Federal prosecutors are asking an appeals court to reconsider its recent ruling that tossed out the convictions of former Pilot Flying J President Mark Hazelwood and two members of his sales team for their alleged roles in an elaborate $56.5 million fuel rebate scheme.
Assistant U.S. Attorney Trey Hamilton filed the petition late Monday seeking a rehearing by the same three-judge panel of the U.S. Court of Appeals for the 6th Circuit.
The government did not seek a judicial review by the full 6th Circuit Court, which would have required approval by the U.S. solicitor general.
“The United States respectfully asks the panel to reconsider and vacate its earlier opinion,” the petition states.
A divided panel struck down the convictions of Hazelwood and two former sales team executives, Scott “Scooter” Wombold and Heather Jones. The 2-1 decision from the 6th Circuit Court of Appeals ruled that Senior U.S. District Judge Curtis L. Collier erred by allowing prosecutors to play secret recordings of Hazelwood spewing “profanities about African Americans and women” at trial.
“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 opinion joined by Judge Eric Murphy.
The majority argued the recordings tainted the jury’s verdict after they were allowed to hear eight minutes of secret recordings at a company retreat that included Hazelwood making racial slurs and derogatory comments about women.
The dissenter on the three-judge panel, Judge Bernice Bourie Donald, argued the Hazelwood recordings were properly admitted to rebut Hazelwood’s character defense.
Judges misinterpreted prosecutors purpose for playing recordings?
Prosecutors claim the judges misinterpreted the government’s purpose for why the recordings were introduced at trial.
The recordings were offered and admitted to rebut Hazelwood’s asserted defense that he was a good businessman and wouldn’t engage in conduct that put the company in jeopardy, Hamilton wrote.
The recordings were “not to establish any propensity to recklessness or fraud,” the petition states.
Instead, the government said the recordings were introduced as evidence to show that “Hazelwood had not always acted in the best interest of Pilot’s reputation.”
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 the country song written by David Allan Coe at a company meeting.
“The majority opinion misapprehends the purpose for which the recordings were introduced and, as written, sows confusion about the government’s ability to rebut ‘good faith’ defenses to intent crimes,” the petition states.
The divided panel disagreed.
“Having a bad set of personal beliefs did not make it more likely that Hazelwood made bad business decisions,” Suhrheinrich wrote in the majority opinion.
The appellate judge stated that Henry Ford, founder of Ford Motor Company, was a “rabid anti-Semite.”
“Yet this character flaw did not impede Ford’s acuity in industrial arenas or affect the success of Ford Motor Company,” Suhrheinrich wrote. “Like Ford, Hazelwood’s personal views are despicable, but they do not correlate with his business judgment.”
In the petition, Hamilton disagrees, citing Ford’s anti-Semitic newspaper articles “prompted boycotts of Ford automobiles until Ford issued a public apology and stopped publishing the newspaper in 1927.”
“The fact that Hazelwood made and encouraged virulently racist remarks that, if publicly known, would have damaged Pilot’s success and reputation directly contradicted his defense that he would never do anything to jeopardize the company,” Hamilton wrote in the petition.
If the three-judge panel declines to review its Oct. 14 ruling, the case will be sent back to the U.S. District Court for the Eastern District for a possible retrial.
Hazelwood, convicted of conspiracy to commit wire fraud, wire fraud and witness tampering, was sentenced to more than 12 years in prison. He was also fined $750,000.
Wombold, convicted of wire fraud, was sentenced to six years in prison. Jones, who was convicted of conspiracy to commit mail fraud, received a 2.5-year sentence.
The fuel rebate scandal rocked the truck stop dynasty in April 2013 after the FBI and the IRS raided Pilot’s corporate headquarters in Knoxville, Tennessee.
The family-owned truck stop chain, owned by the Haslam family, 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.
Pilot CEO Jimmy Haslam has denied any involvement in the fuel rebate scam.
Click for more articles by FreightWaves Senior Editor Clarissa Hawes.
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