Freeman said. "I mean, I called Jimmy and told him I got busted at Western Express."
"What did he say?" the informant asked.
"Oh, he[Jimmy] knew it," Freeman responded.
"Oh, he did?"
"Absolutely. I mean, he knew all along that I was cost-plussin’ this guy. He knew it all along. Loved it. We were making $450,000 a month on him."
Let's get it out of the way off the rip. I have been accused of hating Browns owner Jimmy Haslam. In fact, many people have pretty much called me every name in the book, and some people on Twitter have taken to insulting me because of my out-spoken nature.
I didn't hate Jimmy Haslam. I may have had reservations about him, but he owned my favorite team. I kind of had to like the guy.
Then this happened. Below I have outlined my version of a Cliff's notes version of the FBI document on Jimmy Haslam.
I know a lot of fans are hoping for the best, and we will get to the nitty-gritty, but first let me share a quick story.
I was working at WQXI in Atlanta when the Mike Vick story started to break. We had a high-profile attorney that dealt with high-profile cases join our show. Many Falcon fans were still hoping/believing that Vick was going to be okay. One of his lackeys would take the wrap, or his super expensive lawyer was going to get him off.
I never forgot what the Lawyer told us next (paraphrasing):
When the federal Government comes after you in a high-profile manner, you won't know it until it is too late. It's like having a radar detector and coming over a hill to see a cop. Your detector goes off, but it's just telling you that you're busted. The Federal Government is the same way. Once you see them, it's way too late. Sure they will ask you questions, like do you know why you got pulled over, or do you know where the hard drives are, but the jig is up. When it comes to high profile cases, the Feds don't like to look stupid. They have gone over the facts hundreds of times and made sure that it's a slam dunk. We are talking about a star in the NFL, America's most popular game. It's not if he is busted, it's how bad.
Obviously that was a different case, but a lot of it rings true. Important to remember.
Let's look at what we know. First,
John Freeman, the Vice President of Sales for Pilot
Jimmy Haslam Jr., CEO of Pilot
Brian Mosher, current Director of National Sales
Cathy Giesick, former Regional Sales Manager
Mark Hazelwood, Pilot current President
CHS-1, unnamed whistle blower
CHS-2, unnamed whistle blower
Once upon a time:
From the top, CHS-1 taped a conversation between them and CHS-2, who was not aware of the wire. CHS-2 informed CHS-1 that Freeman and Mosher were intentionally with holding rebate checks from customers. During this conversation, it also become apparent that Giesick knew of the program.
On October 2nd, 2012, the FBI and the IRS contacted Giesick on what she knew of the scheme. She agreed to cooperate with the investigation. She confirmed what the Feds already knew. Under Mosher's supervision, Giesick intentionally short changed customers rebates. Increasing the profitability numbers for the company, and increasing the commission for the salesperson. She cited her discomfort with the situation as a major reason of her leaving the company. She agreed that she will not be prosecuted in return for her help.
She then provided the Feds emails in which the scheme was discussed. She also informed the investigators that she was present for a meeting in which Haslam thanks Mosher for saving the company money. Haslam could have been included in another meeting in which Hazelwood praised the scheme and announced that people would be promoted for saving the company money with the scheme.
Giesick also confirmed that the shortened checks were coming from Knoxville Tennessee, where Haslam was based out of.
Two days later, the FBI and IRS contacted CHS-2, a current director of sales, and laid out their case. CHS-2 confirmed what was already known, dropping the names of Freeman and Mosher. He also stated that Freeman had directed one of CHS-2's employees to engage in fraudulent activity the previous month.
For Browns fans, a bomb shell came next.
CHS-2 then stated that the rebate scheme was known to President Hazelwood and CEO Jimmy Haslam. CHS-2 stated that Haslam and Hazelwood were both present for multiple sales meetings in Knoxville, in which the scheme was discussed. CHS-2 then supplied investigators with an email chain addressed to Mosher and Ashley Judd that outlined the rebate scheme on a customer. CHS-2 then agreed to join the investigation in return for immunity.
CHS-2 then provided numerous taped discussions with other Pilot employees that laid out many different cases in which the discussed different ways in which they would short customers their money. Including blaming computer glitches and just hoping customers would not notice disappearing money.
The Lake home Meeting
On October 25th 2012 at Freemans lake home, CHS-2 taped a conversation in which Freeman admitted that he forwarded "Trip Report" emails (detailed accounts of sales that were added into the SalesForce program that was used to keep track of some of the rebate shortages) to Jimmy Haslam. During this meeting, Freeman also emphasized that the sales staff in the meeting were the "teachers" for the younger sales staff.
Another potential bombshell for Browns fans:
During this meeting, it was decided that Mosher would teach the new sales staff the "manual rebates (which was code for the scheme). Here is the direct quote from Freeman; "Jimmy is pushing us (sales staff) to have a teaching meeting". They agreed, with Hazelwood's approval, of a multi-day teaching session around Thanksgiving in which the senior sales staff would teach the younger sales staff how to work the "Manny's" or manual rebates.
