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Court extends feds’ time to seek rehearing in Pilot fraud case

No ruling yet on Hazelwood’s motion to end home confinement

Appellate court grants federal prosecutors a 30-day extension to file its petition for a rehearing in the Pilot fuel rebate scam. Photo: Jim Allen/FreightWaves

An appellate court has granted federal prosecutors a 30-day extension to file its petition seeking a rehearing after a split three-judge panel overturned the convictions of former Pilot Flying J President Mark Hazelwood and two former staffers.

The U.S. Attorney’s Office for the Eastern District of Tennessee has until Nov. 30 to file a petition seeking a rehearing by the full U.S. Court of Appeals for the 6th Circuit. 

In his motion, Assistant U.S. Attorney Trey Hamilton said the extension was needed to “allow the U.S. solicitor general to thoroughly consider the court’s opinion and the extensive record in this case.”

In its two-to-one panel ruling, the 6th Circuit Court struck down the convictions of Hazelwood and two former sales team executives, Scott “Scooter” Wombold and Heather Jones, on Oct. 14, for their alleged roles in an elaborate $56.5 million fuel rebate scheme.

Hazelwood’s defense team is also seeking the same 30-day extension to give Hazelwood “sufficient time to decide whether to request a limited hearing.”

In the motion, Hazelwood also reserved the right to ask the court to consider his request to have his case reassigned to a different District Court judge, which the appellate court didn’t address in its opinion. 

Hazelwood’s attorneys are also still waiting for the U.S. District Court for the Eastern District of Tennessee to rule on its motion filed on Oct. 17, seeking to end his home confinement.

“We’re very hopeful that the judge will get rid of the home confinement condition because the conviction is no longer in place,” Hazelwood’s attorney, David Debold of Gibson, Dunn & Crutcher, told FreightWaves recently. 

Since prosecutors indicted Hazelwood in February 2016, he has remained on pretrial release for more than 4.5 years. Since his sentencing in September 2018, he has primarily been on home confinement for over 2.5 years, wearing an electronic monitoring device.

The motion filed in District Court states that Hazelwood has been an “exemplary releasee,” going beyond what was required of him by selling his private jet and putting his boat up for sale, proving he wasn’t a flight risk.

Appeals court tosses convictions over “racially charged recordings”

The appellate court ruled that Senior U.S. District Judge Curtis L. Collier erred by allowing prosecutors to play secret recordings of Hazelwood spewing “profanities about African Americans and women” during his trial, according to court documents.

“The district court admitted the recordings on the theory that if the defendant was reckless enough to use language that could risk public outrage against the company, ‘he was a bad businessman,’ and as a bad businessman, he was also reckless enough to commit fraud,” Judge Richard Suhrheinrich wrote in the majority opinion. “This is vintage bad character evidence — and precisely the type of reasoning the Federal Rules of Evidence forbid.”

In her dissenting opinion, Judge Bernice Bourie Donald wrote the Hazelwood recordings were admissible during his trial.

“The government sought to introduce extrinsic evidence of recordings rebutting the proffered defense by showing Hazelwood engaging in and promoting racist, sexist, and otherwise inappropriate talk and entertainment as allowing and encouraging his subordinates to do the same, all at and during a company meeting where business decisions and perspective were had,” she wrote.

Collier sentenced Hazelwood to more than 12.5 years in prison for his alleged role in a fuel rebate scheme to cheat smaller trucking companies out of millions of dollars. Wombold was sentenced to six years, and Jones received a 2.5-year sentence. All three have remained free on bond pending their appeal.

Hazelwood secretly recorded using racial slurs

Collier allowed jurors to hear eight minutes of secret recordings that include Hazelwood making racial slurs and derogatory comments about women.

Hazelwood’s attorneys claimed Collier, who is Black, was biased because he allowed prosecutors to play the alleged prejudicial recordings of Hazelwood. 

The audio reveals Hazelwood asking, “Where’s our greasy (racial slur) song” and then singing along with other Pilot employees to the racist lyrics of the country song written by David Allan Coe.

The tapes also include Hazelwood making profane remarks about Pilot’s board of directors and the Cleveland Browns football team, which Pilot CEO Jimmy Haslam III owns.

Vincent Greco, a former Pilot Flying J sales executive, agreed to secretly tape sales meetings for the FBI and the IRS in exchange for immunity as part of their ongoing investigation into the fuel rebate scheme.

In October 2012, Greco attended a management meeting of Pilot executives at the lake house of John “Stick” Freeman, former vice president of sales. Greco secretly recorded the meeting.

After the sales meeting concluded, Hazelwood later joined the after-party where the sales team members watched football and drank alcohol.

“Mr. Hazelwood made it very clear, both during arguments that his lawyers made at the trial, and then himself personally at the sentencing that those remarks are not the kind of person he is,” Debold told FreightWaves. “He was deeply regretful for stating those types of things, even in private.”

‘Jacking the discount’

The fuel rebate scandal rocked the truck stop dynasty in April 2013 after the FBI and the IRS raided Pilot’s corporate headquarters in Knoxville, Tennessee. 

The family-owned truck stop chain reached a $92 million agreement with the U.S. Department of Justice in July 2014 over the 15-month probe of its five-year fuel rebate scam that targeted customers it considered “too unsophisticated to catch on.” Pilot also agreed to pay an $85 million settlement to trucking companies with fuel rebate agreements.

Fourteen former Pilot employees pleaded guilty for their roles in a scam known as “jacking the discount” among the company’s diesel fuel sales staff. Two other former employees were granted immunity for cooperating with federal investigators, and one was found not guilty.

Court filings claim Pilot employees involved in the deceptive rebate program also targeted minority-owned companies “in hopes that language barriers might make [the] discovery of their fraud more difficult, or easier to explain away if caught.”

Haslam has denied any involvement in the fuel rebate scam.

Read more articles by FreightWaves Senior Editor Clarissa Hawes.

Attorney discusses next steps after court overturns former Pilot president’s conviction
Calling out racism in trucking
Convictions of former Pilot Flying J President Hazelwood, co-workers overturned

Clarissa Hawes

Clarissa has covered all aspects of the trucking industry for 16 years. She is an award-winning journalist known for her investigative and business reporting. Before joining FreightWaves, she wrote for Land Line Magazine and If you have a news tip or story idea, send her an email to [email protected] or @cage_writer on X, formerly Twitter.