Ex-Pilot President Seeks Different Judge, Location For Second Fuel Fraud Trial

The former president of Pilot Co. wants a federal judge to recuse himself from overseeing the retrial of a fuel rebate fraud case against him and two of his former staffers and is also seeking to have his case moved from Tennessee to another state.

Mark Hazelwood was the highest-level executive of Pilot, the nation's largest fuel retailer headquartered in Knoxville, Tennessee, to be indicted in a five-year rebate scam that targeted trucking customers it considered "too unsophisticated to catch on." 

In court filings, Hazelwood, who is white, claims Senior U.S. District Judge Curtis L. Collier, who is Black, was biased because he allowed prosecutors to play alleged prejudicial recordings of Hazelwood spewing "profanities about African Americans and women" during his first trial. 

"I deserve to have a judge who has not already judged me, clearly believing I am a ‘typical' white-collar defendant, and a racist one at that," Hazelwood stated in court filings on Friday.

A split three-judge panel of the U.S. Court of Appeals for the 6th Circuit overturned Hazelwood's conviction, along with two former sales team executives, Scott "Scooter" Wombold and Heather Jones, in October.  

The appeals court ruled that Collier erred in allowing jurors to hear the racist recordings but that he wasn't biased. The judges didn't call for Collier to step aside in the Hazelwood case. 

"The district court admitted the recordings on the theory that if the defendant was reckless enough to use language that could risk public outrage against the company, ‘he was a bad businessman,' and as a bad businessman, he was also reckless enough to commit fraud," Judge Richard Suhrheinrich wrote in the majority opinion. "This is vintage bad character evidence — and precisely the type of reasoning the Federal Rules of Evidence forbid."

In her dissenting opinion, Judge Bernice Bourie Donald wrote the Hazelwood recordings were admissible during his trial.

"The government sought to introduce extrinsic evidence of recordings rebutting the proffered defense by showing Hazelwood engaging in and promoting racist, sexist and otherwise inappropriate talk and entertainment as allowing and encouraging his subordinates to do the same, all at and during a company meeting where business decisions and perspective were had," she wrote.

The audio reveals Hazelwood asking, "Where's our greasy (racial slur) song?" and then singing along with other Pilot employees to the racist lyrics of a country song written by David Allan Coe.

The tapes also include Hazelwood making profane remarks about Pilot's board of directors and the Cleveland Browns football team, which former Pilot CEO Jimmy Haslam III owns. 

Hazelwood later publicly apologized for his remarks. 

In September 2018, Hazelwood was sentenced to more than 12.5 years in prison for his alleged role in an elaborate $56.5 million fuel rebate scheme to cheat smaller trucking companies out of millions of dollars. 

New trial developments

Court filings state that Hazelwood is also seeking to have his trial moved from the U.S. District Court for the Eastern District of Tennessee to Arkansas, Missouri or North Carolina, stating that intense press coverage of his alleged role in the rebate scheme "has poisoned the jury pool to the point that a fair trial in East Tennessee is impossible." 

Wombold and Jones are also seeking a change of venue for the retrial.

The new trial will also focus more on the Haslam family, including former Gov. Bill Haslam and Browns' owner Haslam III.

The Haslams have denied any involvement in the fuel rebate scam.

"We note that, for various reasons, the retrial will focus much more on members of the Haslam family than in the original trial," according to court documents, citing social functions that were attended by both Collier and Bill Haslam and asked the judge to "consider whether any relationship or connection between the court and Gov. Haslam merits recusal."

Hazelwood's attorney, Jim Walden of Walden Macht and Haran LLP, did not immediately respond to FreightWaves' request for comment. 

The fuel rebate scandal rocked the truck stop dynasty in April 2013 after the FBI and the IRS raided Pilot's corporate headquarters. Court filings claim Pilot employees involved in the deceptive rebate program also targeted minority-owned companies "in hopes that language barriers might make [the] discovery of their fraud more difficult, or easier to explain away if caught."

The truck stop chain reached a $92 million agreement with the U.S. Department of Justice in July 2014 over the 15-month probe of its five-year fuel rebate scam that targeted customers it considered "too unsophisticated to catch on." Pilot also agreed to pay an $85 million settlement to trucking companies with fuel rebate agreements.

Fourteen former Pilot employees pleaded guilty for their roles in a scam known as "jacking the discount" among the company's diesel fuel sales staff. Two other former employees were granted immunity for cooperating with federal investigators, and one was found not guilty.

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