in which seven company employees have already entered guilty pleas.

Attorney Aubrey Harwell Jr. of Nashville said Jimmy Haslam, owner of the Cleveland Browns and CEO of the truck stop chain, had no knowledge that employees were cheating customers. The company is co-owned by Haslam’s brother, Tennessee Gov. Bill Haslam, who has said he isn’t involved with Pilot Flying J’s operations.

U.S. District Judge James Moody said Monday that he was satisfied that the settlement was fair, reasonable and equitable.

“I don’t have any reservation about giving final approval here,” Moody said at the end of an hourlong hearing in Little Rock.

Moody also approved $14 million in fees that will go to the truckers’ lawyers.

The settlement reimburses trucking firms for their losses, plus 6 percent interest, which is calculated from the time each rebate should have been paid. The cheating dates back to 2005.

Lawyers on both sides stressed that no one among the 5,500 companies agreeing to the settlement filed an objection and that only about 1 percent of affected companies opted out of the agreement so they could file their own lawsuits.

Don Barrett, an attorney for the truckers, said the settlement makes his clients whole.

“What Pilot was required to do was done well and … honorably,” Barrett said.

He said many clients received their money before the settlement was approved.

“They’re already paying it out. They’ve paid out most of it already” Barrett said.

Barrett praised Jimmy Haslam for opening the accounts in question to auditors and striving to make trucking companies whole.

“We couldn’t have had this result in this short amount of time had not Mr. (Jimmy) Haslam stepped up to the plate, said he was going to do the right thing and in an honorable way and he did it. … That’s the comment of the 5,800 truckers that I represent,” Barrett said.

Harwell said it was in the interest of the company to reach a settlement quickly.

“The advantage to Pilot Flying J is demonstrating clearly and unequivocally that they were committed to doing the right thing. Where there were things that happened improperly, they were committed to make them right,” Harwell said.

Pilot Flying J conducted internal audits after the chicanery came to light in April and, according to Harwell. An independent auditor verified the company’s findings.

The truckers’ lawsuit alleged a variety of violations, including fraud, unjust enrichment, fraudulent concealment, breach of contract and other claims, all of which were dropped with the settlement.

Pilot Flying J has annual revenues of about $30 billion.

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 sales staff took part in a training session that taught employees how to defraud trucking companies without getting caught.

Harwell stressed that the Haslams had no involvement in any wrongdoing.

“The federal government took documents, they’ve interviewed witnesses, they’re subpoenaing people to the grand jury and they’ll get to the bottom of what they think occurred. In terms of any impact … there will be charges brought, there have been some guilty pleas already, there will likely be more,” Harwell said.

The settlement breaks down to $66.25 million in principal and $9.75 million in interest that goes to the truckers. Legal fees comprise $14 million. The company spent $4.5 million on audits plus other expenses.