Haslams try to halt fallout from FBI raid on Pilot

Wednesday, April 24, 2013 at 11:21am

Tennessee's Haslam family is furiously trying to control the damage following a federal investigation into the family business that could threaten to unravel decades of growing wealth and influence that spans business, sports and politics in the state and beyond.

Jimmy Haslam, the CEO of Pilot Flying J, owns the NFL's Cleveland Browns and recently sold his small holding in the Pittsburgh Steelers. His brother Bill is governor of Tennessee, and their father, Jim, has been a prominent GOP fundraiser for presidents and senators. The family has given heavily to philanthropic causes in the region and elsewhere.

"It would be hard to think in Knoxville of a family that has been more active and more consistently generous and supportive of their fellow citizens in all walks of life," said Victor Ashe, a former Knoxville mayor and former ambassador to Poland.

"That's what makes this all the more unfortunate," he said.

Jimmy Haslam's wealth is estimated at $1.8 billion by Forbes magazine, which also ranks Pilot Flying J as the sixth-largest privately held company in the country. The company's estimated revenues of $31 billion come within $2 billion of Tennessee's annual budget plan.

An affidavit released after an April 15 raid of the company's headquarters by FBI and Internal Revenue Service agents alleges that sales employees withheld rebates owed to customers so they could boost profits and pad their commissions. The affidavit indicates the practice was widespread and, according to Pilot employees, was known to the top executives.

At first, Jimmy Haslam tried to downplay the criminal investigation. In his most recent public statement this week, he struck a far more serious tone.

"That was the most painful — and still is — 48 hours that I've ever experienced in business," he said. The CEO has said he won't step aside from the Browns or the company, but he announced an audit of customer contracts, the suspension of several salespeople and personally appealed to customers who Pilot workers belittled in often-crude language.

"We make mistakes like any company does, but there is absolutely no excuse for that kind of behavior," Haslam said. "I don't think I've ever been as embarrassed as I have been since I read the affidavit."

No charges have been filed in the case as the investigation continues.

NFL Commissioner Roger Goodell said he met with Jimmy Haslam on Tuesday to discuss the federal investigation into the truck stop chain.

"Jimmy's doing everything he's asked. He's cooperating. He wants to make sure that he's doing all the right things in that regard, and he's assured us he's going to," Goodell said at a pre-draft event in New York.

The Haslam family's reputation stretches back to the football dynasty of Gen. Robert R. Neyland at the University of Tennessee, and their political connections are deep.

Company founder Jim Haslam played tackle for the 1951 national championship team under Neyland, who built the Volunteers into a football powerhouse. The family has been a major financial backer of the state's flagship public university and its athletics programs ever since.

The elder Haslam founded the Pilot Corp. in 1958 with a single gas station in Gate City, Va. He credits his sons with expanding the chain from mostly gas stations and convenience stores to a "travel center" concept featuring branded fast-food service, plentiful truck parking, clean showers and other services.

Under Jimmy Haslam's leadership, the company acquired its closest rival, Flying J, and has become the country's largest retailer of over-the-road diesel fuel.

The Haslam family had long been active behind the scenes in Republican politics, mostly as campaign donors. Jim and Jimmy Haslam were among the top fundraisers for George W. Bush's presidential bids and for other GOP candidates.

Jimmy Haslam has been close friends with U.S. Sen. Bob Corker (R-Tenn.) since they were roommates at the University of Tennessee, and their families have vacationed together at Haslam's summer home on Nantucket, Mass.

The governor and Jimmy Haslam also lead the ownership group of the Tennessee Smokies, a double-A affiliate of the Chicago Cubs. Gary Wade, chief justice of the Tennessee Supreme Court, is part of the group.

Bill Haslam was the first in the family to run for office, narrowly winning the 2003 Knoxville mayor's race. Seven years later he was elected governor. That race featured heavy criticism from both Democratic and Republican candidates about his refusal to divulge financial details about his stake in Pilot.

A spokesman said the FBI allegations haven't changed the governor's views on keeping his Pilot earnings secret or keeping his holdings in the company outside of a blind trust for his other investments.

Democrat Mike McWherter, who lost the 2010 governor's race to Haslam, said the revelations emerging out of the Pilot investigation renew questions about the governor's stake in the company.

"It would have been better for Bill Haslam in retrospect, with all of this information coming out, to have gone ahead with a full disclosure," McWherter said. "Because people would know exactly what his relationship is to Pilot."

