Pilot Fraud Trial: The bond hearing and the day after

 Fall guy Mark Hazelwood, taking one for the team. (Photo: Shutterstock)

Fall guy Mark Hazelwood, taking one for the team. (Photo: Shutterstock)

Commentary

Where do we go from here?

Rarely does a major Federal trial come knocking on your hometown’s court doors. The Pilot Fraud Trial is now a piece of Chattanooga history, even if it was every bit as much of a story for Knoxville. There are takeaways for the nation as well. It’s too bad that one of them is that business transactions really can’t be based on mere trust. You’ve got to understand your numbers.

More importantly, we are reminded that we live in a cultural and technological time when the transaction of data can and should be if not always open-source, certainly at least transparent to the parties involved, as FreightWaves has previously pointed out.

Yesterday, as the defendants and their attorneys gathered back in the courtroom, anxiety ran high. Tension was etched across the stiff countenances of the defendant’s families.

As the verdicts were read aloud, occasional moans and muffled but audible weeping punctuated the silence. As for the defendants themselves, they remained relatively stoic. Only Mark Hazelwood, whose name led the list on Count 1, and was the first to hear, “Guilty of conspiracy to commit wire fraud and mail fraud,” nodded somewhat nervously and looked down and to the right.

On first blush, the verdict was somewhat baffling. Count 1 included all four defendants on the charge of “conspiracy to commit wire fraud and mail fraud.” After Hazelwood was found guilty, then Scott Wombold was found not guilty, followed by Heather Jones who was found guilty, and then Karen Mann, who was found not guilty.

Karen Mann was only up on the single charge, so she was effectively exonerated on the spot. Her defense characterized her as an enthusiastic employee who was just trying to do her job well. Unlike the other defendants, there was no evidence that she participated in the active training and mentoring of young employers in the “manual rebate” scheme.

As the days of jury deliberations wore on, it became known that the jury was held up on a single count, but had 13 of the 14 other counts unanimously decided. On Wednesday there was widespread speculation that the verdict was imminent, but as everyone gathered together in the courtroom in eager anticipation, it turned out the jury was asking Judge Collier to consider offering up a partial verdict because they simply could not decide on the last count. People speculated that it might mean that everyone else had been found guilty, but the jury could not decide the fate of Mann.  

The defense also argued that Mann never knew she was doing anything she wasn’t supposed to be doing. Technically speaking, manual rebates were not fraudulent, and as far as she knew the adjustments were justified. Adjustments can be complicated things involving volume, margins, general discounts, and factors often only known to a sales rep. The defense did a fine job in stipulating just how high the amount of evidence was required to find her guilty beyond a reasonable doubt. In the end, it was a persuasive enough case to win the day on her behalf.

Whatever the case about which count the jury was hung up on, Collier essentially played Chicken with the jury, instructing them that they really hadn’t taken an “inordinate” amount of time, and to get back together and finish their job. Then, yesterday, still awaiting a verdict well into the morning, Collier gave the jury an Allen charge, a special instruction from an 1896 Supreme Court ruling intended to encourage those in the minority opinion to resolve their differences and reach a consensus.

 Judge Collier, who patiently presided over the surprisingly long and convoluted trial, commended both sides of case, calling it a "remarkably civil proceeding."

Judge Collier, who patiently presided over the surprisingly long and convoluted trial, commended both sides of case, calling it a "remarkably civil proceeding."

Within a few more hours, the jury finally completed with their unanimous verdict.

As the remaining counts were read aloud, Counts 2-6 Wombold was found guilty in a single instance of wire fraud, but also found not guilty on two other specific dates of wire fraud. Heather Jones was found not guilty in all three instances attributed to her. Hazelwood was found guilty in one instance and not guilty in another.

How was Jones found guilty of conspiracy to commit wire and mail fraud, but not guilty in each specific instance in the following counts is anyone’s guess. Certainly Wombold held a position of authority over her. In the end, however, she and Wombold were each found guilty in only a single instance of the many they were indicted on.

Counts 11-13, were all about Wombold’s making false statements to the FBI while they raided the Pilot offices. On each of the three charges, Wombold was found not guilty.

The defense had argued that Wombold didn’t have any incentive to participate in the fraud scheme, and named some misleading commissions he made during 2012, which amounted to pennies. In point of fact, Wombold made literally ten times the amount of either Heather Jones or Karen Mann in 2012: a little over $1,156,000. He was high up on the ladder and in charge of many Pilot employees, answering only to Hazelwood.

However, overall, Wombold’s defense was powerful. In addressing the false statements, the defense was aggressive, detailing the duress he must have been under in speaking with FBI agents while around 60 of them raided their offices for the better part of two hours. They argued that the agents had contradictory accounts and that neither one of them recorded the interviews, relying only on the fallibility of their memory. In other words, this especially was governmental over-reach and clearly there is substantial reasonable doubt that he ever made any such false statements.

The argument won.

"We are grateful to have had the opportunity to represent Mr. Wombold and successfully assert his innocence on almost all of the counts," attorney John Kelly said. "All along, Mr. Wombold desired only to be judged by a jury of his peers at trial. Today, having done exactly that, he stands vindicated on six of seven counts." Kelly also said he intends to explore appellate options on the sole count of wire fraud.

Finally, on the remaining final count, Hazelwood was found guilty of witness tampering, a serious enough charge unto itself. There are levels of culpability to witness tampering, the worst being malicious threat. Hazelwood didn’t go that far, but he did implore Sherry Blake on multiple occasions that he had no knowledge of whatever was transpiring, that he never read the boxloads of trip reports he constantly demanded from sales reps, and also paid Blake $10,000 on two separate occasions, even after he and she were no longer Pilot employees.

Perhaps it was his seniority in the organization, or the cumulative nature of the recordings, emails, texts, wires and other communications that led to his being found guilty on most of the counts that he was indicted on. It seems equally as likely that his coarse language on numerous documents, and the highly sensational recording of his racist rant didn’t do him any favors.

Juries are only human after all.

Outside the courthouse, Hazelwood's attorney, Rusty Hardin, said they will appeal the verdict.

“We continue to believe he’s not guilty, and we respectfully disagree with the jury, but we honor it. I never complain about what a jury does. So now we appeal, and we look forward to moving on there," attorney Rusty Hardin said.

Today, a federal magistrate judge on Friday ordered the former president of the nation’s largest diesel fuel retailer to be placed under house arrest.

U.S. Magistrate Judge Bruce Guyton declined to jail Hazelwood pending sentencing on convictions for conspiracy to commit wire and mail fraud and related charges as prosecutors Trey Hamilton and David Lewen requested.

But Guyton agreed with the prosecutors that Hazelwood was a flight risk and ordered him to be placed under house arrest in Knoxville and to wear an electronic monitoring device.

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