Monday morning are usually hard, but for Jimmy Haslam, owner of the Cleveland Browns and CEO of Pilot Flying J truck stops, April 15 is one Monday he would probably love to forget. That day Flying J’s headquarter, located in Nashville, Tennessee, was raided by the FBI and IRS. Flying J’s is one of the nation’s largest family owned businesses with over 480 truck stops across the county, and more in Canada and is now the subject of a federal criminal investigation relating to their gas rebate program.
Gas rebate programs are common place amongst truck stops as a way to build customer loyalty. Trucking companies agree to use certain truck stops exclusively for their fuel, and in return, the truck stop gives customers rebates for the gas they purchase. Flying J’s rebate program was no different, if your trucking company contracts with Flying as an exclusive source of fuel, then Flying J’s sends your company a rebate as a reward. The more gas you buy, the larger the check. However, in cases of fraud, fueling companies do not pay the full amount owed to the truckers and keep the money to increase their own bottom line. It is precisely this issue, known as “manual rebates” or “screwing”, that has Flying J’s under an FBI and IRS investigation. The FBI alleges that Flying J’s, under Haslan’s stewardship, intentionally shorted smaller trucking companies money that was rightfully owed to them as rebate program participants. Additionally, the IRS is interested in this case because if there is indeed fraud, then Flying J’s accounting would be inaccurate, leading to tax fraud.
Unbeknownst to Flying J’s, the FBI had been investigating their rebate program for two years, which led to the office raid. The FBI searched Flying J’s headquarters seizing documents and other materials to build their case of “conspiracy to defraud by employees (of Flying J’s) to deceptively withhold diesel fuel price rebates and discount from pilot consumers.” According to Forbes[i], secret recordings were obtained by the FBI as a part of the investigation and resulted in particularly damning pieces of evidence. Flying J’s upper management was allegedly caught on tape explaining why smaller trucking companies were targeted for rebate fraud:
“Some of ‘em, some of ‘em don’t know what a spreadsheet is. I’m not kiddin’. So, again, my point is this: Know your customer… If the guy’s sophisticated and he truly has gone out and gotten deals from the other competitors and he’s gettin’ daily prices from us, don’t jack with his discounts, ’cause he’s gonna know, okay?… ”
Whether or not there was actual fraud or the extent to Jimmy Haslen’s involvement has yet to be determined in a court of law. One thing is seems certain, this raid came as a complete surprise to Haslan. The Browns owner describes in a press briefing that he was utterly shocked that Flying J’s was even under investigation, and the raid of the office headquarters came as a complete surprise. Jimmy Haslam quickly sent out message to Flying J’s employees that he was cooperating “appropriately” with the investigation and states “We believe and trust there has been no wrongdoing.”
So, what lessons can be learned by watching Jimmy’s worst Monday unfold on a national scale? First, it is important to know that most FBI and IRS investigations do not end up in a surprise raid. Generally speaking, whether a company is dealing with allegations of tax fraud, security frauds, bank fraud or other business related allegations the companies are aware of the investigation and typically any business records or other information are given to the FBI voluntarily. It is rare that a company would be surprised with the kind of raid that Flying J’s underwent.
Second, if you or your company are a part of any criminal investigation, whether is it preliminary in nature, or formal charges have been filed, it is vital to hire an attorney who is knowledgeable in these areas and who can provide you and your company with a skilled defense. This area of criminal defense law is quite complicated and anyone facing these charges needs an attorney to help navigate the many twists and turns these kinds of cases present. Additionally, it is important to make sure you hire an experienced attorney. Important questions to ask might be: How many years they have practiced criminal defense? Do they focus solely on criminal defense? How accessible is the attorney? What is their track record in criminal defense? Ultimately when facing any criminal charge it is important to hire an attorney you can trust to help you navigate the process.
Finally, take all appropriate actions to assist the investigation. An attorney can help you respond to allegations and requests for discovery, which might be documents or other forms of evidence such as emails, or other business records. This can be extremely tricky to know how to comply with these requests. Before responding to any type of investigative inquiry, make sure you have hired an attorney that can help you and your company with compliance. Most companies won’t be dealing with the same kind of national exposure Jimmy Haslan has endured, but Haslan has followed the above advice by working with his attorneys, complying with the investigations and trying to be as transparent as possible by meeting with the press, communicating with his staff, apologizing to other NFL owners for any potential fallout, and initiating several steps to audit Flying J’s business practices.
It is clear that the best advice of all is to not just wait and hope the issue will go away, but if you are under investigation, or even just worry that your company might face an investigation act right away by getting the right people around you, hire a good attorney, and do what is needed to fix the situation.
Think you or your company might be investigated? Want to decrease your liability? Contact W. Joseph Edwards for a consultation at 614.309.0243.
[i] Forbes article, 4.19.2013. FBI Says Recordings Expose Jimmy Haslam’s ‘Jacking The Discount’ Fraud At Pilot Flying J