Truck line discusses alleged Pilot Flying J rebate ripoff

7:34 AM, Apr 27, 2013   |    comments
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Pilot Flying J Investigation


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OMAHA, Neb. -- Nestled along the Missouri River and a wide open Midwestern horizon, the city of Omaha, Nebraska, stands out with its big buildings, big steaks, and big trucks. Standing at the convergence of several interstates, the countless transfer trucks navigating through Omaha can cause the ground to shake.

For more than 80 years, Omaha's hauling landscape has featured a family-run force by the name of W.N. Morehouse Truck Line, Inc.

"This goes back four generations," said operations manager Curt Morehouse. "My great-grandfather started it back in 1932. His name was William Newel Morehouse, and that's the "W.N." in the name. He started hauling with ice because they didn't have refrigeration back then."

Today Curt and his older brother Brad have worked their way up through the ranks to run the family business. The company's calling card remains keeping customers' cargo cool with climate controlled trucks.

"We haul a lot of Tyson foods, a lot of chicken a lot of beef. We also haul Miller beer. If you're drinking Miller beer, there's a good chance we hauled it. We also haul medical equipment like syringes that are made of metals that can rust if they are not kept in climate controlled environments."

With around 100 trucks serving 48 states and trailers refrigerated via fuel-powered generators, Morehouse estimates the company spends around $9 million a year on diesel. That makes Morehouse a coveted customer for Pilot Flying J and the fuel company offers perks at the pump to retain their business.

"There's one perk and that is to give you a better price on diesel fuel than the next guy [fuel company]," said Morehouse. "Pilot and other fuel companies come to us and make the best deal they can afford to make. Pilot made a deal with us to have a rebate for a certain amount of pennies for every gallon we buy on the gallon."

Morehouse's drivers do not pay for gas while traveling. Pilot bills the company and directly drafts payment electronically. Morehouse did not receive the rebate in the form of cash back at the end of the month. Instead, the promised rebate was calculated by Pilot and automatically deducted from the total bill.

In a closet at the W.N. Morehouse office, Curt opens an electronics rack loaded with computers, routers, and servers. One of the computers features some specialized software specifically for the trucking industry.

"We plug the formula for the fuel rate we were promised into a computer program we call our fuel optimizer. That computer tracks fuel prices and tells our drivers where the best deal is along the route they are going. The optimizer was sending our drivers to Pilot locations based on the rate we were quoted," said Morehouse.

In late May 2012, Morehouse noticed Pilot had actually been billing him at a higher rate than what was plugged into his fuel optimizer.

"When the two [rates] didn't line up, we've got a problem. I went back and tracked it several years and it was always off by the same amount of $.035 a gallon. I totaled it up and figured Pilot owed us around $146,000," said Morehouse. "I emailed them and they replied with, 'Yeah, there is a problem, but it is not as bad as you thought.' They said it was an accident and it was because we switched sales reps and a computer glitch happened at the same time. It was just an excuse and I took them for what they said."

Pilot did not reimburse Morehouse the full $146,000. Instead the company bargained with him by writing a check for $88,000 and also offering an additional discount on top of the one he was already getting at the pump. This second discount would come as a separate rebate check at the end of the month. Since the summer of 2012, Morehouse received two discounts on fuel: one at the pump and the other in the form of a check.

"And when you get a big check everyone's happy," said Morehouse. "What people did not know was the checks a lot of people were getting were not as big as they should have been."

Morehouse continued to get checks until earlier this month. He said on April 8, the company received an in-person visit from their normal sales rep Kevin Clark. Clark was accompanied by John Freeman, the vice president of sales for Pilot Flying J. Morehouse said during the visit the salesmen recommended a change to "tidy up" the rebate system so that both discounts were given electronically at the pump and the checks would be eliminated.

