Recordings of Pilot president’s epithets could disrupt trial

CHATTANOOGA, Tenn. – Secret recordings of one of the defendants uttering racial epithets are threatening to disrupt the federal fraud trial of former executives and sales staffers at the truck stop chain controlled by the family of Cleveland Browns owner Jimmy Haslam and Tennessee Gov. Bill Haslam.

With the trial about to take a monthlong recess for the holidays, the Knoxville News Sentinel reports that U.S. District Court Judge Curtis Collier said that he would allow prosecutors to present the recordings of former Pilot Flying J President Mark Hazelwood using what he called “vile, despicable, inflammatory racial epithets,” and disparaging the city of Cleveland and its pro football team.

Prosecutors and defense attorneys said they will research whether those comments are inflammatory enough to warrant separate trials for Hazelwood’s co-defendants.

“Mr. Hazelwood’s utterances are beyond the pale,” Collier said. “Several subordinates of Mr. Hazelwood were present. Mr. Hazelwood was in a position of authority over them.”

The judge said he decided to allow the government to play the tapes because Hazelwood’s attorneys have presented him as too skilled a businessman to engage in practices that could hurt Pilot’s reputation. If his comments had become public while he was Pilot’s president it could have led to boycotts and lawsuits by African-American employees, Collier said.

Pilot in a statement called the statements “saddening and troubling.”

“This kind of behavior is not acceptable, tolerated or reflective of the values of the company. No current team member of Pilot Flying J was present or participated in these conversations,” the statement said.

With the first month of the trial completed, here’s what has been learned so far:

REBATE FRAUD

While the four defendants in the case – former President Mark Hazelwood, former Vice President Scott “Scooter” Wombold, and former sales representatives Heather Jones and Karen Mann – maintain their innocence, 14 other former members of the Pilot sales team have pleaded guilty to participating in the scheme to shortchange trucking customers on diesel rebates. Jimmy Haslam was not charged and has denied any prior knowledge of the scam. The company paid a $92 million penalty to the federal government and settled a class action lawsuit for $85 million. Prosecutors say the scheme ran from at least 2008 until agents raided the company’s headquarters in 2013. One former executive testified that the fraudulent practices at Pilot began small and then spread. “We kind of slid into it,” former northeast regional sales director Arnie Ralenkotter said.

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STAR WITNESS TO COME?

Prosecutors have been building their case with testimony from an array of former Pilot employees from the lower and middle ranks of the sales team. They have detailed how the company preyed on less sophisticated trucking customers unlikely to be able to keep up with the complex discount system. Former Vice President John “Stick” Freeman, whom the government describes as the architect of the fraud scheme, has yet to take the stand. But he has been featured prominently in others’ testimony and in undercover recordings played for the jury, including one in which he boasts that Haslam “loved it” when the sales team swindled customers. “He knew – absolutely,” Freeman said in the recording. Freeman pleaded guilty in July.

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DEFENSE STRATEGY

Defense attorneys have signaled that Haslam will feature prominently in their efforts to persuade the jury of reasonable doubt. Hazelwood’s lawyers have said that that Haslam’s relationship with Freeman will be “highly relevant” to the case. “Make no mistake about it, Jimmy Haslam III and (his father) Jim Haslam II were in charge of this company,” attorney Anthony Drumheller said. “This was a family company they owned and strongly managed.” Wombold’s lawyer, John Kelly, said his client did not participate in the scheme, and even saw his professional prospects eclipsed by those like Freeman who were directly involved in the fraud.

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`JIMMY, WE’VE BEEN CAUGHT’

Investigators were denied in an effort to lure Haslam into discussing the fraud scheme in a recorded phone conversation before agents descended on the company’s Knoxville headquarters in 2013. Former sales executive Brian Mosher testified that agents had him call Haslam to say, “Jimmy, we’ve been caught.” Mosher said Haslam replied: “I understand there are some folks at your house,” and then handed the phone to a lawyer in Pilot’s legal department. Court filings submitted before the trial suggested that investigators’ plans may have been thwarted by Mosher’s wife passing along word that the FBI was at the house to Wombold, who in turn informed Hazelwood.

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AP-WF-12-09-17 1906GMT