NASHVILLE, Tenn. (AP) -- Two employees of the truck stop chain owned by the family of Tennessee's governor and the owner of the Cleveland Browns pleaded guilty Wednesday to scamming the company's customers out of rebates, a practice well-known among both sales staff and executives as "jacking," according to court documents.
Court papers outlining the plea deals say regional sales director Arnold Ralenkotter and regional accounts representative Ashley Smith Judd were part of the conspiracy to boost profits and pad commissions at Pilot Flying J, which is owned by the family of Tennessee Gov. Bill Haslam and Browns owner Jimmy Haslam.
Ralenkotter and Judd were the first charged in the federal investigation, and both pleaded guilty to conspiracy to commit mail fraud. The pleas were entered in U.S. District Court in Knoxville.
Judd's attorney did not immediately respond to calls seeking comment, though Ralenkotter's attorney said he is cooperating with authorities. Both were charged earlier this month in a document typically filed when defendants are cooperating with investigators.
"This is a man who's admitted doing something wrong, but he's trying to make amends by cooperating and providing substantial assistance," said Ed Yarbrough, a former federal prosecutor representing Ralenkotter, 51.
The conspiracy charges carry up to 20 years in prison, but Ralenkotter is likely to have a much less severe sentence because he is a first-time offender and because of his cooperation.
The defense attorney declined to say how Ralenkotter would be cooperating, what he knows and whether Pilot CEO Jimmy Haslam knew that employees were withholding rebates from tucking companies.
Jimmy Haslam has denied any wrongdoing and has suspended several members of the sales team, but he has declined to identify exactly who has been suspended. An affidavit unsealed last month shows that a Pilot employee was secretly recorded saying that Jimmy Haslam knew what sales people were doing, though he has denied knowing of any fraud.
He also has said an internal review suggested about 5 percent of the company's customers received less rebate money because of manual adjustments by Pilot employees.
"The statements released by the federal court today do not come as a surprise given what we've been learning in our own internal investigations, but are nonetheless disappointing," Pilot Flying J spokesman Tom Ingram said in a statement. "We want to assure our customers that we are taking every step to correct any wrongdoing that has occurred and to make certain that it does not happen again."
Court documents in Ralenkotter's and Judd's case show that fraud was well-known among sales staff and that Pilot's national account sales director taught employees how to defraud trucking companies out of rebate money without getting caught. The national account sales director was not named in the plea agreements Wednesday, but an affidavit unsealed in April said national sales director Brian Mosher trained employees on how to get away with the fraud.
Mosher could not be reached for comment. Public records did not list a telephone number for him.
Court records say that it was often difficult for trucking companies to track how much money they were entitled to because there were so many variables in the company's diesel price discount program.
Documents indicate people both higher and lower than Ralenkotter were aware of the fraud. Ralenkotter even threatened to take a customer account away from a subordinate if the worker did not go along with the deception, known among employees as "jacking" the discount, court documents say.
For his part, Ralenkotter specifically pleaded guilty to being part of the fraud that lowered the rebate of New Jersey-based trucking company Dana Transport. Officials with the trucking company did not immediately respond to a call seeking comment. As for Judd, she admitted to defrauding customers of $200,000. Court documents say that whenever a trucking company challenged her about whether they were getting the right amount of rebate money, she would say it was an error caused by a "lapse in numbers."
Court documents in Judd's case show there may have been more than 50 companies defrauded by Pilot.
On April 15, the same day FBI agents raided the company's headquarters, they also searched the homes of three regional sales directors, including Ralenkotter's home in Hebron, Ky., according to an affidavit. That document indicated that the FBI and the IRS have been investigating the company for about two years, and that they had secret recordings of company officials discussing the rebate scheme.
The Knoxville-based chain is run by CEO Jimmy Haslam, the governor's brother. Pilot Flying J, the country's largest diesel retailer with annual revenues of $31 billion, was founded by their father.
A spokesman for the governor deferred to what Bill Haslam has said previously about the probe. The governor has insisted that he has "faith and confidence" in his brother's ability to deal with the situation and that there had been "gossip and speculation" about the raid on the company.
At least eight trucking firms have sued Pilot over the rebate program. Some have retained former FBI Director Louis Freeh's firm as part of their lawsuits.
Associated Press writer Lucas L. Johnson III in Nashville and AP Sports Writer Tom Withers in Cleveland contributed to this report.