Exactly one week later on April 15, the FBI raided Pilot Flying J headquarters in Knoxville. Affidavits with transcripts of secret recordings quote Freeman and Clark as participants in an alleged rebate fraud scheme that centered heavily on customers who received rebate checks. The affidavit also claimed Pilot Flying J sales representatives targeted "unsophisticated" clients.

"They absolutely were targeting me and you read that in the affidavit," said Morehouse. "They are talking about how I had an optimizer account, but he said 'the dumb s### never checked it.' I don't think someone is dumb for not checking. I think I was just trusting. I won't do that again. We check everything now."

Morehouse said he immediately started getting calls from others in the trucking industry when the affidavit for the search warrant was unsealed.

"People are calling me and asking what do you think about them calling you unsophisticated. That's what hurt. I mean, money comes and goes and you can't take that with you when you're gone. But your reputation is what really matters. It was also insulting because truckers already have a hard enough time as it is. This was like another insult to the entire industry. I also do not think their categorization was true. I don't think they are correct calling us unsophisticated. After all, we caught them [in May 2012]," said Morehouse. "But once the affidavits came out, it made me think the $88,000 was just what they thought they could give me to make it go away and maybe they really did owe me $146,000."

Since the release of the affidavits, Morehouse also received a call from Pilot Flying J's CEO, Jimmy Haslam.

"Jimmy Haslam called me personally from his cell phone. He told me he was sorry to meet me like this over the phone. He told me without admitting that he or any of his staff had done anything illegal, which I would have done the same thing, he still wanted to make things right."

Jimmy Haslam described the conversation during a press conference on Monday, April 22, as "not cordial" but "a very professional conversation in which he [Morehouse] said I just want you to pay me my damn money if you owe me any. And I said, 'Mr. Morehouse that's more than fair.'"

Morehouse said he and Haslam came to an agreement on fair repayment. Morehouse also said he will continue to buy gas from Pilot because that is what is best for his company's bottom line and his employees in Omaha.

"I don't have any loyalty to them [Pilot] at all. They provide the best price for fuel. As soon as they do not offer the best price for fuel I will go to someone else. If I don't get the best price of fuel, I can't pay my drivers the best wage, I can't pay my mechanics the best wage, and I can't pay my office people the best wage. Are there hurt feelings? Absolutely. Is it going to stop me from doing my job? Not at all."

Morehouse said he also tries to keep things in perspective regarding the Pilot Flying J corporation as a whole.

"It appears there might be 15 or 20 bad apples in the sales department. But Pilot is a huge company and those people are not the ones that matter to me. Jimmy Haslam is not the one that matters to me. The people I care about over at Pilot are the ones who make $10 or $12 dollars an hour and help my drivers. They should not be lost in this conversation because if they make my guys' day better by helping with fuel, giving them a smile and a hot cup of coffee, providing a place to rest and get a hot shower, then they are who we will do business with."

While Morehouse is not applying personal hard feelings towards Haslam or the travel center employees, he definitely holds some personal rancor for those he feels misled him.

"No hard feelings towards Jimmy Haslam. If it comes out later that he absolutely knew about this, I would definitely think less of him and let the justice system take care of him if there is a law that has been broken. The sales reps, that they knowingly did these things on purpose, I'd love to see some people get fired. That is not my decision, but even if a law was not broken what they did was unethical and we do not operate that way," said Morehouse.

Morehouse said as of Friday night, he is still awaiting the check Haslam has agreed to pay. Once the payment is received, Morehouse will consider the situation resolved satisfactorily.

"I do not want to convict anybody. That's not my job. I trust the government and law enforcement to do that. That is the courts' job. I am a business man and so is my brother. We just want to get what is due to us and keep on trucking," said Morehouse.

Jimmy Haslam, who is also owner of the Cleveland Browns, announced several changes earlier this week at Pilot Flying J, including the elimination of the company's manual rebate program that pays customers via check. In the future, the company will provide discounts electronically at the pump.

By Jim Matheny, WBIR

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