Bond ratings agency Moody's Investors Service has placed Pilot on review for a possible downgrade following the raid, which would make it more expensive for the company to borrow money. Meanwhile, Standard and Poor's has said the raid would not change the company's rating.

The rise and fall of another powerful pair of Knoxville brothers, Jake and C.H. Butcher, provides a cautionary tale for the Haslams. The Butchers' grew a single bank started by their father in 1950 into an empire of 27 financial institutions in Tennessee and Kentucky, bringing them considerable power and influence.

Jake Butcher ran twice for governor as a Democrat, and the family members were major donors to others in the party. He reached the zenith of his power in his successful bid to bring the 1982 World's Fair to Knoxville, where the 266-foot-high Sunsphere still stands as a faded icon to the event that was supposed to propel Knoxville into the top tier of Southern cities.

The Butcher businesses began to unravel on Valentine's Day 1983 when the United American Bank in Knoxville was closed by regulators probing illegal banking practices.

One by one, the others closed under the weight of unsecured loans, paper corporations loaded with debt and a massive shell game in which loans were shuffled from one bank to another ahead of the bank examiners. It was the fourth-largest U.S. banking failure at the time.

23 Comments on this post:

By: pswindle on 4/24/13 at 5:19

How could you stop a fallout with a big story like this?

By: Jughead on 4/25/13 at 7:39

There is no "fallout." It is the Justice Department smearing a Republican family for business decisions.

Yet, they let absolute criminals like Jesse Jackson and Al Gore walk.

By: Loner on 4/25/13 at 7:39

This thing stinks to high heaven....and the Governor, by foolishly refusing to put his Pilot holdings into a blind trust, has made himself a legitimate target of any investigation....git a rope!

The Southern penchant for rule by wealthy aristocratic families comes with inherent risks; these tycoon-governors see their conflicts of interests as confluences of interest....this sort of scandal is the natural result.

Impeachment anyone?

By: pswindle on 4/25/13 at 7:43

Judhead,
Explain how Al Gore is a criminal? You are overstepping a bit here.

By: Loner on 4/25/13 at 7:57

So, the Governor and his brother cooked up a scheme to rip off the trucking companies and the independent truckers....promising rebates, but not delivering on the promises....and being downright nasty to the victims....that sucks.

Yeah, a total IRS audit of the Haslam family's "business operation"s is clearly indicated....with this much smoke, there's gotta be one hell of a fire down below....keep digging, you'll discover the fires of Haslam's Hell....and the devils that run the place.

The Governor should consider resigning now, before the really nasty stuff comes to light....spare the citizens of Tennessee the national embarrassment....do the right thing, step down now, Gov.

By: Loner on 4/25/13 at 8:05

Al Gore is a criminal? Did he get a BJ too? As we all know, the Republican definition of a high crime and misdemeanor includes getting a BJ....if and when that "offense" is committed by a Democrat.

By: Loner on 4/25/13 at 8:21

From the article:
Under Jimmy Haslam's leadership, the company acquired its closest rival, Flying J, and has become the country's largest retailer of over-the-road diesel fuel.

Whatever happened to the antitrust laws in this country?

Is Pilot now, "too big to fail"?

It's easy to see why the state of Tennessee has not gone green...fossil fuels have made the governor's family fabulously wealthy.....and fossil fuels will make them even wealthier down the road....keep on truckin'.....suckers.

By: Loner on 4/25/13 at 8:31

Jimmy Haslam disciplined some underlings...he announced, "the suspension of several salespeople ".

Those are the sacrificial lambs...the scapegoats....Jimmy is hoping that the feds thirst for blood has been slaked by the sacrifice....nobody was actually fired, mind you...that could cause bad blood inside the inner circle... and if people were being actually fired, not suspended, they might become disgruntled whistle-blowers...the Haslam's certainly do not want any whistle-blowers to blow any whistles....hush money anyone?

By: Loner on 4/25/13 at 8:53

By the way, Jesse Jackson Junior has not "walked"...he's gonna do time in the big house...his wife is also going "up the river".

http://www.nytimes.com/2013/02/21/us/politics/jesse-l-jackson-jr-pleads-guilty-to-wire-and-mail-fraud.html?_r=0

Jesse Jackson Senior was a womanizing grand-stander, but he was never convicted or even charged with a criminal offense.

http://en.wikipedia.org/wiki/Jesse_Jackson

By: cityjvtao on 4/25/13 at 9:35

Please do not feed the trolls. Persons like “jughead” have no insight into any relevant issue. Their only motive is to incite hate. He and others of his brand have demonstrated numerous times that they are simple minded juvenile delinquents with limited intellect. “Cast not your pearls – for he “jughead” is swine”! So why even bother?

