The Pilot Scandal: What Business Owners Need to Know |
Headquartered in Knoxville, Tennessee, Pilot Flying J is the largest supplier of diesel fuel in the United States. Pilot Flying J has more than 650 locations and is the nation’s largest retail operator of travel centers and travel plazas in North America. Since opening in 1958 it has experienced rapid growth, expansion, and partnerships. Pilot and Marathon Oil Company entered an agreement to found Pilot Travel Centers in 2011 (Pilot, 2013). Pilot Flying J’s mission statement states: We believe it is essential to give back to our communities that have given so much to us. Our priorities are education, social services, and economic development. Through contributions in these areas, we strive to better the communities we serve. In April 2013 the FBI ordered search warrants and a raid on Pilot Flying J headquarters along with an off-site computer storage facility and three home offices in Nashville, Kentucky, and Iowa (Garvin, 2013). The affidavit that was sent to a judge for the search warrant had evidence of intentionally defrauding trucking fleets out of tens of millions of dollars over nearly a decade long period along with tapes that had high ranking executives involved including the owner, Jim Haslam, Pilot CEO (Roche, 2013). In the months before this happened the NFL approved Haslam’s purchase of the Cleveland Browns and he addressed the media to which he said,” I had five people that reported to me at Flying Pilot J. They are all smarter than I am and they are all better at their role than I am, and we let them do their jobs. On the other hand, we question them, we push them, we challenge them, and we hold them accountable.” Now if the allegations from the affidavit are found to be true the primary reason in the sales department was to profit, and the brains that Haslam was bragging about were used to defraud the “less sophisticated” customers. This is how the rebate fraud worked: Companies that bought fuel from Pilot were given an option to take their rebate at the pump or rebate checks mailed to them. All amounts were based on how much fuel the company purchased, what type of rebate they were given and the price of fuel at the time. Certain employees wouldn’t give certain accounts their full rebate. Instead of letting the rebate be processed automatically they would manually fill in the rebate with a smaller amount to which the company kept the rest. During one of the sales training sessions through which a whistle blower had worn a wire tap, it was said to target the less sophisticated customer, the smaller company who they felt would never figure it out. We aren’t talking about hundreds of dollars here. We are talking $25,000-$50,000 a month in rebates. Some companies as much as $100,000 a month but because they had such bad accounting practices Pilot never thought anyone would catch the shortfalls on their rebate checks. has donated hundreds Pilot Flying J did live by their mission statement to a degree. The company of thousands of dollars to the Wreaths Across America Organization. They donate wreaths to be laid on veterans graves throughout the country. The company gives to several food banks in the Knoxville and surrounding communities to help feed the less fortunate, etc. So they do give back to the community but at what expense? Their fraudulent scheme has bankrupted companies, made other companies take out loans from banks to just help pay bills when the rebates that were due them would have covered the costs and possibly kept some companies from going bankrupt. So what is the ethical dilemma? Is it that Jimmy Haslam gave his top executives too much freedom? Or was it good people making bad decisions? Good people doing what they were told or they would lose their job? Let’s look at each question. Mr. Haslam gave a statement on television that his people were smarter than he was. Did he really mean that? At this time it isn’t clear exactly what Mr. Haslam knew and if he knew of anything at all. He has stated his innocence in all of this, however, in several of the tapes top executives had long conversations about what Mr. Haslam had told them how to handle certain situations and handle certain customers. It was also mentioned that Mr. Haslam knew of the scheme and approved of it with the less sophisticated customers. If this is true than how can his company be ran ethically when top executives where in training sessions demanding the sales people to find the customers to target to increase the profit margin? It is written in many books and psychology books that good people behave unethically all the time. Depending on the situation what they are doing may end up having a great outcome whereas it could also end up as an unintended consequence. For example, even though the company was shorted from their rebate they still received a rebate just not as much. And “Sally” approved the rebate but the shortage went to her sales bank and ended up giving her a bonus check at the end of the month. She needed this money to pay bills. Is it a win-win situation? In Sally’s eyes it is but to the company who depended on the rebate for their expenses it could very well put them out of business. If your job is on the line because you are being told to cheat your customers would you do it? Especially since your supervisors knew and accepted the behavior? I believe most people would do it. Not because they are bad people but they have bills, children to feed and they won’t get fired. Mr. Haslam has a long road ahead of him. He needs to revamp his whole executive staff, regain respect within his company and community, and pay back all the people he owes money to. The pending lawsuits will reveal more than we know now but hopefully all business owners are looking closer at their staff, training classes, and how their companies are being run.
References About us. (2013, November). In Pilot Flying J. Retrieved February 9, 2014, from www.rebateeducation.piloyflyingj.com Carl, G. (2013, April). Behind the accusations of fraud at Pilot Flying J. In The Case Against Pilot. Retrieved February 9, 2014, from www.metropulsenews.com J, J. (2013, June). Rash of lawsuits follow Pilot allegations. Commercial Carrier Journal, 170(6), 10-14. Retrieved February 9, 2014 Walter, R. (2013, July). Five things to know about pilot flying j investigation. In Pilot Flying J Employees Out. Retrieved February 9, 2014, from http:// usatoday.com
Author: Beth Amato firstname.lastname@example.org
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