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Gov. Bill Haslam listens to a question during his first news conference on Wednesday in Nashville. (AP Photo/Mark Humphrey)

More than a decade ago, Phillip Adams, the CEO of Utah-based oil company Flying J, called Jimmy Haslam with an invitation.

As Haslam tells the story, Adams suggested the two men and their wives go down to the Florida Keys for a long weekend. Adams' wife couldn't go, so the women stayed home, but Adams and Haslam - the CEO of Pilot Corp. - met in February 1998 and spent time diving, fishing and running.

"And he brought it up at dinner one night," Haslam said. "'Why don't we put the two companies' (retail operations) together?'"

The marriage of Pilot and Flying J didn't materialize at that time, but the proposal foreshadowed the biggest change in Pilot's history.

In 2001, Pilot had inked a new deal with its old partner, teaming with Marathon Ashland Petroleum LLC as 50-50 partners in a new venture called Pilot Travel Centers LLC. Less than two years later, Pilot grew again, paying $189 million to buy 60 locations from Williams TravelCenters, whose parent company had been hard hit by the Enron debacle.

Pilot was on track to have 260 locations in 40 states by the end of 2003 while selling about 450 million gallons of gasoline and 3 billion gallons of diesel fuel a year.

But the road to fuel industry dominance also could be bumpy. In July 2005, the U.S. Department of Labor announced that Pilot Corp. had agreed to pay $720,000 in back wages and damages to 110 assistant managers in a case that centered on how to interpret which employees were eligible for overtime pay.

That fall, Hurricane Katrina roared ashore on the Gulf Coast and severely disrupted the nation's fuel system. Pilot came close to running dry, and at one point sold premium gasoline at regular unleaded prices because it had run out of regular unleaded. But the bigger impact to the company may have come three years later when hurricanes Gustav and Ike came ashore.

Gas prices spiked, and at the stations where fuel was still available, consumers fumed at paying more than $4 a gallon.

In early 2009 Pilot settled price-gouging allegations in three states, including a $100,000 fine paid to settle a Kentucky case and a $20,000 fine in Georgia.

Pilot wasn't the only fuel retailer to get hit in the wallet - in Tennessee it was among 16 companies that agreed to pay civil penalties and restitution of more than $113,000 - but the settlements quickly became a political issue in the race last year for governor, where Bill Haslam, Jimmy's younger brother, was seeking the Republican nomination.

More than a year later, the episode still is a sensitive subject with Jimmy Haslam. The CEO said that when public officials declare a state of emergency, fuel retailers can't raise prices until they've sold out of the fuel they bought at a lower price.

In some cases, he said, Pilot raised the price before completely selling through its inventory, which he acknowledged was a violation of the law but blamed the situation on a lack of technical controls across the company's network of locations.

"So did we violate the law? Yes, we did," he said. "OK? Absolutely no doubt, and I've never said we didn't. Is that price-gouging, and does it really stick in my craw when Bill's opponents bring that up and rub our name across the dirt? It makes me mad, because we've made our reputation by having the lowest price, whether it be gasoline in Knoxville or diesel across the country."

Pursuit of Flying J

After the Florida trip in 1998, according to Jimmy Haslam, he and Flying J CEO Phillip Adams had numerous meetings, but the negotiations eventually foundered.

In 2003, the Utah company's founder and chairman, Jay Call, was killed in a plane crash. Haslam said that about six months later, he called the late chairman's daughter, Crystal Call Maggelet, who was on Flying J's board. Haslam traveled to Utah and had some "pretty good meetings" with Maggelet, her husband, and her brother about a deal.

In December 2008, Flying J filed for bankruptcy protection, and soon Maggelet had taken over as president and CEO.

Haslam said that in March or April 2009 he started calling Maggelet. They met in June at Salt Lake City, where they began laying out the details of a deal on the paper tablecloth.

On July 14, 2009, the companies confirmed their plans publicly, announcing a deal in which Pilot would buy 250 travel centers from Flying J, but would not buy the company's refining, oil and gas, credit card, banking, insurance and pipeline businesses. Later that month a bankruptcy judge approved outlines of the deal, which would allow Flying J to emerge from Chapter 11 proceedings.

The proposed deal underwent months of scrutiny from the Federal Trade Commission, but ultimately - with the condition that Pilot sell 26 travel centers to Love's Travel Stops and Country Stores to resolve competitive concerns - the agency approved the final settlement.

An incomparable year

The FTC's final order was announced on Nov. 23, three weeks to the day after Bill Haslam was elected as Tennessee's governor and 20 days after Forbes magazine unveiled its list of the nation's largest private companies, with Pilot Flying J -- which had 2010 revenues of $20 billion, according to Jimmy Haslam - ranked No. 12.

On Dec. 13, Jim Haslam - the father of Bill and Jimmy and the founder of Pilot Corp. - turned 80 years old, celebrating with a party at the Orangery in West Knoxville.

And on Saturday, the entire family gathered at the state Capitol, where Bill Haslam took the oath of office on a cold and bright Nashville morning.

News Sentinel business writer Josh Flory may be reached at 865-342-6994.

In his address to the crowd, Bill Haslam referred to his father, sitting just left of the podium.

Jim Haslam, he said, instilled in his children a sense of being unable to look at a problem and not do anything about it.

"He taught us that life does not revolve around our own world, as comfortable as that might be," the new governor said. "You have to be willing to reach out, take a risk and understand that the reward for a job well done comes from knowing you have played your part with the gifts God has given you so you are a part of something bigger than yourself."

Capital partners

Nearly a decade earlier, Chris Stadler had gotten to know Bill Haslam when the Pilot executive joined Saks Inc. to head up the fashion retailer's new Internet venture.

According to Jimmy Haslam, Marathon was looking to exit its partnership with Pilot, prompting a debate within the Knoxville company.

At Martin's suggestion, the Pilot team brought Stadler into Knoxville for a brainstorming session.

On the last day of September 2008, Marathon announced it was selling its 50 percent stake in Pilot Travel Centers back to parent company Pilot Corp. for $700 million. At the same time, Pilot announced it was selling a 47.5 percent stake in the travel-center company to CVC Capital Partners.

It was Pilot's first venture into the world of private equity.

Jimmy Haslam said Pilot officials were honest with Stadler, telling him they wanted to maintain more than half of the ownership and explaining that "we don't want to have to do this again in three or four years." Haslam said the two sides agreed to a seven-year deal that requires both sides to agree on major decisions.

According to Stadler, one consideration raised by the Haslam family was the fact that partnering with CVC would give them more flexibility to pursue major acquisitions, and he said Flying J was "certainly one of the companies that we talked about."

It wouldn't take long for the opportunity to arise.

News Sentinel business writer Josh Flory may be reached at 865-342-6994.


ABOUT THIS SERIES

When Bill Haslam was sworn in Saturday as Tennessee's 49th governor, it capped a family rise to prominence that began some 60 years ago. The Knoxville News-Sentinel, a member with the Chattanooga Times Free Press of the Tennessee Newspaper Network, documented the family's journey to wealth and power.

Sunday: Jim Haslam, family patriarch

Monday: The young Haslam family and the start of Pilot Oil Corp.

Tuesday: Pilot gets bigger

Wednesday: The emergence of Bill Haslam

Today: The rise of Jimmy, and the Haslam family's philanthrophy

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