Appeals court throws out fraud convictions of three PFJ execs
October 16, 2020
A federal appeals court has overturned the convictions of three former high-ranking Pilot Flying J executives who orchestrated an elaborate fraud scheme, saying a lower court erred in allowing jurors to hear secret recordings of the company’s then-president using racist and misogynistic language at a corporate retreat.
In a 2-1 ruling, the Sixth Circuit Court of Appeals overturned the convictions of former Pilot President Mark Hazelwood, Vice President Scott Wombold and regional sales representative Heather Jones and remanded them for a new trial. The appeal was lauched by an attorney for Hazelwood, who argued that the offensive language on the tapes prejudiced the jury against the defendants.
“Does the fact that Mark Hazelwood used utterly repulsive language in private make it more likely that he and his cohorts committed wire fraud? No. Does it make it more likely that a jury would convict? Yes,” wrote Judge Richard F. Suhrheinrich in the majority opinion.
Eighteen Pilot employees were charged in connection with the conspiracy, which sought to entice trucking companies to purchase fuel from Pilot and Flying J truck stops at a discounted price via a rebate offer.
The rebate amount was manipulated by Pilot Flying J staff.
Another former executive, Vince Greco, turned FBI informant in exchange for immunity and recorded the tapes at a corporate retreat in October 2012. Before Hazelwood proceeded to trial in late 2017, 14 other Pilot employees and executives had already pleaded guilty to conspiring to commit wire or mail fraud. Karen Mann, a regional account representative who was tried jointly with Hazelwood, Wombold and Jones, was acquitted.
The jury trial lasted 27 days, with nearly 30 witnesses, including cooperating Pilot employees who pleaded guilty for their roles in the conspiracy. Prosecutors also presented emails among the alleged co-conspirators, and undercover audio recordings. Hazelwood can be heard on the tapes using profanity, making racial slurs, and belittling women while drinking alcohol and watching a Monday Night Football game with other Pilot staffers.
The jury returned its verdict after deliberating for five days. They found Hazelwood guilty of conspiracy to commit mail fraud and wire fraud as well as witness tampering.
“Having a bad set of personal beliefs did not make it more likely that Hazelwood made bad business decisions. … Being a racist and a chauvinist did not make it more probable that Hazelwood would commit wire fraud,” Suhrheinrich wrote. “And eliciting testimony that it would be dumb to risk a company’s reputation by committing fraud did not put bigotry or sexism in ‘issue.’”
In her dissenting opinion, Circuit Judge Bernice Bouie Donald wrote that “just like the fraudulent scheme, Hazelwood and Pilot had no reason to doubt the serious risk that the public would become aware of the recordings and their content,” as the recordings reflect the Hazelwood and the other executives “systematically adopting and condoning egregious business practices and perspectives extending from the top to the bottom of Pilot’s sales department and corporate structure.
“In the very least, if Hazelwood is willing to use racist, misogynistic, and otherwise inappropriate language when communicating with his subordinates at a company retreat held for the purpose of conducting business, as well as invite and condone the same statements and behavior by his subordinates, it makes the factual assertion elicited by Hazelwood that he was such a good businessman less probable,” Donald wrote. “And if Hazelwood being a good businessman that would not put the company at great risk for little reward is relevant in that it tends to serve as one evidentiary step in concluding that he could not have committed the fraud, evidence that Hazelwood does not have the good business judgment purported, but bad business judgment, is relevant to rebutting that conclusion.”
Name, CEO changes
Earlier this year, Pilot announced it would change its corporate name to Pilot Co. In July, the company announced that longtime CEO Jimmy Haslam, son of founder Jim Haslam, would transition to a new role as chairman of the board on Jan. 1, 2021. Shameek Konar, the company’s chief strategy officer, is expected to become CEO at that time. LL