The Investigation continues
On November 19th, 2012, CHS-2 met with Heather Jones, one of the people in charge of keeping track of the manual rebates. She showed CHS-2 the spread sheets, dating back to 2008. She then explained how she kept track of the supposed discounts and how she went about making sure the proper numbers were kept. Her office was located at the Knoxville office.
The Plane Joke
On November 20th, 2012, (two days after the loss to Dallas by the way), Haslam, CHS-2, and Hazelwood all attended a meeting that was taped secretly. In the meeting, the Western incident (which was mentioned at the start of the article in blockquotes) was again brought up again, this time in front of Haslam.
An unnamed voice spoke up during the meeting referencing the "plane deal" (Pilot purchased a plane for Western when they were caught red-handed, which will be discussed in depth later). The comment was laughed at, and Freeman responded with "Yeah, ah, some of us rich and famous have our own planes."
I guess that was funny to the men in the room.
On December 7th, 2012, CHS-2, Mosher and others had a discussion regarding Pilot's deal deal with the Postal Service. They openly agreed that they were scared of these accounts because they should have a good grasp on their numbers. In fact one sales person said that he refused to screw the Postal Service because "I do not want to get thrown in jail."
The Merger and the FTC
We have a new face to introduce. When Pilot and Flying J merged, the Federal Trade Commission was very interested, and not in a good way. There was a investigation, hearings, etc.
Freeman, CHS-2 and Chris Andrews, a salesman who was brought in front of the FTC, admitted on tape to CHS-2 that he was scared of emails:
[After being asked about testifying in front of the FTC] Andrews: Yep. That's even why today, if I do a manual rebate, I will never do it through an email"
CHS-2: Yeah, you don't document it. You know Cathy Ciesick?"
I mention this because the FTC was already interested in the Pilot-Flying J merger. I'm guessing they are lining up for the next whack at Jimmy Haslam and the company. When there is blood in the water, sharks are going to swarm.
The Investigation continues
On Feburary 6th, 2013, CHS-2, Freeman and Andrews had a discussion about an employee named Ben.
Maybe the most damning statement in regards to Haslam:
Freeman discussed again the Western situation, when he was caught red handed stealing a customers rebate money (an estimated 1 million dollars). When asked if Haslam knew if the situation:
Freeman: "I called Jimmy and told him I got busted a Western Express."
CHS-2: "What did he say?"
Freeman: "Oh, he knew it."
CHS-2: "Oh, he did?"
Freeman: "Absolutely. I mean, he knew all along that I was cost-plussin' this guy. He knew it all along. He loved it. We were making $450,000 a month on him."
CHS-2: "Holy shit!"
Freeman: "Why wouldn't he love it? Did it for five years, cost us a million bucks. I mean we made six million dollars off the guy, cost us a million."
Seems to back up the idea that Haslam knew of the plane deal back in November, when the Plane was joked about in a meeting in which Haslam attended.
Jimmy Haslam returns to run Pilot on February 11th, when the current CEO John Compton was "re-assigned" in the company. Haslam said he missed running the business. Anyone buy that?
During February, CHS-2 had numerous conversations, taped, with Hazelwood, Freeman and others where the openly discuss the rebate program and encouraged the usage. At one point in time pondering whether or not to make all customers use the paper check rebate program, making it easier to change the numbers in their favor.
Haslam was not mentioned during this time (most of these conversations took place during the combine, but Haslam did not attend for the Browns) but the further implication of Hazelwood and Freeman is not good news for Haslam.
Ashley Judd and the burning file
Not that Ashley Judd. I wondered too.
Ashley Judd is a Regional Account Representative at the Knoxville location. She manually kept track of all the rebates in a file in her desk. She never e-mailed anyone about the files and made sure that they were always easily accessible. In a taped conversation with CHS-2, Judd said that if the Knoxville location were to ever be raided, she would burn the file the second someone entered the door.
CHS-2 gets a tip
After returning from a vacation on April 1st, 2013, CHS-2 has a discussion with a fellow employee and is told the CFO Mitch Steenrod and Pilot General Counsel Kristen Seabrook were gathering information on the manual rebates. All Regional Account Representatives were requested to give how much money was being rebated, and how much money should have been rebated. In other words, they wanted to know how much money was being made. CHS-2 and the other employee were told that they wanted the numbers to figure out the liability of the manual rebates. It was also decided at that point that all rebates would be approved by Seabrook.
This was just a week prior to the raid. [Seems too convenient for me.]
On April 9th, 2013, CHS-2 was informed that Seabrook wanted all rebate information by the end of the day. She wanted how much the customers should be getting and how much they would be getting for the following weekend.
The final nail in the coffin?
Straight from the FBI document:
CHS-2 has advised, and the consensual recordings show that various reports, including diesel sales profitability reports [which would show the manual rebate savings(my edit)], are sent by email to senior members of Pilot's management structure, including CEO Jimmy Haslam.
