Prosecution rests its case in Pilot Flying J fraud trial, jury deliberates

The prosecution presents a compelling case, but will it be enough for a jury to unanimously convict? (Photo: Shutterstock)

Much of the defense’s family and friends were gathered in the minutes leading up to the prosecution’s rebuttal. A priest accompanied Mark Hazelwood and his wife. Defense attorneys took deep breaths and ran their hands over their hair.

Trey Hamilton, lead prosecutor, began by addressing what this prosecution is not about. It’s not about customers who failed to live up to their end of the bargain. It is about targeting unsophisticated clients. It is about lies, deceit and fraud.

“It is hard to imagine a more clear scheme to defraud,” Hamilton began.

It’s about a $56 million scheme to defraud. Lying about cost-plus discounts is a “material” misrepresentation. What could be more material than price to a trucking company? asked Hamilton. “Fuel is a trucking company’s largest variable cost. Fuel becomes the largest controllable cost whereby a limited network can save a company 3 to 8 cents per gallon depending on who is buying.” This comes directly from the company’s direct sales manual.

The prosecution’s case provided evidence of the scheme. In many cases, there was simply no way for the customer to know how much the rebate check was supposed to be, and the customer had to just trust Pilot because fuel prices change daily.

The prosecution argued that they actually exceeded their burden of proof by demonstrating the dramatic losses of each of the 11 companies. All they really had to do was prove “material.”

Hamilton then addressed the defense that the “manual rebates” was a legitimate business practice. First, there was testimony that manual rebates are almost non-existent in the industry now; at best the practice is rare. In terms of customers not meeting their requirements, there is a litany of evidence that Pilot didn’t require customers to meet a gallon requirement.

It’s undisputed that virtually none of the clients had any minimum requirements. Part of the proof shows that even if they could go to a gallon requirement they knew the customer could go to Love’s or another competitor. So, instead of telling them the truth, they continued to lie, especially in the form of the rebate fraud.

Heather Jones was active in teaching Brian Mosher and others about the way they could manipulate spreadsheets in order to make the numbers line up with the rebate checks.

Many of the players gathered together to mail out the rebate checks. There is a photograph of the team actually hanging out and putting together the checks to send them out together — which certainly points to conspiracy in that they were all together while participating in the activity. And, in fact, Heather Jones did get an increasingly higher salary for several consecutive years, ending up at $115,000 in 2012.

Karen Mann did commit fraud and specifically instructed with clear agreement about the manual rebate pricing scheme, Hamilton argued.

A defendant doesn’t act in good faith if they knowingly make false or fraudulent pretenses or representations. And Mann did in fact profit from the scheme as well, going up to $117,000 by 2012. Conspirators don’t need to know all the details of a scheme in order to be a part, the prosecutor reminded the jury. 

Wombold is on the tape clearly saying “all we’re doing is taking advantage of the advantages without having to sell the customer on doing it. That’s the game you want to play.”

At a sales meeting, known now as their “rebate fraud school,” Wombold tells sales reps there are three things you need to know backwards and forwards. He also provides a rationalization for new employees in terms of capping rebates without telling the customer—you’ve got to “wrap your mind around this fact.”

In other words, Wombold wanted salespeople to know how to target customers, cheat them out of rebates, and get away with it.

What else helped Wombold’s motivation? Mark Hazelwood was writing Wombold checks for $30K in commission. And by 2012, Wombold’s salary had ballooned to $1,156,000.

For his part, Hazelwood is on the record in many instances encouraging the culture to keep working the numbers and to do it without having to report specific data as often as possible. There’s even a now rather infamous email in which he writes, “rebate rebate masturbate. Make him feel special.”

On the witness tampering count, Hamilton detailed that this was not an incidental or “morally corrupt” count that the prosecution was pursuing—as the defense claimed it was. Back as early as 2006, Hazelwood demanded weekly trip reports. He ended up getting so many of them, they literally filled boxloads and had to be moved on a pallet. He is on email as reminding employees to fill them out weekly in an executive summary format. He called himself a “bulldog” about wanting the reports, even having them delivered to him when he was in Italy.

By April 15, 2013, Hazelwood learned that Sherry Blake would be talking with the FBI. Amongst other things, he paid her $10K twice even after neither he nor she worked for Pilot. He also repeatedly tried to contact her during the same timeframe. He got through and told her that he just wanted her to know that even though he wanted those reports all those years, he wanted her to know that he never actually read them. Why did he want to tell her this so badly? Because the reports were full of damning information.

The cumulative nature of the prosecution’s emails, recordings, texts, wires and other communications shows an overwhelming abundance of information that the United States government has done their job in providing the burden of proof. The defendants knew exactly what they were doing and began to fear they would get caught.

After a break, Judge Collier explained the rules and terms for the jury to exercise in their deliberations. They have two main duties: (1) what are the facts from the evidence; and (2) to take the law he gives them and to apply it to the facts, and determine if the government has proved them beyond a reasonable doubt.

All four defendants are being indicted on conspiracy. Karen Mann is only charged on the one count. The other three are also charged with wire fraud and mail fraud. Hazelwood is also being indicted on the count of witness tampering.

The jury has until 5 p.m. of Wednesday, February 7 to arrive at a decision, or else reconvene again on Monday.

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Chad Prevost

Chad is radio host and broadcast media specialist for FreightWaves.