By: Loner on 4/25/13 at 9:52

I'll try, city...I'll try.

By: cityjvtao on 4/25/13 at 10:50

Loner - The temptation is great and I too at times do so enjoy a battle of wits with an unarmed man. peace....

By: Badbob on 4/25/13 at 1:17

Loner, there was an anti-trust matter in the acquisition. I have almost exclusively used Flying J in the past 8 years. The day Pilot took over Flying J, they raised the prices 10 cents a gallon or more. Where the DOJ required them to keep both a Pilot and Flying J open at the same exit, they cut the staff at the Flying J so the bathrooms went from spotless to disgusting. They removed the fantastic food service and replaced it with Denny's.

I am surprised seemingly thinly veiled attempts at circumventing the DOJ's anti-trust rulings are not part of this announcement. I have a feeling, employees are rolling over on a lot of stuff not yet made public.

Then, there is the ethnicity charges not mentioned in this article that might be the most serious of all charges. White collar crime is rarely punished seriously. But, violations of the civil rights act of 1964? Uh oh.

By: yucchhii on 4/25/13 at 2:31

"ALL" politicians are CRIMINALS!! They do CRIMINAL things like SCREWING the AMERICAN people!! All the things they are doing to this country are CRIMINAL ACTS!! Yes, that includes AL GORE!! I believe NOTHING out of a politicians mouth, "NOTHING!!" Everytime they open their mouths, a TURD comes out, that's all they're worth...hell, NOT EVEN THAT!!

By: Jughead on 4/25/13 at 2:45

You dolts need help if you believe AlGore is honest. His delaings to get stupid green crap funded, then taking kickbacks, is documented an uncontested.

Plus, he rapes women.

By: pswindle on 4/25/13 at 6:30

How silly! Jug. You know nothing of what you speak.

By: ancienthighway on 4/25/13 at 8:03

pswindle, knowing of what one speaks means nothing to wingnuts. If the facts and truth don't suit you, make something up.

By: Loner on 4/25/13 at 8:15

Badbob...a union-hating scab outfit would naturally try to screw the ethnics....do you have any credible sites, to back that allegation up?

By: Loner on 4/25/13 at 8:28

The Governor of Tennessee refused to put his Pilot-Flying J holdings into a blind trust....that means that he maintained his ties, influence and input with the family business...he is the sitting governor of one of the great states in our union of American states, yet he and his family have been screwing America's truckers at the same time.....Billy Haslam cannot distance himself from Jimmy Haslam...he had the opportunity to do so, when he took the oath of office....he arrogantly refused....now, he must pay the price....he is guilty by association.

The governor is dirty....he must go.

By: Badbob on 4/25/13 at 9:23

LOL Loner, my personal experience. Google can fill you in on the "manuel" "manwell" racism aspect.

By: Badbob on 4/25/13 at 9:32

Actually, the racism was in the request for the subpoena.

The allegations are shockingly arrogant. It reminds me of what I call, the "Fate Thomas effect", where someone in the public limelight steals a lot of money, and then creates a Holier than thou persona doing charity work.

By: fan13 on 4/26/13 at 9:35

Loner, You are absolutely correct ! By refusing to place holdings in a blind trust the Gov has refused to be uninvolved in company dealings. Why in the world would Bill want to continue to be involved in company dealings and risk his own future IF there wasn't something in it for him ? He is not in a position to distance himself at this point in time. The scandal is so far spread that I received an e-mail from a friend in S Cali with NO ties to TN about the ties to Gov of TN. Schemes worth millions are hard to keep quiet, especially within a family.It matters not whether anyone has any criminal activity going on. THIS one is the one being investigated and when illegal it's ILLEGAL/IMMORAL ! Clearly we have, yet, another public figure (s) that needs to be prosecuted. EXACTLY like Bernie Madoff.

By: whitegravy on 4/26/13 at 3:29

Haslams flying j/pilot annual revenues were just a few billion less than the annual budget for the ENTIRE STATE OF TENNESEE.......so the only ones with power over that kind of power-brker are the feds........the ultimate outcome remains to be seen.....but no-ones gonna go to jail.........when you have BILLIONS in your slush-funds, scapegats pop-up ( and are duly compensated) as well as heightened and publisized contributions to charites to stroke the public........nothing that a good well funded PR DEPT CANT DO........and the band played on........