Judge Collier opened by asking for professionalism, restraint, and decorum between each other—and he meant that between the attorneys, as well as those in the courtroom.
“Emotion has its place,” he said, “but today is not the day.”
Collier also noted he was operating under sentencing guidelines established in 1984, which require a three-prong consideration: retribution, deterrence, and rehabilitation. Then, Collier went on to note that 168 letters were submitted on the defense’s behalf, and he specifically mentioned Bruce Pearl and Max Fuller among them.
“It is not about Mr. Hazelwood being a racist. That is not a part of the trial or the court’s consideration. The system does not punish people for their views. It is for the crime in question. Instead, the considerations are about the factual findings, and the court must respect the jury’s findings.”
One might expect that the terms of the sentencing would soon follow, but that was not the case. A full day was scheduled, and for those of us who had followed the months of ongoing testimony during the trial itself, it was something like a compressed trial concentrated into a single day.
The strategy of the prosecution, led by Trey Hamilton, was to let the facts speak for themselves and be concise and efficient; while the defense strategy—at least at first—seemed to be to hold forth as long as possible and to delay.
To begin, Hamilton summarized that “there was more than a preponderance of evidence” of Mr. Hazelwood as “an organizer and a leader.” This wasn’t merely a crime of accounting, but a systematic crime occurring over a course of several years (2008-2013) and only stopped by the investigation. It was effectively supervised criminal activity.
Judge Collier stated that the sentencing guidelines called for 135-168 months. He said today’s proceedings would not be about departing from those guidelines one way or the other. The arguments, he said, needed to focus within these guidelines.
The defense, however, did end up asking the court to depart from those guidelines first based upon the concept of “downward departure,” and then based upon “variance.”
The first point of focus centered on the concept of harm. What harm had Mr. Hazelwood done really? While there is no doubt he is guilty of the crimes in question, how bad were they really? Hazelwood’s new defense team then brought in an expert witness in accounting and mathematics to testify.
First, he took the number that was paid back to the fleeced customers of $56 million. That was divided up among the 78 customers who were officially documented in the prosecution’s case. If Mr. Hazelwood was making 3.5% of the net profits for his commissions from the scheme then he effectively made profited between $2.1 and $3 million in aggregate. (Later in the sentencing, this figure was dramatically amended and reduced in scope when discussing motivation.)
The overall scope of the testimony led to an important point which was used and argued over for the rest of the day, and that was the concept of de minimus. The concept means that something is too trivial or minor to merit consideration. The expert witness’s testimony was that mathematically, when spread out over time and over 78 different customers, the total amount that was stolen from the customers in question was less than 2/100 of 1%. They compared it to stealing $10 from someone with a salary of $130,000.
Defense attorney Jim Walden of Walden Macht & Haran LLP, put on an impressive defense throughout the day. “This is an extraordinary case in that not only were there no victim impact statements, but some of them have in fact come out and said that the withholdings had no material impact on their operations, and they have now been made whole.”
He also observed that although they didn’t have time to gather statements from all that they attempted in the short course of time they’ve had, they did gather three letters from those who had been “victimized” from the scheme who effectively said that their business operations were in no way compromised as a result.
At 11:38 a.m. Judge Collier called for time at 30 minutes, to which Ward was taken aback. With deference, he still managed to go back and forth with the judge at least three times, imploring for more time. Collier gave him an illustration about two men giving a speech in 1863. “One spoke for two minutes and forty-seven seconds, and one for two-and-a-half hours. The one who spoke for two minutes and forty-seven seconds was Abraham Lincoln. Who was the other man?”
Ward said he knew that Judge Collier has a reputation for running an efficient courtroom, and that while he didn’t remember the name of the man (it was Edward Everett), he had read of Collier using this illustration before. Finally, Collier asked him how much more time he needed, and he asked to go to 12:30. Many laughed, including the judge, who granted him until 12. Then, as noon approached, he negotiated for five more and that too was granted.
Among other things, as the defense argued for a downward departure from the guidelines especially as it related to harm, they said the amount of $56 million paid back from Pilot wasn’t even really the amount. The government got it wrong, Ward argued. Mr. Hazelwood made about $21,000 per year from this. That amount represents about .2% of his compensation of $15 million per year. Therefore, there is a lack of financial motivation.
When the prosecution had a chance to respond, Hamilton said it’s not just the amount, but the overall criminal conspiracy. The U.S. first addressed that it wasn’t about proving materiality. First, it was the direct sales manual that directly benefits employees and what they get for discounts. This attests to the serious of the scheme. Second, customers still liking Pilot after getting scammed were effectively lied to and manipulated into continuing to work with them. Third, it was the Pilot audit that came up with $56 million and an additional $12 million. He also noted that the civil complaint actually came up before the criminal case. Also, he noted that detailing harm was never a part of their case, yet there is still a huge part on the material record of just how much harm was done. Not only to the customers themselves through lies and deception, they were also denying competitors too. It was a zero-sum game, and if Pilot gained customers, its competitors lost them.
