FBI investigation: What awaits Jimmy Haslam as trial proceeds for former Pilot Flying J employees?

Another losing season is not the only thing Jimmy Haslam wants to get behind him.

As the Browns owner attempts to focus on righting a franchise that’s 1-29 in the past two seasons, he’s also casting a wary eye toward Chattanooga, Tennessee. That’s where four former Pilot Flying J employees are standing trial in U.S. District Court accused of conspiracy to commit wire and mail fraud in a scheme to promise trucking firms big discounts but shorting them on rebates.

The 63-year-old Haslam, who serves as Pilot’s CEO, has not been charged and has denied any wrongdoing in a case in which 14 other company executives and employees have pleaded guilty.

It doesn’t mean Haslam is completely in the clear just yet — either under federal law or the long arm of NFL Commissioner Roger Goodell. The findings of the jury trial, set to resume Jan. 10 and likely to stretch into late February, could potentially impact his status as Browns owner.

But nothing that’s transpired to this point in the trial would appear to place him in serious jeopardy in terms of the law or with the league. Obviously, that can change with a bombshell development. It’s important to note, however, the government has had nearly five years to bring charges against Haslam. And barring extraordinary circumstances, the statute of limitations is set to expire April 15, sources have indicated to The Athletic.

In other words, the government is running out of time to make a case against Haslam.

How did we get here? A quick refresher.  On April 15, 2013, FBI and IRS agents raided Pilot Flying J headquarters in Knoxville, Tennessee. Authorities asked Brian Mosher, a Pilot sales executive, to call Haslam and inform him, Mosher testified last month.

“I said, ‘Jimmy, we’ve been caught,’ ” Mosher testified. “(Haslam) said, ‘I understand there are some folks at your house.’ ” Haslam immediately transferred Mosher to Pilot’s legal counsel.

In short order, the Browns owner held a news conference to deny any knowledge of the rebate scam. Pilot Flying J’s board of directors confessed criminal responsibility and agreed to pay $92 million as punishment. The company was placed on two years’ probation. It also settled lawsuits by trucking companies totaling $85 million and agreed to pay for the defense of former Pilot President Mark Hazelwood and subordinates Scott Wombold, Karen Mann and Heather Jones. The truck-stop giant has regained enough public confidence for Warren Buffett to buy a significant share in it.

“Without getting into too much detail, it is traditional when employees of a company are sued or have a legal problem that the company — until those employees plead guilty or are found guilty — pays for their legal expenses,” Haslam told reporters in Berea on Dec. 8.

Jurors recently heard secret recordings of a man whom prosecutors identify as Haslam saying: “Sounds like Stick’s deal with Western.”

It was a reference to an incident in which former sales executive John “Stick” Freeman had been caught cheating Western Express, a Nashville firm. In an attempt to smooth things over, Pilot J agreed to pay $1 million to buy a broken-down airplane from Western.

Freeman already has pleaded guilty, and is awaiting sentencing.

What does that recording mean for Haslam? There’s a big difference in the law between having general awareness of a scheme versus directing it, participating in it, supervising it or ratifying it. Right now, the recording shows — and this is arguable — that Haslam may have been aware of the scheme. The buck does stop with the head of the company, but there’s a difference between knowing about something and authorizing it.

Freeman is expected to take the stand at the trial and his testimony figures to be a pivotal moment for Haslam. It was Freeman, also caught on a recording, who said it wasn’t a secret at Pilot that the firm’s manual rebate system was used to defraud trucking companies.

“I mean, I called Jimmy and told him I got busted at Western Express,” Freeman was heard saying. “He knew — absolutely. I mean, (Haslam) knew all along that I was cost-plussin’ this guy. He knew it all along. Loved it.”

Two points here. The government has known for years about the recording, but hasn’t brought charges against the Browns owner. Also, saying it in casual conversation and making the claim in federal court under oath are two different things.

That’s why Freeman’s testimony will be so pivotal.

Beyond the court of law also lies the court of Roger Goodell. The NFL would not need an indictment of Haslam to punish him if Goodell believes the owner is guilty of conduct detrimental to the welfare of the NFL.

The “general awareness” precedent from the Patriots’ Deflategate saga could become problematic because it’s established Goodell’s sweeping authority to discipline players, owners, coaches and all personnel in the league. Under the NFL’s Constitution and Bylaws, the
commissioner could choose to suspend Haslam, fine him up to $500,000, or refer the matter to the league’s executive committee for the possible divestiture of his ownership interest. That possibility lurks in the background, but where we stand today in terms of what we’ve learned in the trial so far does not seem like enough to lead to those kinds of penalties. The league has not been calling Haslam for updates, sources indicate, but the Browns owner has updated the league office whenever he believes it’s necessary.

NFL sources recently told CBS insider Jason LaCanfora: “No prosecuting authority has found reason to bring charges against Mr. Haslam … so that’s where we leave it.”

Former Niners owner Eddie DeBartolo Jr. was suspended from the NFL for a year in the 1990s and eventually yielded control of the team to his sister, Denise DeBartolo York, for his role in a bribery scandal. DeBartolo was convicted of failure to report a felony when he paid what was described as extortion money to former Louisiana Gov. Edwin Edwards in exchange for a riverboat gambling license approval.

On the other hand, the league took no action against Vikings owner Zygi Wilf in 2013 when he was found liable by a New Jersey court for breaking civil state racketeering laws and keeping separate accounting books to fleece former business partners of shared revenue.

If there are guilty verdicts rendered in the Pilot case, what we will have is corporate responsibility in excess of $100 million in fines and penalties and convictions and guilty pleas across the board without exception. That might give the commissioner something to think about.

But it’s been five years since the Pilot offices were raided and to our knowledge the NFL has not initiated any investigations.

Here’s another important point: The league is not well equipped to conduct the kind of investigation of far-reaching fraud involving trucking companies and witnesses located all over the country. That’s a far more detailed probe than investigating the deflation of a football or a domestic violence incident involving two people.

Would the league attempt to force Haslam to sell and plunge a franchise into chaos during an investigation that would likely last more than a year?

The Pilot case is not a high-profile one outside of Cleveland and Tennessee. It’s not creating a public relations problem for the NFL in the way the Ray Rice and Adrian Peterson cases did. Extensive media coverage and blowback from fans and league sponsors certainly played factors whether the league wants to admit it or not.

Where I see this going, barring some incredible revelation or harmful testimony from Freeman is that Haslam will avoid any criminal repercussions and the statute of limitations will likely run out.

Still, it figures to be a nervous few months for Haslam before he can get some peace of mind.

Editor’s note: Daniel Wallach is board certified in appellate practice by the Florida Bar and is a nationally recognized authority on gaming law and sports law.

Photo credit: Nick Cammett/Getty Images