Former Pilot Flying J Executive Ruled Out Defrauding U.S. Postal Service

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CHATTANOOGA, Tenn. — The former Pilot Flying J executive who spent three days as a government witness hoping to garner a drop in the prison term he faces was once too afraid of jail to fleece the government, secret recordings showed.

Arnie Ralenkotter was director of sales over the truck stop giant’s northeast region and – by his own admission – a power driver in the conspiracy among Pilot Flying J direct sales executives and staffers to rip off trucking firms that were too clueless to catch the fraud.

He routinely ordered subordinates to defraud companies, especially when those firms weren’t putting money via diesel fuel purchases into the coffers of Pilot Flying J and its commission-earning sales teams, he has said in three days of testimony in U.S. District Court in Chattanooga.

Don’t Mess With the Mailman

But, a recording revealed, he wasn’t about to rip off the U.S. Postal Service, which had agreed to buy 4.5 million gallons of diesel from Pilot Flying J every month in return for a six-cent discount on the price.



“I’m not going to (expletive) around with them cause I’m not going to get thrown in jail for cheating them,” he said on the recording.

Ralenkotter is one of 14 former employees of the nation’s largest diesel fuel retailer who have confessed guilt in a scheme that generated millions in fraudulent profit and helped put the family-owned business into the driver’s seat in the diesel fuel market. Two others have been granted immunity.

Money Ventured, Money Spent

Former President Mark Hazelwood is standing trial along with former vice president of sales Scott Wombold and regional account representatives Heather Jones and Karen Mann on charges including conspiracy to commit wire and mail fraud in a five-year scheme to promise trucking firms big discounts but pay them much less.

Pilot Flying J’s board of directors has confessed criminal responsibility and is required to assist Assistant U.S. Attorneys Trey Hamilton and David Lewen in mounting a case against the quartet. The board is also paying for the defense as part of its employment agreements with the accused.

Pilot Flying J Chief Executive Officer Jimmy Haslam, who also owns the Cleveland Browns, has denied knowledge of the scheme and is not charged. He is personally represented by attorney Tom Dillard, a former federal prosecutor and white-collar crime expert.

Nashville firm Neal & Harwell represents the board and has representatives in the courtroom monitoring the trial and assisting current Pilot Flying J employees who have been summoned as witnesses. Pilot Flying J also is paying a public relations firm to monitor media coverage of the trial.

Pilot Flying J has paid $85 million so far to settle lawsuits over the fraud in addition to a $92 million criminal penalty.

The FBI and IRS Criminal Investigation Division raided Pilot Flying J’s Knoxville headquarters on Tax Day 2013.

‘Sharp Elbows’

Ralenkotter has given jurors in the trial, which is expected to continue for weeks, a glimpse at what he conceded in cross-examination by attorney Eli Richardson was “arrogance” among Pilot Flying J executives and salesmen about their fraud.

The trucking companies, he agreed, were just as hard scrabble, promising Pilot Flying J diesel purchases they didn’t make and ripping off independent truckers some of the discounts the truck stop giant did pay.

“This was a sharp elbows (business), wasn’t it?” asked Richardson, who represents Wombold.

“Yes,” Ralenkotter answered.

Ralenkotter said the decisions on which trucking companies to defraud were simple – did they buy the “gallons” they promised and would they catch the fraud?

Drinking and Thinking

The Postal Service, which had signed a memorandum of understanding to boost the gallons of diesel its drivers bought at Pilot Flying J in return for one of the largest discounts offered by the truck stop giant, wasn’t delivering on its end of the deal, a recording showed.

The recording was made by Vincent Greco, a top Pilot Flying J salesman who turned mole for the FBI. Ralenkotter and Brian Mosher, another former executive who has pleaded guilty, were with Greco after a company Christmas party, and Greco was recording it.

“Would you agree you all were drunk?” asked attorney Rusty Hardin, who represents Hazelwood.

Ralenkotter answered, “I don’t recall.”

He conceded he’d been drinking, though.

On the recording, Ralenkotter and Mosher joked about the “mugshots” on the walls of government buildings and groused that the Postal Service was getting too sweet a deal but they were too afraid to punish the government with some fraud.

“It was a slow process of getting them to the gallons (promised),” Ralenkotter said.

When Hardin asked Ralenkotter if he was “afraid to cut” the Postal Service’s rebate, Ralenkotter agreed.

“Not only were they a governmental agency, but they had someone watching (daily fuel reports),” Ralenkotter said.

The trial continues Monday, with a Thanksgiving break scheduled for jurors to begin on Wednesday.

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