Horrible People, Pilot Flying J Edition

More details have emerged in the fraud case against Pilot Flying J, the family business of Gov. Bill Haslam which is run by his brother. The company headquarters was raided by the FBI on Tuesday. And man, is this turning out to be a big ol’ shitpile.

The allegation is that the company intentionally reduced monthly rebates due trucking company customers to increase the company’s profitability on monthly P&L statements — and thereby increase sales commissions, which were based on those figures. According to the FBI affidavit, the practice was shockingly commonplace and widespread, involving a wide array of employees — account executives, regional supervisors, executive management; it was even openly discussed in a meeting attended by Pilot’s President Mark Hazelwood and CEO Jimmy Haslam III. This was no whispered back-room deal done under the cloak of secrecy — unless you’re a Pilot Flying J customer, of course. Nope, as layed out in the FBI affidavit, it was business as usual, even something discussed in sales meetings. Everyone, save customers, seemed to know about it. [UPDATE: The Tennessean, which operates the worst website in the history of journanimalism, now has a dead link to the FBI affidavit, because I guess they figure no one ever digs through the memory hole on the web. However, I think this one goes to the same information.]

Even more shocking is the incredible hubris on display in recorded conversations. “Fuck ’em early and fuck ’em often,” says John Freeman, Pilot’s VP of sales on page 50 of the affidavit. What a swell guy.

On Page 52 we hear Arnold Ralenkotter, Pilot regional sales director, joking with Brian Mosher, Director of National Sales, about ripping off what Ralenkotter called “a fuckin’ Russian mafia guy” in Illinois named “Pav”:

MOSHER: How’d it end up?
RALENKOTTER: Well, we agreed to the across-the-board deal. And we didn’t change a thing.
MOSHER: He doesn’t fuckin’ have a clue. He doesn’t have a clue.
RALENKOTTER: But he slid that, he slid the, you know, the Love’s offer letter, where they kinda lay it all out? Walked out of there, I said don’t change a thing. Let him believe whatever the hell he wants.
MOSHER: He didn’t have any fuckin’ clue.

Mosher and the rest treated customers like the enemy. If you were a smart negotiator, they’re all like, “How dare you! You gonna mess with me? I’m gonna mess with you.” But if a customer didn’t understand Pilot’s complicated pricing program, they’re like “Stupid rubes! You deserve to get ripped off!” Indeed, these guys seemed to take special pleasure in preying upon — no, relishing — customers’ ignorance about pricing and rebates:

SCHIMMEL: Let me ask a question. Even though, do we have an idea of what percentage of people out there truly know, have an understanding of discounts? I mean …
MOSHER: I would tell you it’s, I’m gonna say way less than 50%. I’m thinking it’s 25% or less, that really, really know on a day-in-day-out basis. Now, again, that depends, right? Because if you’re sending that customer a daily price fetch, he doesn’t have to know, all he has to do is save his e-mails, okay? Because he can go back and recalculate this stuff. (Laughter.) But the guy that doesn’t– huh?
WELCH: Some of’em. (Laughter.)
MOSHER: Some of ’em, some of ’em don’t know what a spreadsheet is. I’m not kiddin’. So, again, my point is this: Know your customer. Know what you’re sending him, know what his preferences are, know how sophisticated he is, okay? If the guy’s sophisticated and he truly has gone out and gotten deals from the other competitors and he’s gettin’ daily prices from us, don’t jack with his discounts, ’cause he’s gonna know, okay? But the guy that’s just sayin’ “Cost-plus, cost-plus, cost-plus, I need cost-plus.” “Why do you need cost-plus and what do you know about cost-plus? How’s cost-plus compare to retail-minus over the last three months?” “I don’t know, but Love’s is sayin’ it, so I need it.” Solution: Tell him we can do it. Tell him we can do it on a rebate.

What despicable people. I wonder if Gov. Haslam regrets his decision to keep his Pilot Oil holdings out of his “near-sighted” trust, under the reasoning that,

… Tennesseans are “very familiar” with his relationship with Pilot, a privately held company with annual revenues of $20 billion.

