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Published: Friday, 7/19/2013

Facing lawsuits and criminal probe, Haslams move briskly to end truck stop rebate scandal

ASSOCIATED PRESS
An FBI investigation of alleged fraud by the sales staff at the nation's largest diesel retailer has brought increased scrutiny and raised more questions about links between the governor and Pilot, owned by Browns owner Jimmy Haslam, above. An FBI investigation of alleged fraud by the sales staff at the nation's largest diesel retailer has brought increased scrutiny and raised more questions about links between the governor and Pilot, owned by Browns owner Jimmy Haslam, above.
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NASHVILLE, Tenn. — The nation’s largest diesel retailer reached a speedy settlement with some customers cheated out of rebate money, which experts say is all the better for Cleveland Browns owner Jimmy Haslam and his brother, Tennessee Gov. Bill Haslam, whose family owns the truck stop chain.

Jimmy Haslam runs Pilot Flying J, which was founded by his father. Gov. Bill Haslam left the company to run for Knoxville mayor in 2003 and still has an ownership stake. Their prominent positions certainly give them incentive to put the scandal behind them as quickly as possible: Bill Haslam has a looming re-election campaign, and Jimmy Haslam could face sanctions from the NFL if it isn’t dealt with.

A judge has given initial approval to a class-action settlement to reimburse customers with interest, though there is no guarantee all those wronged will join. That settlement was approved Tuesday, just three months after a scheme among Pilot’s sales force to cheat customers was made public in an embarrassing blow to the company’s reputation.

Pilot seems to be trying to reach a resolution in a matter of months — even though the average class-action suit takes three years to settle, Vanderbilt University Law School professor Brian Fitzpatrick said.

“All this has happened very quickly,” he said. “This is very unusual.”

Public relations experts said the swift movement could benefit the company, which has more than 600 truck stops across the country and is frequented by countless travelers daily.

“Whenever you have something ... that could play over into an election year or into upcoming business transactions, what you want to do is clear the deck,” said David Johnson, CEO of Strategic Vision in Suwanee, Ga. “You want to settle it.”

Furthermore, the scandal could attract more lawsuits the longer it remains unresolved, Johnson said.

“You have people coming out of the woodwork saying any kind of allegation, and those sometimes are more damaging than the initial raid and lawsuit,” he said.

Gov. Bill Haslam, who will run for re-election next year, has attempted to distance himself from the scandal, saying he has not been involved in day-to-day operations for 15 years. His personal share in the privately held company has not been released, though it is kept outside of the blind trust established for his other investments and is not publicly disclosed.

Meanwhile, Jimmy Haslam also has denied any wrongdoing — though he could find himself in trouble with the NFL if he faced criminal charges. Owners have faced reprimand in the past, including former San Francisco 49ers owner Eddie DeBartolo Jr. He was suspended for a year in 1999 after being found guilty of failing to report a bribe by a government official, a felony.

So far, the NFL has not considered any sanctions for Haslam or made contingency plans regarding the Browns’ ownership.

Haslam can move quickly because the private company doesn’t have to answer to shareholders or a board. However, he has only so much control over the situation.

For instance, there is no guarantee that the class-action settlement will resolve all the claims. Trucking companies can opt out of accepting the settlement to pursue their own lawsuits.

“They can try to make it as sweet a deal that people may be inclined to accept it, but they don’t have any authority to prevent people from exercising their rights,” said Dick Williams, chairman of Common Cause Tennessee, a group that advocates for open government.

At least one company, Blachowske Truck Line, has said it won’t be part of the settlement. So far, 22 class-action lawsuits have been filed against Pilot Flying J, one of which was dismissed.

It’s also not clear whether others may be targeted in the criminal investigation, or how long that probe will last. Five Pilot employees already have pleaded guilty in the rebate scheme. An affidavit in the case says at least one Pilot employee was secretly recorded saying Jimmy Haslam knew what sales people were doing, though Haslam has denied that.

Even if the criminal and civil cases are resolved quickly, repairing the company’s reputation could prove a more complicated hurdle, said Howard Bragman, vice chairman of the reputation management company Reputation.com.

“As much as the company is trying to make it go away, it’s probably not going to for a while,” Bragman said.

Still, some trucking firms may be willing to stick with the company out of loyalty and give Jimmy Haslam the benefit of the doubt. Olin Wooten, who owns Atlantic Coast Carriers, another trucking company that has sued Pilot, said he did not know much about the settlement announced Tuesday and was leaving the legal decisions to his attorneys. But he said he was willing to give Jimmy Haslam a chance.

“He might not know what was going on,” Wooten said, adding that he has had dishonest people working for him in the past.

“I’m not ready to barbecue him,” Wooten said of Haslam. “Let’s just get it straight.”

___

AP Writer Travis Loller in Nashville and AP Pro Football Writer Barry Wilner in New York contributed to this report.



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