- Lester Munson, Legal Analyst
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By admitting that his diesel fuel company defrauded its customers of more than $56 million, Cleveland Browns owner Jimmy Haslam saved his Pilot Flying J truck stop empire from further federal investigation by agreeing to reimburse his customers and to pay a fine of $92 million.
His decision may have also saved his ownership of the Browns.
The settlement with federal investigators came 15 months after dozens of FBI and IRS agents raided the company's headquarters in Knoxville, Tennessee, seizing dozens of computers and thousands of documents. Since the raid, 10 Pilot employees have admitted guilt and offered evidence against the company and some of its senior executives.
Under the terms of the agreement, federal prosecutors will continue to investigate other former employees and officers and may file additional charges. Sources involved in the investigation told ESPN.com that several guilty pleas are expected from other employees who will soon be charged.
Haslam's admission about his company doesn't guarantee that he won't be charged as an individual, but that would be highly unlikely. And that's good news for his continued NFL ownership, because if he were to be charged, his fellow NFL owners and commissioner Roger Goodell would have faced pressure to take action on Haslam, just as Goodell has taken action on players who have faced serious charges. In addition, with the NFL trying to settle concussion lawsuits and facing renewed collusion litigation with the NFL Players Association, it would be difficult for the other owners to accept the idea of a fellow owner facing massive fraud charges.
Part of the reason it is unlikely that Haslam will be charged has to do with actions he took shortly after the federal raids. Haslam said then he was "making it right" with his customers. It has been an enormous undertaking. According to the "criminal enforcement agreement" that Haslam signed on Thursday, Pilot has already paid more than $56 million in refunds and must continue to pay refunds to Pilot's 5,000 customers and must add 6 percent interest as the investigation continues.
Between July and November of 2013, the company has employed 120 outside auditors who reviewed 6,700 accounts and determined how much Pilot owed each of the customers. Working 70 hours per week, the accountants searched through discount agreements that dated back to 2005 and calculated the amounts that Pilot employees had shorted from rebates paid to Pilot customers.
In the agreement, known more commonly in federal courts as a deferred prosecution agreement, Haslam and Pilot agree to cooperate with government prosecutors in their efforts to investigate other former employees who were involved in the scheme.
The agreement avoids what could have been a disaster for Pilot, the largest provider of diesel fuel in the U.S., selling 6 billion gallons per year at 563 locations and employing more than 23,000 people. If the company had been charged with federal crimes, it would have struggled to survive. The last large firm to be charged with such crimes was Arthur Andersen, the mammoth accounting firm that collapsed and went out of business.
In addition to the large fine and the reimbursement, the agreement requires Pilot to install a series of systems to ensure that the scheme cannot be renewed and requires the company to eliminate its discounts structures.
Pilot will pay the fine of $92 million, according to the agreement, in eight quarterly payments of $11.5 million with the first payment due immediately.
Under the terms of the 25-page agreement, neither Haslam nor the federal prosecutors are permitted to discuss the settlement.