Yes, we are very familiar, indeed. Grab the dang popcorn, peeps.


Filed under Bill Haslam, corporations, Tennessee

15 responses to “Horrible People, Pilot Flying J Edition

  1. CB

    Well, there is some hope that they’ll reap what they’ve sown, early and often. 🙂

  2. democommie

    I have no idea about Pilot’s customer list including companies like Werner or the other biggies, but assuming it does they could see a “run on the bank” sorta reaction where all of their customers that don’t sue them simply stop doing business wherever that is possible.

    You know one what you never hear from the oligarch’s when they’re the “marks” in one of these situations?

    “Og yeah, we all fuck each other whenever possible. The free hand of the market sorts it all out and we don’t need no steenkeen lawyers!”.

    • …. where all of their customers that don’t sue them simply stop doing business wherever that is possible….

      That’s the problem. Pilot has a virtual monopoly, ever since they bought their nearest competitor, Flying J, out of bankruptcy in 2009:

      Some of the truckers say they’re looking for other fuel sources but that it’s tough to cut Pilot Flying J out completely because it’s such a big company with little competition in some areas.

      “We had been in talks with Love’s (truck stops) to move some of our business there before we even knew about this, mostly because of our heavy reliance on Pilot,” Titan’s Hodges said. “But we could not move all of it away without impeding our operations considerably.

      “The existing system outside of Pilot could not take care of all the trucks going up and down the road,” he said. “But everybody will be looking for alternate sources. There is going to be a credibility problem with their customers, probably for years to come, and we’ll never be able to trust them again.”

      Morehouse said his company is discussing shutting Pilot off completely. “I wish the whole industry would do it to let them know we won’t tolerate that kind of behavior.”

      This is precisely what regulators were worried about back in 2009 when Pilot bought Flying J. But, we don’t need no stinkin’ regulators! Free market (as long as the billionaire has it cornered) — amiright, people? Predatory practices are just the glorious free market at work, where the greedy and powerful rule over the plebes.

      The good news is, at least one company has filed suit against Pilot, and there are calls for a class action suit.

      So the question remains: what will be the new name they come up with? You know, like how HCA, Enron, Blackwater and the rest all gave themselves a fancy new name in the hopes of distancing themselves from scandal? Suggestions?

  3. “Predatory practices are just the glorious free market at work, where the greedy and powerful rule over the plebes.”-SB.

    And the beat goes on…

  4. democommie

    Southern Beale. I expect that you’re correct, in the short term, about Haslam’s company (that, btw, is how we lowdown scummy hippies like to refer to companies that are run by, for or pay dividends to sitting pols–yeah, I’m lookin’ at you, Mittunshitcanned Romney).

    What would be REALLY interesting is if this case involves RICO (and it certainly sounds like a plausible scenario). If that’s the case the Governator of TN might find himself in the soup. Also, what if records reveal that part or all of the reason that Flying J. WENT bankrupt is the dishonest dealings of Haslam’s company (see how easy it is to use his business “acumen” as a negative–feel free to pass this along to the TN Dems) ? I feel like I could be a GOPerv or NRA-hole political consultant. Alas that lucrative career path is blocked for me. I blame my parents for instilling the virtue of honesty and i blame JESUS and HIS TWO DADDIES for creating me with a concsience.

    • GregH

      Nice! Regulators (ICC?) impose a consent decree because Pilot used unfair business practices to bankrupt and buy out Flying J. One of the conditions is that Flying J be spun off as a separate company and sold to to an unrelated private equity partnership or, better, co-op of trucking companies. The money from the sale turned over to Pilot is set as the original price Pilot paid, so they don’t make a single, red cent (the rest is part of the fine imposed). Heh, heh, heh.

  5. democommie

    “and I’m still convinced Ken Lay is enjoying cocktails stirred with little umbrellas on some island off the coast of Paraguay….”

    I’m pretty sure that if Kennyboy’s death was faked a number of people would have gone to some trouble to make sure it was true. I know at least one person who lost about $8M in net worth (she’s a charismatic fundie, I think) and I’m pretty sure that her Stockholm Syndrome lasted about as long as a slush puppy in hell.