'I let it go too far': Architect of Pilot Flying J fraud scheme sentenced to prison

CHATTANOOGA – The race at Pilot Flying J belonged to the fastest – no matter how many rules had to be broken to claim first place.

"Our culture at the very top was to be hyper-competitive," former executive John "Stick" Freeman told a federal judge Wednesday. "You didn't succeed at our company by backing down or asking questions."

Freeman, 55, will spend two-and-a-half years in prison for not asking those questions. He and fellow former Pilot executives Vicki Borden and Brian Mosher faced the judge for sentencing in their roles in a multi-million dollar fraud scheme that cheated trucking companies nationwide out of promised diesel rebates over at least five years.

U.S. District Judge Curtis Collier sentenced Freeman and Borden to two-and-a-half years behind bars and Mosher to two years. Freeman and Mosher must each pay a $100,000 fine, and Borden a $75,000 fine.

Had each not pleaded guilty early in the case and handed over evidence to prosecutors, the judge said he wouldn't have been so kind.

"This was a concerted criminal action," Collier said. "The defendants were able to commit a massive crime on a massive scale across a long period of time. The chances of being caught were small. We don't want to live in a society where a company can engage in behavior such as this."

All three got off easier than their former boss, onetime Pilot president Mark Hazelwood. He'll spend 12-and-a-half years in prison for overseeing the fraud – including Christmas, despite Hazelwood's pleas to spend the holiday with his family before turning himself in.

Parties to the plot

Freeman, Pilot's former vice president of sales, began defrauding trucking companies as early as 2007. He bragged shamelessly about the fraud to bosses, employees and trainees, court records show – including at meetings recorded by an undercover FBI informant.

Freeman designed the fraud scheme, in which Pilot offered discounts on diesel fuel to trucking customers in exchange for customers guaranteeing a minimum number of gallons a month. Sales reps promised rates based on wholesale fuel costs plus a pumping fee, usually of a few cents per gallon.

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Between wholesale costs that fluctuated daily and the various state and local gas taxes, most customers couldn’t keep up to verify they got the promised deals. Pilot staff calculated the discounts day by day, for what became known as a “manual rebate” — called “Manuel” for short. Borden helped keep the cooked books so sales reps could keep their lies straight.

Shorting customers a few cents here and there added up to big money fast – and to bigger profits, commissions and bonuses.

"I made a terrible mistake," Freeman told the judge. "I let it go too far."

Friends and enemies

Freeman and Hazelwood started at Pilot as salesmen at the same time and rose through the ranks together. Freeman's orchestrating the rebate scheme earned him a promotion to vice president of sales – and the jealousy of fellow Pilot exec Vincent Greco, who turned FBI informant.

A federal jury convicted Hazelwood in February of wire fraud, witness tampering and conspiracy to commit wire fraud. Freeman never testified at that trial, but the threat of his testimony as a counter kept Hazelwood from taking the witness stand or allowing his defense team to introduce other evidence, according to Freeman's lawyer, Roger Dickson.

Only Mosher, a former regional sales director, testified at the trial, spending more than a day on the stand to explain the intricacies of the fraud. He got the lightest sentence in exchange.

"You are not bad people," the judge told the three. "You can still be an example to your family, your friends, your co-workers. Tell them it's always better to take that path the angel on your shoulder whispers for you to take."

Pilot Flying J’s board of directors has admitted criminal responsibility and paid a $92 million settlement for the fraud. Pilot CEO Jimmy Haslam has denied knowledge of the scheme and has never been charged. The clock has run out on the filing of charges in the rebate fraud.

Nineteen executives and staffers of the truck stop giant have either admitted or been convicted by a jury of participating in the fraud scheme. Fourteen pleaded guilty, three were convicted, and two were granted immunity, including Greco.