KNOXVILLE -- Two Pilot Flying J sales employees have pleaded guilty to conspiracy to commit mail fraud and wire fraud, in connection with a federal investigation into the Knoxville-based company.
According to court documents, Arnold Ralenkotter, who was a regional sales director in Pilot's direct sales division, and Ashley Judd, not the celebrity of the same name, but a regional account executive, have admitted to intentionally reducing rebates owed to some of Pilot's commercial customers over the course of several years.
Cleveland Browns owner Jimmy Haslam is also the CEO of Pilot Flying J. Haslam is mentioned in the affidavit but maintains that he had no knowledge of the rebate scheme.
Haslam's attorney Aubrey Harwell in Nashville was reached by phone and said this is what they expected since the raid on April 15 and the affidavit was released.
"It's obviously something that Mr. Haslam regrets, he regrets what apparently occurred, but that was a regret he experienced when he read the underlying affidavit. It does not change a thing. We're still full speed ahead with all those things we committed to do and are doing, and this doesn't change anything, and as I say, it didn't come as a surprise," Harwell added.
Ralenkotter, who was based in Hebron, Kentucky, admitted that he "caused and approved the sending of fraudulently reduced rebate checks and fraudulently determined invoice amounts by mail and commercial interstate carriers to certain targeted Pilot customers."
The documents show that the purpose of the conspiracy was to increase profits for Pilot and the commissions of the sales executives who represented those customers.
"[Ralenkotter] wanted to tell the truth about everything. He felt the case was basically indefensible," said his attorney, Ed Yarbrough of Nashville in a phone interview. "He wanted to be truthful with the agents and with the government. And we explored our options in that regard and determined that the plea agreement that was executed today was the best course of action for him."
Yarbrough confirmed that Pilot Flying J has agreed to "indemnify its employees who act in good faith" by paying their attorney fees. Ralenkotter is a current employee of the company, as of Wednesday evening.
"He has no desire to testify against anyone. He's just going to tell the truth, about what he knows," said Yarbrough.
Both Ralenkotter and Judd are cooperating with the government.
Ralenkotter is mentioned extensively in an FBI affidavit released after search warrants were carried out at Pilot Flying J's headquarters, as well as his home in Kentucky.
He's quoted on tape in a conversation with Brian Mosher, the national sales director, "I'm not going to f--k around with them because I'm not going to get thrown in jail."
Court documents show Judd sent the shorted rebate checks, purposefully keeping information off the computer, in a file in her desk.
The affidavit reads that Judd told the company's whistleblower, "...if anyone ever came in the office that that file would be first one that Judd would burn."
Ralenkotter admitted not only determining the amount of the money that was to be reduced from the rebate checks, but even to training other sales executives on how to do it. He even said he told a subordinate that if they were "not willing to deceptively reduce a customer's rebate" then he would take over the account.
As part of the deal, Ralenkotter and Judd could face up to 20 years in prison. A judge will sentence them at a later date.
Richard Lillie, a Cleveland attorney who is not involved with the case, told Channel 3 News the sentences will be based on the amount of fraud attributed to each defendant.
Lillie said a plea on information means the matter was not presented to the grand jury, and it indicates cooperation on the part of defendant.
At a base level, fraud between $200,000 and $400,000 would amount in an estimated two to three year sentence.
But Lillie stressed, a judge would consider several factors in the sentence, and these defendants would likely be given some leniency for acceptance of responsibility.
Pilot Flying J spokesman Tom Ingram released this statement Wednesday: "The statements released by the federal court today do not come as a surprise given what we've been learning in our own internal investigations, but are nonetheless disappointing. We want to assure our customers that we are taking every step to correct any wrongdoing that has occurred and to make certain that it does not happen again."