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Et tu, Pluto? //updated alt title: Why Pluto is a pro.

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Click for cle-dot-com article.

The Plain Dealer has hit rock bottom.  When normally reliable Terry Pluto makes a mistake that no blogger would make, it should be a wake up call.

Investigation of downgrade does not equal downgrade.


Above is a screen cap of the cle-dot-com webpage of Pluto’s Sunday article.  It states a downgrade occurred at PFJ.

That’s major news.

I wondered how I’d missed it.  I knew there was nothing in the WSJ piece revealing a new downgrade of PFJ debt; but the sentence is written as though a downgrade occurred in addition to the WSJ article.  (Use of the word “and” is important.)  So I checked Moodys (who have announced an investigation) and S&P (who have not).   (more…)

PFJ org chart and tracker.

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Click to enlarge.


UPDATE 7/29:  Two more yellow boxes.  Fenwick and Welch pled guilty, it was reported today.


DOJ is up to five guilty pleas in the PFJ fraud investigation.  Adding in CHS-1 and CHS-2 (Greco), that adds up to seven cooperating PFJ employees in the investigation.  I thought it might be useful to see where these people are in the org chart and check into how it’s mapping out.  In particular, are there are any straight lines to Jimmy Haslam?

The org chart is based on the info in search warrant linked here; it’s a best effort, but in some cases I’ve guessed who reports to whom.  (Stinnett is a question; I’m assuming discounting coordinator is part of accounting and rolls up to the CFO.)  If you’re not up to speed on the case, here’s the best review I’ve read on it.

Who has pled guilty?

  • Arnie Ralenkotter, Eastern Regional Sales Director based in Hebron, KY (Cincy suburb).  Uttered the immortal line, “He thinks you’re fuckin’ em. So you might as well be fuckin ’em.”
  • Ashley Judd, Inside Sales (unclear whose account she handled).  Judd told CHS-2 that if anyone ever came in the office that that file would be first one that Judd would burn.
  • Kevin Clark, Sales Rep based in KC.  Unlucky for him, his boss was a DOJ informant and was rolling tape when Clark said:  “You’re gettin’ like cost-minus-1 but we were really givin’ him like cost-plus-3.  And the fucker never checked in the optimizer! To me, I felt like sayin’ Well you’re the moron that didn’t check it!”
  • Jay Stinnett, unclear his official role or who he reports to.  He was an outside rep, was promoted, and was at Freeman’s lake house meeting with other sales directors.  As near as I can tell, he seems like a Sales Productivity and/or Training jack-of-all-trades.  He didn’t teach the manual discount break-out session, but he planned it.  Among his damning tape:  “Our advantage is their ignorance.” (Male voice)  “Yeah, AKA, we’re fuckin’ ‘em. (Laughter.)”
  • Holly Radford, Inside Sales for Hanscomb.  In the fateful breakout session she coined the phrase, “Welcome to the gray side.”  She also handled Stinnett when he was on the road and ‘kept his shaved accounts straight.’ (more…)

The other investigation.

Still open.


They’ve had no issue with suppliers and their stores have remained open.

Did anyone else take notice when Jimmy Haslam (in the press conference embedded below) sought to allay concerns about PFJ’s health by noting that none of his stores closed in the immediate aftermath of the FBI/IRS action?  That PFJ was able to maintain a supply of diesel fuel to all its shops (although something something Minneapolis something something)?

Were you – like me – thinking:  Wait.. WHAT?  Isn’t that your business?  How is this even on the table?  And, NO, I do not feel better about the health of your company for having had this assurance.  I’m going to circle back to this point, but first:

That was a flag and there have been others.

  • Its largest competitor in the truck-stop travel center business, Flying J, went bankrupt in 2009.
  • Not buying the Browns outright with 35% (~$367,500,000) due to Randy Lerner in 2016.
  • Wresting the ‘player lowest salary cap hit’ crown away from the Bengals’ Mike Brown.
  • And now a Moody’s review of all its PFJ ratings, including the previously-downgraded Probability of Default rating.

I’m not a financial analyst or an MBA; open invite to any in the audience who can add insight to this.

But let’s take a look at what – for Browns fans worried about whether or not Jimmy Haslam will be the owner long-term – is the more serious investigation.

A Moody’s action will do more to force a Browns sale than rebate fraud.


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Click for link to Moody’s. Registration required.

