In the April affidavit, the FBI described how Pilot's fraud worked, in part, like this:
[Cathy] Giesick [who was cooperating with the FBI] further explained that Heather Jones, who also worked as [Director of Sales for National Accounts, Brian] Mosher's Regional Account Representative, would once a month send by e-mail an Excel file to Mosher that listed all of the Customers who were due a Rebate Amount and that listed the actual Rebate Amount due to the listed Customer pursuant to the price discount deal between the Customer and Pilot. Mosher would then engage in Rebate Fraud by typing into the Excel file the reduced amounts to be paid to Customer and returning the Excel file back to Heather Jones for her to execute the Rebate Fraud as directed by Mosher by having rebate checks prepared and sent to the Customer for the reduced amount inputted by Mosher. Giesick was copied on these e-mails and believes she saved them in her Pilot e-mail account and may have saved them under a folder entitled "manual rebate." (p. 20-21)
If you're at all familiar with Excel, this makes perfect sense. Giesick sent Mosher a list with the actual rebate amounts due to the customer. Mosher would then decide, for instance, that he didn't want to give Company X the $50,000 they were due, but could, instead, get away with sending them a check for $40,000 and then handwaving away the difference, if they even noticed. So, Mosher would just type directly into the cell where it said $50,000 and change it to $40,000. And this became the official spreadsheet from which checks were issued.
Now, the nice thing about this story for higher-ups at Pilot is that, someone, say the company president or, oh, I don't know, the CEO could be doing his job and looking over everything to make sure that it looked on the up and up and this would pass muster. It would, indeed, seem to confine the fraud only to the perpetrators.
Think of it this way. Say I agree to pay you 2+x, but I don't make it completely clear to you what x is going to be. Now, say that, for August, x=4, you should be getting $6 and the Excel spreadsheet reads $6 when I review it. But say, instead, that I type $4 into the Excel spreadsheet. If the FBI is describing what happened correctly, it seems like the sales directors were empowered to make whatever deals they could to companies. I might have one company I'm paying 2+x and another company I'm paying 4+x, for instance. So, the refunds any company might get for the same amount of fuel would differ from other companies, depending on who got the best deal. My numbers could be all over the place and that wouldn't raise red flags.
So, the only way my supervisor could know that I promised to pay you 2+x, but was short-changing you is if my supervisor had access to those formulas and knew what my agreement was with you. It doesn't sound from the affidavit like this was the case. Also, even if the formulas were in the spreadsheet, those formulas come from the sales directors. Someone would have to know what the sales director and the customer agreed to in order to know if the agreement wasn't being met. The hitch? Pilot admits they made a lot of verbal agreements. See, for instance, CSPnet.com from last week:
Q: Before all this happened, most of Pilot Flying J’s agreements with its customers were verbal. Now you’re working to document agreements in writing. Was “verbal” just the way the industry did business? How are customers dealing with the change to written agreements?
A: Having verbal agreements is a common practice in our industry. However, as leaders, we are changing the industry standard at Pilot Flying J by creating and implementing new systems and processes. For example, we are documenting all agreements with our customers in writing, which is just one more step in our commitment to doing the right thing.
Easy enough for me to tell you I promised you 2+x and to tell my boss I promised you x. My word against the customer's, with no way for Pilot to know who was trying to pull one over on whom.
The only people, in the scenario Giesick outlines, who know the fraud is happening is the sales director who changes the numbers and the account rep who sent him the original numbers and has to act on the new numbers.
Now, in the affidavit, at least one, if not more of the account reps were keeping copies of the unmodified numbers for their own self-protection. But, again, under this scenario, the fraud does seem like it could be kept from the higher-ups. In the "verbal agreement" scenario, it seems even more likely that higher-ups could be kept in the dark. Hell, even my account rep would have no way of knowing if I told her the wrong arrangement.
But two news stories this past week complicate that narrative.
The first comes from the Cleveland Plain Dealer, in which they're talking about NKC Transportation suing Pilot over this scheme:
The suit, filed by attorneys Mark Tate and Drew McElroy, says the company had spreadsheets that show the amount owed to customers under the rebate program versus the amount actually paid.
This could be semantics. If the account reps all kept copies of the original spreadsheets for their own protection, then, technically, yes, the company had spreadsheets that showed what the customers were owed and spreadsheets that showed what they were actually paid. This doesn't mean that those were side-by-side comparisons available internally to anyone who wanted to see them.
But it seems hard to believe that every account rep would keep evidence of illegal activity, if she wasn't required to. Coming at it from another direction, this seems to indicate that account reps had pretty accurate records of what these verbal agreements were, which makes the "verbal agreement" excuse ring a little hollow.
So, now check out this story from The Tennessean about Pilot claiming a couple of companies owe them money.
In a response to one of multiple civil lawsuits against Pilot, filed Friday in circuit court in Knoxville, the truck stop company’s lawyers claim that the two firms, Glazier Trucking of Kiefer, Okla., and Golden Carriers LLC of Troy, Ala., owe Pilot $1,529.98 because they were overpaid on rebates. In the 11-page filing, Pilot’s lawyers said a third company, Blachowske Trucking of Brandon, S.D., is owed nothing.
In the filing Friday, Pilot lawyers said Glazier owes Pilot $64.19 in overpayments, while Golden owes Pilot $1,465.97.
So, somehow no one at Pilot but the perpetrators knew about this fraud because it was so difficult to detect and they had so many ways of finessing numbers that it just made it kind of impossible to know who was verbally promised what or owed what, but, by god, Glazier owes Pilot $64.19.
Maybe it's just me, but it doesn't seem like both things can be true. Pilot can't be the kind of place where people looked at the numbers, shrugged, and said, "Looks good enough to me" and also be the kind of place where they know they're short $64.19. You're either a stickler for accuracy or you're not.
Either only the fraudsters knew what customers should have been getting or Pilot keeps such good records $64.19 among billions of dollars in transactions stands out. But, I suppose, Pilot has to try to argue that, somehow, it's the kind of company where both things are true—Jimmy Haslam didn't know what was happening AND customers can believe that the settlement numbers are the real numbers and now Pilot is playing square.
Still, I'll be watching to see how Pilot attempts to explain how it could possibly have both not known this was happening and now knows exactly how much it owes everyone.