Defense rests its case in Pilot Flying J fraud trial

Today brought closing arguments on behalf of the defense for the Pilot Flying J fraud trial. (Photo: Shutterstock)

Today brought closing arguments on behalf of the defense for the Pilot Flying J fraud trial. A sense of nervous expectation flooded the courtroom before proceedings began. Mark Hazelwood hugged his family reassuringly.

Scott Wombold’s defense led off, spanning the rest of the entire morning. “I could do this all day,” said the defense at one point.

Pilot was described as a family, Wombold’s attorney said, and some families have dysfunction, and some members of families get in trouble with the law. A family, however, should not be judged by association. The “Five Fundamental Truths” of Wombold’s defense went as follows:

(1) Wombold only approved Brian Mosher’s deals, not his fraud (Mosher was Pilot director of national sales, and has already pled guilty). (2) Even if he did know about the fraud, it was argued, knowledge of fraud is not enough. (3) Manual rebates are a legitimate business practice . (4) Wombold didn’t defraud his customers. (5) Guilt by association is not enough.

The defense argued that you can’t get into a person’s head in order to evaluate intent, but as far as Wombold’s actions went, he was always left out of conversations related to deceptive practices. Wombold is on record as saying “If our margins blow out, it’s only fair that we should get some of that back. Wrap your mind around that.” This statement was used today on behalf of his defense.

In discussing national accounts, Wombold is also on record as saying that rather than quietly yanking discounts, instead they need to “put it in writing.” This would be a good thing rather than having everything verbal and under the table.

Also, in Wombold’s concluding defense, the FBI agents who interviewed him didn’t record the interview and had to depend on their memory. Thus, the alleged statements of Wombold conflict with one another based on the subjectivity of the agents’ memories. The statements were made under duress during the FBI/IRS raid. Further, it was argued that Wombold did not gain monetarily from the pricing scheme, making only a pittance in commissions from July 2011 through November 2012.

The government, the defense said in conclusion, has over-reached, and they are now saddled with this case.

Karen Mann’s defense hinged on acting in “good faith.” She believed she was doing what she was supposed to be doing. Manual rebates were not fraudulent, and adjustments were justified due to volume margins, general discounts, and factors known more to sales reps. The adjustments were overseen by supervisors anyway and were known to be necessary.

Mann reported to Tim Prins and Ron Carter who were over her, in other parts of the country, and they are the ones who negotiated the deals. She was instructed to “work hard, work smart, and find creative ways to find discounts.” To be clear, argued her defense, she wasn’t just following orders. She understood that what she was doing were legitimate business decisions.

Mann’s job, in other words, was to know how but not why, and she never independently made the changes. There is also no email or testimony that Mann herself ever deceived a customer. There is also no evidence that Mann ever benefited financially.

There is also no evidence, the defense claimed, that Mann ever intentionally misled or participated in fraud to customers. Some of her reports that might have adjusted numbers were first sent to Arnie Ralenkotter, and were more like “rough drafts” that he had to approve and adjust before any further action was taken. She was an enthusiastic employee — not one who intended to commit fraud and deceive customers.

The emails from the prosecution, they argued, have been “cherry-picked.” In the case of Mann, it’s all about context. Also, Mann is the only litigant charged with only a single crime in the 50-page indictment, that of conspiracy. Lacking enough evidence, there is more than enough to establish reasonable doubt that Mann was involved. The defense cast doubt that anything like a conspiracy occurred at all.

The beginning of Mark Hazelwood’s defense began by spending a great deal of time re-covering the terms of precisely what Hazelwood and the defendants are being indicted on — emphasizing just how much the preponderance of evidence the government must prove to overcome reasonable doubt. The prosecution simply has not proved with any evidence that wire fraud and mail fraud occurred, the defense argued.

The defense systematically reviewed all the witnesses assumptions, how no one could be absolutely certain that Hazelwood read various memos, and how there was never any specific evidence on the record of Hazelwood discussing doing something that was unethical or illegal. The defense also pointed out that no victims of the crimes were called to testify, citing that as the “absence of evidence.”

Of the hundreds of thousands of documents the prosecution provided as evidence of alleged pricing schemes involving the 11 companies, the defense pointed out that only 5 documents have Hazelwood responding, and never in any damaging way.

Finally, the defense pushed the idea that the infamous two-tier pricing scheme was comparable to what car dealerships do every day as standard operating practice. “You may not like that the uninformed customer isn’t going to get as good of a deal as the informed customer, but that’s just the way it is,” said Rusty Hardin, Hazelwood’s lead attorney. “If that’s what the government is saying, then maybe I ought to get out there and tell all the car dealers in Knoxville to be wary.”

Also, Hardin concluded, they didn’t always send all the information to the smaller players because it often just complicated things unnecessarily. They sent them the bill and if nothing was said, then they accepted the business. “It’s only fraud if you don’t do what you say you’re going to do, and then when confronted about it, you lie about it,” said Hardin.

Tomorrow promises to conclude the three-month-long trial with the prosecution resting its case starting at 9 a.m.

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Chad Prevost

Chad is radio host and broadcast media specialist for FreightWaves.