Navigating Moody’s

All the data I’m putting forward is straight from Moody’s.  You can access the same data, you just have to register.  Screen-cap above is linked to the research reports found dating back to the Flying J acquisition in 2009.

The initial report says:

Proceeds from the proposed bank revolver and term loans will be used to re-finance existing debt and partially fund Pilot’s acquisition of the travel center assets of Flying J Travel Centers (Flying J) for approximately $1.845 billion.

That’s $2,000,000,000 in debt for the Flying J ‘merger.’  I’ve been unable to find the cost to Pilot for taking on bankrupt Flying J.  The FTC did order PFJ to sell 20 travel centers to competitor Love’s but I have no idea on the cash that would bring in.

First downgrade:  Probable Default Rating (PDR). (more…)

Cleveland Schadenfreude.

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Assuming rejection of a ‘just following orders’ defense these people are criminals going to jail.
Still feeling great about your FBI?


In the midst of a rush to judgement concerning Jimmy Haslam, perhaps we can take a step back this weekend.  I’m not sharing any of the most common emotions I’ve seen expressed on this issue.  I hope I’m not the only one.

What’s your deal Kanick?  After all, you helped kick this off.

When news of this raid broke I came down hard on Haslam and PFJ.  That was when I thought we were dealing with serious charges and naively thinking Justice was being used to effect a greater good.  Now it just looks like a power play of dubious value and born of questionable motivation.

In Tuesday’s post, I explored any number of probable outcomes that would cause government armed forces to enter forcibly a private enterprise, confiscate property, and first confine, then eject workers from corporate buildings.  IT. IS. A. SERIOUS. ASSERTION. OF. GOVERNMENT. AUTHORITY.  Breaking into a place of business with weapons brandished should only be used for good reason.  A ‘good reason’ being the serious criminal activities or white collar crimes on the scale of:

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Guess the company that was not raided this week!
Hint: this company’s business is not truck stops.
Hint: their operating margin is greater than 3%.
Hint: this company is not based in Knoxville, TN.

  • Enron, $25,000,000,000 in assets;
  • Lehman, $138,000,000,000 in Federally-backed advances;
  • AIG, $150,000,000,000 in FRBNY exposure and the life-or-death of GE and GM held through their Credit Default Swaps.

Were public or stockholder monies of that scale at risk and so forcing the drastic intervention?
Nope.  Hell, it couldn’t be a billion dollars, the company only made around $600,000,000 (against $29B in sales).  Not AIG here.

Ok then, maybe we’re dealing with the sex-slavery trade known to occur at truck-stops; FBI has been trying to clean that up.

Bribing of public officials in return for sweetheart land development schemes?

Price gouging?

What this raid was about (ostensibly) is your government prosecuting PFJ for shorting their customers in a rebate program.  The sum total of the missing rebates is not known, Kanick wagers that it will be under $10,000,000 over five years.

Small potatoes.  Small potatoes with just a whiff of caveat emptor that might apply to the customers; how do they not know what they’re supposed to be getting back?

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Nothing says criminal high-finance fraud like a mustard bungalow in Nashville.
(FBI served warrant here… this a target.)

A crime, to be sure.  But there are levels of crime magnitude; discretion on what is and is not prosecuted;  how the prosecution is executed.  Discretion plays a key role; not everything is enforced in the same way.  Anyone bet on the Masters last weekend?  Ok, that’s almost all of you… anyone have 30 cops break in and take your hard drives?  Right, thought not.  Levels of magnitude.  Prosecutorial discretion.  

Was any used here?

The way this played out was the FBI scaring the shit out people who are pretty much just doing their job.  (Even Haslam was rattled as you could tell when the ‘candidly’ meter clicked nine times yesterday.)  The women pictured above are named prominently in the affidavit.  One is the pricing coordinator, two are inside sales people who support outside reps.  These are the people who actually applied the rebates. They’re the ‘good Germans’ who were ‘just following orders.’  Think that’ll fly with the FBI or AG?  Think you’d feel good having your future held in the hands of either agency?  I wouldn’t.

Bet these women never saw this coming when they got their jobs which I’m guessing pays south of 30k/yr. (more…)

They don’t call.

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Michael Clayton knows.  The FBI doesn’t call before entering your data center.

UPDATE:  For a second look on the PFJ saga, after release of the search warrant affidavits, see Cleveland Schadenfreude post. 


