Pilot Flying J

Flying the Coop – When Rogue Employees Leave you Liable

It’s nearing the end of the fiscal quarter, and your salespeople are trying to make their quotas in order to get their bonuses. They’re out in the field selling, but just to hedge their bets, they commit a sin of omission by not mentioning the discounts and rebates that your company typically gives to clients.

This is an overly simplistic version of what happened recently at Pilot Travel Centers LLC, better known as Pilot Flying J, a company that operates about 650 truck stops in the U.S. Flying J is one of the country’s largest privately-held companies — you may recognize the name of their CEO, Jimmy Haslam, as the owner of the Cleveland Browns.

The case against Flying J

The Justice Department’s investigation is long and involved, but lays out a case that Flying J employees and supervisors committed fraud by reducing the amount of diesel fuel price discounts to which Flying J customers were entitled. Employees were charged under mail and wire fraud federal guidelines.

The Justice Department entered into a Criminal Enforcement Agreement with Flying J so that the company can resolve its criminal liability. Under the agreement, Flying J is to pay full restitution to victims, and must also pay a $92 million penalty. An investigation into Flying J’s practices is ongoing, so this could be the tip of the iceberg for the Knoxville, Tennessee-based company.

Numbers like this make a quarterly bonus seem trivial, but when employees are under stress to perform, and supervisors are answering to higher-ups about the bottom line, it’s sometimes easy to see how cutting a few corners can quickly get out of control.

Could it happen at your company?

Nobody likes to think, this could happen at my company – in fact, most of us work pretty hard to ensure that best practices are in place in all departments – but the truth is, a few employees operating under their own set of guidelines could put your company at risk for huge liability.

It’s critical to maintain a close eye on all departments, and put checks and balances in place throughout your organization to hold managers accountable for their departments, and also to get frequent reporting on how employees are doing. At the same time, work with your legal and HR teams to make sure proper channels are in place so that when something goes wrong, a whistle blower is heard or a red flag is seen.

And finally, be sure you’re covered if something does go awry. Companies dealing with even a small scandal a tenth the size of what Flying J is going through will face legal fees, public relations costs, lost sales, employee suits, and more. When traditional liability coverage isn’t enough, consider an enterprise risk captive as a way to cover your company.

If we can provide any information, feel free to contact us.