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Haslam: Pilot boosts efforts to fix issues, pay customers | News

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Haslam: Pilot boosts efforts to fix issues, pay customers

Pilot Flying J CEO Jimmy Haslam said Monday morning the company has made "significant progress" to investigate and fix issues connected with the fuel company's rebate fraud scandal.

He read a 13-minute prepared statement and did not answer any questions due to the ongoing criminal investigation.

"I would like to tell you in detail everything I know and take every question I know you would like to ask, but I cannot, and I hope you understand," said Haslam.

Haslam's address was basically a progress update on a speech he made in April following an FBI raid on the company's headquarters. At the time, he outlined a five step plan to correcting the issue. Monday he said Pilot expanded its initial five step plan to ensure that "this type of thing never happens again."

"Our initial audit went back to 2008. We decided to expand the scope of that all the way back to 2005," said Haslam. "The amount of discounts and rebates treated wrong, if you will, was an extremely small percentage. We should have everyone paid back with interest in the next couple of months."

Haslam said this scandal was not just difficult for his company, but it's been hard on his family as well.

"This has been a very humbling and embarrassing time for myself, my family, and for Pilot Flying J. There's no other way to say it," said Haslam.

Federal investigators are looking into claims that Pilot Flying J cheated hundreds of trucking companies out of money they were owed in a fuel rebate program. It's been more than five months since the FBI raided Pilot headquarters in Knoxville. Since the raid, seven Pilot employees have pleaded guilty in federal court to fraud-related crimes. Haslam said one of Pilot's missions is to rebuild its sales team and restore the public's trust in the company.

According to Haslam, Pilot has made great progress in all five steps to fix any wrongdoings.

"Since April 15, we have done our best to investigate the allegations made against some members of our diesel fuel sales team, to identify any wrongdoing, and to assure our customers that we will not tolerate that kind of behavior anywhere in our company, and we will make right 100 percent any errors we discover."

Step 1: Bring in a field audit team to review all manual accounts with its diesel fuel trucking customers

Haslam reported that the field audit team completed the review of Pilot's entire manual rebate accounts on June 30.

Where Pilot found a discrepancy, Haslam said the company notified almost every company effected and sent those customers checks for the amount of the discrepancy plus interest.

"This is really important to understand this - if we wronged trucking companies by $10, that's not okay," Haslam said during the conference.

Pilot is now in the final steps of auditing all of its other diesel fuel accounts using a direct discount agreement dating back to 2005. The company expects to finish this process by the end of the year.

Haslam stressed that the field audit team found that only a small fraction of Pilot's customers were impacted. So far, the team has audited almost 7,000 diesel fuel sales customers.

Pilot's lawyers, along with lawyers for some of their customers, have worked together proposing a class action remedy in an Arkansas federal court. Haslam said this would guarantee every one of its customers using rebates and direct discounts will get the money they should've received plus interest. A federal judge gave the agreement preliminary approval in mid-July. Pilot said it hopes it will receive final approval in November.

MORE: Attorneys battle over Pilot's financial documents

"We believe it is a fair and just settlement and allows our customers to made whole sooner rather than later," said Haslam.

Step 2: Pilot placed several members of the diesel fuel sales team on administrative leave. The company is in the process of restructuring the team.

Pilot fired seven members of its sales team after they pleaded guilty to fraud-related charges. The company has placed others on administrative leave, pending the results of the ongoing investigation.

MORE: CEO Haslam talks guilty pleas

Haslam said Pilot has made tremendous strides rebuilding its team. From now on, Pilot will place almost every customer contract in writing.

Step 3: Pilot eliminated all manually managed accounts, converting all diesel fuel customers to an electronic system

Pilot said it has nearly completed this process.

"We said we would do away with the manual rebate process," said Haslam. "I'm delighted to say that it is done."

Step 4: Pilot created an internal/external advisory committee

The committee is working with Pilot's team, reviewing all of Pilot's company policies, procedures and processes. It will make recommendations to improve Pilot's procedures.

Step 5: Pilot hired a special counsel to make an independent report to the board.

Pilot hired Reid Weingarten to complete a full investigation into the matter. Haslam said he did not know when Weingarten and his team will complete their work. He's unsure whether the board will make it public.



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