The FBI and IRS locked down Jimmy Haslam’s Pilot Flying J headquarters Monday in the service of court ordered search warrants; a second warrant was executed on another building Tuesday.  (Update:  it was a total of four warrants; one for each Knoxville building.  One of the buildings housed their data center.)  The reason for the extraordinary use of force to obtain evidence is unknown other than that it pertains to a criminal investigation.

I’ve worked enterprise-sized accounts for a high tech company for decades.  Outside of the financial service industry, I’ve never heard of this happening.  The ones I’ve heard of:  AIG, Lehman, Enron.. I don’t have to tell you how it turned out for them.

Admission: Kanick is not a fan. We’re going to soften this statement to, “there are things that bug us about Haslam,” see note here.

I let my conspiratorial side fly over on Frowns’ forum yesterday.  Why not?  It’s mock draft season; the time for conjecture on subjects we’re barely qualified to talk about but do so anyway and with gusto.  There have been quite a few oddities with the Haslam acquisition of the Browns and his short tenure as owner; I let fly with most every misgiving that has crossed my mind.  (Obligatory caveats of ‘this is speculation’ and ‘it’s early’ apply.)

* What kind of NFL owner/billionaire needs to purchase a team on an installment plan?  Lerner still holds 30% of the team and in 2016 Haslam needs to come up with $315,000,000 to complete the purchase.  I always thought that deal was squirrely; that’s a hell of a balloon payment.

* You don’t buy a home in Bratenahl and six months later decide that you really want to ‘take care of your first love’ in Knoxville. You just don’t.  Moreover, I have a problem with people who offer jive explanations like that and assume the audience will buy it on face value.  In addition to being a preposterous statement, the very making of it indicates a person who’s been insulated with yes-men for far too long.

* Browns salary cap now 31st in league. Under NFL cap rules, you can take this headroom with you, but just for one year and only on new players. –Or— you take the leftover cash and put it in your pocket.  I think it’s not out of the question that this (plus the installment purchase plan) (plus IRS-related shenanigans) could indicate a cash flow problem.   He wouldn’t be the first NFL owner with inadequate cash on hand to run his operations in spite of a strong paper net worth.  Could be that we’re under the cap because Haslam simply needs the dough?

* Haslam sold his 12.5% stake in the Steelers last week.  It seems very coincidental that the raid on his HQ took place roughly two business days after closing.  Maybe now the feds figure that Haslam has the cash equivalent of 12.5% of the Steelers in his bank account this week (at least $125,000,000) and thus now is the time to start serving warrants and freezing assets.

These are items that I’ve thought and wanted to get expressed.  But today I want to explore what on the wide wide world of sports could be the nature of a criminal investigation that prompts three law enforcement agencies to don combat-gear and attack the sixth largest privately-held American business’ headquarters.  We’re talking about dozens of armed men entering a business and ordering 1600 employees to turn off their cell phones, power down their computers, and leave the building.

That shyte does not happen over the insignificant application of rebates and we might not even be writing this blog post today if Haslam hadn’t suggested such a ludicrous reason for the raid.  Which brings us to our first point.



Profiles in hubris.

This ties back to the apparently way-too-insular world Haslam seems to have been in for way too long.  Was there no advisor at the conference table yesterday to tell Haslam, before his press conference:  “Yes, Jimmy, you’re a smart guy.  Yes Jimmy you’re a great leader, the face of PFJ.  But there is no good to be done by discussing your company’s criminal investigation by the FBI/IRS.  There is only risk.  Don’t do it.”

But Jimmy came out and finessed the questions from local media.  Set the stage for throwing some sales guys under the bus.  Here’s how he explained Monday’s remarkable raid yesterday:

“It appears to be centered on a very insignificant number of customers and the application of rebates — that the rebates owed to the customers were not paid,” CEO Jimmy Haslam said at a short news conference Tuesday.

“We of course disagree with that. It does not involve any tax issues. To my knowledge, there was no evasion of state or federal taxes involved.”


I ask you:  if you’re an FBI or IRS investigator and you read Haslam’s jive spin that includes the word ‘insignificant’ in relation to your investigation, will you be:

a. more likely or,
b. less likely

to want to nail this d-bag’s balls to the wall?  Haslam just called you out.  You don’t need to be a wordpress.com blogger to figure out the response from the FBI/IRS:

Very insignificant Jimmy?  We’ll see about that. (more…)