Collier interjected that they couldn’t really assess the damages to the competitors and how much they would have lost in business. After much back and forth along those lines, Hamilton concluded that we partly don’t know because it was simply stopped and at a time during which Pilot was expanding. Overall, the prosecution assessed the potential damages at something more akin to $1.1 billion that was at stake. Collier, however, interjected that this wasn’t as clear as the defense’s expert testimony, and that he found the assessment of $21,000 per year to be “persuasive.”
Ward got another opportunity to speak and suggested that sometimes the manual allows for a guided departure from time to time. The idea focused on how if a large amount of people are hurt in an almost undetectable way, the sum may be large, though no one was really hurt.
“I am not aware of this being used outside of the securities area,” said Judge Collier. He went on to say that it was not fair for the court to have to consider the degree to which people were hurt. There is no conclusive proof who was hurt and to what degree. The question is about harms, and the primary way to do this is through the amount of money at stake. The court is unable to say that even though in some cases the harm may have been de minimus, in others it may have been.
“Based on the recordings, the culture of the company, the court finds that Mr. Hazelwood is an extremely competitive person and his desire to grow the business was his motivation regardless of his monetary gain. As for offsets there isn’t substantial proof. The court concludes that the loss amount doesn’t substantially state the seriousness of the crime.” And with that, Collier said the court denied the defense claims to depart from the guidelines.
After a late lunch break, the proceeding started again at 2:00 p.m. If any hope for leniency still existed, it was now as the defense asked instead of “downward departure,” then for “variance.”
“You can grant it, your Honor,” said Ward. Variance is different from downward departure. It asks for the judge to consider discrepancies between established norms (such as the sentencing guidelines), and what the party actually proves at trial, in this case, the amount of harm done when compared to the person of Mr. Hazelwood and all that he has been through and who he is as a person.
Mr. Hazelwood came from humble beginnings, began Ward. He lacked opportunities and worked menial jobs from ages 13-18 until he got his first office job. Mr. Hazelwood got to where he was from extremely hard work. Ward went on to produce numerous examples of white collar crimes which led to lost fortunes and ruined lives, and all of whom got lesser sentences. Hazelwood also possessed vision and truly helped the industry. He helped create the network that led to the travel plaza industry. A stiff sentence along the lines being considered “creates disrespect for the law,” said Ward. “A 14 year sentence is the functional equivalent of killing a mouse with an elephant,” he concluded.
Hazelwood also took his opportunity to speak before the court, standing beside Ward. “I am devastated that I am here today under these circumstances,” he began. “I do maintain my innocence. I will be appealing this decision, and I am glad that Pilot customers have been paid back. I have made mistakes along the way…in particular I want to say I am truly sorry for the racist language that came out of my mouth that night at the lake house. I am sorry for the hurt I have caused from what I said…there’s not a racist bone in my body, and I am truly sorry for that…”
At that he began to cry, and went on to ask for leniency so that he could go on and be a contributing member of society.
Judge Collier and the large constituency of the court who were there on behalf of Hazelwood seemed moved by the efficacy of the ethos. Some measure of hope swelled.
The prosecution then had a final turn to speak to the concept of variance. “What Mr. Hazelwood did for the trucking industry was good, yes,” responded Hamilton. “But it was all for the good of Pilot. Pilot’s biggest worry was the shrinking diesel market. If he built showers for Pilot, it was for growing Pilot. If it meant ripping off customers, then he did that too.”
Because of his socioeconomic status he was able to do social good. During the time in question, he made $78 million. Many of his actions are no doubt commendable, but it doesn’t warrant variance, said Hamilton. “The United States doesn’t think socioeconomic status should be considered with charitable contributions,” he stated.
“Would the prosecution consider a certain percentage of giving as means for variance?” Judge Collier posed.
An interesting back and forth ensued in which Hamilton considered possible “cultural metrics,” such as a tithe or offering, as well as suggesting that possibly “giving until it hurts” as possible types of measurements. He concluded that while Mr. Hazelwood was certainly capable of laudable acts, they aren’t extraordinary enough to consider as variance.
Finally, Judge Collier was ready to begin delivering the sentence. He began by reflecting on “the reality of the human condition.”
He said, “We are genuinely saints and sinners, and what we see in this white collar crime is the duality. Yet we make choices, and these choices aren’t made based upon necessity in this case. When the court is asked to consider all the good, it must also consider the laws that he broke again and again over a period of half a decade.”
Collier then proceeded to read his lengthy (about 25 minutes) decision. He observed that he knew of no recorded case of a white collar crime in which so many were in on the scheme. It required the concerted criminal activity of at the very least 20 people—and “those at the highest level tend to leave behind the fewest fingerprints.” Among Mr. Hazelwood’s motivations was simply hubris, and his “extremely competitive nature.”
At length he discussed each of the three prongs for sentencing guidelines, and with each he came away observing that Mr. Hazelwood merited sentencing at the maximum end of the spectrum. In fact, after he delivered the verdict of 150 months, he made note that the effect of the letters and the testimony of the day, were persuasive. The maximum fine of $750,000 that Hazelwood also must pay seems nominal in light of the fact that he still has a net worth of $52 million according to the testimony of the day.