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KNOXVILLE, Tenn. -- One year ago today, the FBI raided the headquarters of Pilot Flying J due to the company's failure to pay fuel rebates owed to trucking customers.
Pilot Flying J CEO Jimmy Haslam initially stated that he believed and trusted there had been no wrongdoing, but in the months that followed several executives stepped forward and pleaded guilty to mail and wire fraud charges related to accusations that the company schemed to reduce rebates owed to customers.
Over the past 12 months, the truck stop operator has settled 95 percent of the class-action lawsuits brought against it since the raid, totaling an $85-million settlement. Haslam stated early on that Pilot Flying J's goal was to "make things right," agreeing to pay back the discrepancies in the fuel rebate accounts, plus an additional 6 percent. The company even created a rebate education website, www.rebateeducation.pilotflyingj.com, to report on its progress.
CSNews Online tried contacting Pilot Flying J to reflect on the past year, but the company declined an interview. Nevertheless, to get an idea of how well the retailer has handled the situation and what the industry impact has been, CSNews Online reached out to a litigation and forensic services expert for an assessment.
"I think the company has handled things exceptionally well and Haslam's focus has been on three core issues in everything we see him talking about, which is a focus on the customers, making things right, and focusing on the future and not the past," said Lewis Baum, director of litigation and forensic services at SS&G Inc. SS&G is an accounting and business consulting firm with offices in Ohio, Illinois, Kentucky and New York.
On April 22, 2013, just one week after the FBI raid, Haslam released a five-point plan to the public, stating: "We are going to diligently and aggressively figure out for ourselves what's going on and if we find anything amiss, we are going to make it right straight away." He ended his statement on a positive note, saying: "We believe we will come out of this adversity stronger than ever as individuals and a company."
Making things right, or righting the wrong, has been a recurring theme in a lot of Haslam's press conferences, said Baum.
"Focusing on the future and trying to make things right -- all those things are positives," the expert pointed out.
Part of Pilot Flying J's five-point plan included bringing in a field audit team to review all 3,300 trucking customer contracts to "proactively address any miscalculations" found, as well as hiring an independent special investigator to "oversee and validate" all the internal inquires related to the federal investigation.
"Getting an independent examiner involved early on is a good thing," Baum said. "At the end of the day, if this was truly litigated, they would have to pay restitution anyway. So in my mind, they were trying to get out in front of the ball, if you will, and address things up front."
Also under the five-point plan, Haslam explained that all diesel fuel customers would be converted to electronic calculation and payment in order to eliminate any risk of abuse in the future from manual calculation and payment, which is how it was being done in the past. The CEO additionally announced a new staff position of chief compliance officer, who would report to the company's general counsel on any similar questions or issues that may arise in the future.
"[Haslam] really handled it all very well," observed Baum. "Sometimes you run into companies where the senior leadership buries their head in the sand in hopes it will go away, and takes a backseat with the news. But he has been driving the news and getting in front of it."
The plight of Pilot Flying J is now a cautionary tale for the industry at large.
Baum doesn't believe this incident will have an effect on customers participating in loyalty or rebate programs with trusted companies, however, nor does he believe it will prevent other chains from promoting rebate and loyalty plans.
"Customers are always looking for a bargain or a way to save money, and companies are looking for a way to gain loyalty, so I don't see these things going away," he said.
What can be learned, particularly for retailers participating in rebate or promotional programs with their vendors, is that they must take more ownership on their end of the program and truly reconcile what is owed and received, according to Baum.
"There should be some type of system to verify you are receiving what you should be, rather than relying on the provider to calculate payments," he explained. "If you are a retailer in a program with a vendor, you must go through and verify you are receiving the money owed."