The next 15 or so pages of the document outline what the Feds want from the Pilot offices. They name offices. They name people. They name specific computers, even name specific files. They knew exactly what they wanted, and they knew exactly where they were. In other words, they had their shit in order. They crossed T's, dotted i's and even made sure the o's were perfect circles. They even discovered that Pilot had kept a back-up of every file at another location. They found a third location that received Fed Ex packages for some Pilot employees, and they believed that there could be computers there. They knew it all.
They went for warrants.
Over the next few days, the Feds photographed every entrance, every car and even traced every license plate at both locations. They were getting ready. On April 15th, the day in which the next wave of manual rebates were to be sent out, the FBI and the IRS executed search warrants and seized everything they wanted. Just for good measure, they went back the next day and got more.
What does this mean for Haslam?
Already in the fold, the feds have 3 whistle blowers, so much taped audio they were unable to go through everything before issuing warrants, and every hard drive, computer and file they wanted from Pilot.
In other words, the feds have everything they want.
I know people think Haslam will be protected, I think the opposite. The FBI and the IRS don't want the small potatoes guys. They don't even want the president. Sure they will get what is coming, but the feds want the big fish. They don't put on their good clothes to beat up on the weaklings. They want Haslam. Read the report, anytime Haslam is even remotely named, it is highlighted and focused on. He is target number one.
How can they do it? Haslam has been implicated on five different counts, by different people. If there is an e-mail to Haslam showing an improper rebate, which seems like an when sort of thing, not an if at this point, he is cooked. Let's assume he cleared that out like pwanda's internet history (which I give a 0.0000003% chance of happening).
Freeman, who seems to this non-lawyered eye, has the most to lose. He seems to be the focus of the investigation. Maybe most importantly for Browns fans, he obviously had plenty of open dialog with Haslam, and is the one who puts Haslam right in the FBI cross hairs with his plane story. I'm guessing Freeman will be offered some sort of deal.
Same for Hazelwood. He could quite easily push the buck right up the hill. He obviously knew of the scam and attended many meetings outlaying Haslam's wishes to further the scam by teaching new sales the tricks of the trade.
People will be out to save themselves. No one wants to go to jail, they said it themselves. We are talking about guys that own lake houses, jets and probably the cash to buy Ben Roethlisberger all the women he wants. They won't think twice on selling out Jimmy if keeps them out of jail, no matter how nice the "jail" is.
The NFL suspended Eddie DeBartlo Jr. for a year after he was caught up in a scheme to get a gambling license for a boat. He later was forced to sell the team to his sister. That was for extortion of $400,000. If the accusations are proven to be true, and they look pretty solid right now, that is a literally a fraction of what Haslam was stealing in a month.
What about the Players Union? They were already pissed about Roger Goodell being too rough on players. Guys get suspended for a week for a bar fight. How will they react to an owner stealing millions of dollars? How will the other owners react? This isn't a happy go-lucky bunch of guys. You think Dan Rooney, the US ambassador for Ireland, is going to be pissed about this? He vouched for this guy! Now he is a crook!
The Mara family? The McCaskey family?
Roger Goodell answers to these people. He has to worry about the players union throwing a shit fit because he would be showing favoritism. He has to "protect the shield."
I'm not a lawyer. Many here on DBN are. If I made any errors, please point them out; this is an open discussion to inform Browns fans. Please excuse any spelling errors; it is 2am CST, and I have gone over 159 pages of FBI documents. I am more cross-eyed than a shit-faced Stuart Scott.
My guess? We have a new owner within two years. Don't know how the NFL does it, heck maybe even Haslam bows out on his own. But this isn't going away. Haslam probably is.
What does it mean for the Browns?
This is Banner's ship. He somehow got what he wanted in Philly. You could make the argument that Banner and Lombardi are in the same position they put Heckert and Shurmur in. Maybe we will see Banbardi shoot for the moon this draft. After all, a playoff appearance would look good to the next owner, whoever that would be.
Outside of Banner and Lombardi going crazy, I don't think this effects the Browns too much this season. It will be a constant question at every road trip, but unless the Feds freeze the money, it shouldn't hurt. If they do freeze the money, Alex Mack could be a FA next off-season. Haden right behind him. If our owner can't spend any money, we could be in a freeze. That could hurt us badly.
Maybe the most likely outcome will be that the Browns will get a new owner in 1 to 2 years, who will want his own guys (C'mon Mark Cuban!). We will flush them all out. Hire a new GM, a new coach and possibly even switch defenses again.
This is a situation that has never been seen before. Sure some owners have gone broke before (see the Mets right now and the Dodgers under McCourt), but I don't remember an owner every being the central figure in a scheme that stole millions. Truly a brave new world.
The only thing I do know, is that the US government doesn't like to pick fights they don't know they can win. Before we let the lawyer off the phone when discussing Vick in 2007, we asked the lawyer one question before he left; If you were Vick's lawyer, what would you tell him to do?
Throw yourself at their mercy. Don't lie, they already know the truth. They only ask to see if you are lying or not. At the end of the day, hope they are in a good mood when they decide what they want to do. You can't win.