D&L Creditor Owed $950,000 Speaks Out
YOUNGSTOWN, Ohio -- Rick Glass says he's spent the bulk of his professional life building a business and furthering the reputation that his father established in 1957.
But Glass, owner of Tom's Sewer and Drain Service Inc. in Girard and Heavy Duty Industrial Services LLC in McDonald, laments he's caught up in the legal morass of D&L Energy Inc.'s bankruptcy, which could one day bury one of his companies.
"It could devastate us," Glass said. "It's a lot of money for a sewer and drain company."
Tom's Sewer and Drain is among the top 20 creditors owed money by D&L, the embattled energy company that filed for bankruptcy protection under Chapter 11 Tuesday, along with its subsidiary, Petroflow Inc.
According to court documents, Tom's is owed $631,856, money Glass thinks his company will never recover. "We worked hard and now I'm going to eat the cost?” he says. “It's ridiculous."
Glass's other company, Heavy Duty Industrial, is also named as a creditor and is owed $330,365.
"They owe us more than $950,000," he told The Business Journal.
Glass said Tom's Sewer and Drain was called after an employee of Hardrock Excavating was caught illegally dumping drilling wastewater into a storm drain at D&L's Salt Springs Road site. The contamination fed into a stream that leads to the Mahoning River.
A subsequent investigation by the Ohio Department of Natural Resources and the Ohio Environmental Protection Agency alleges that for months Ben Lupo, who owned both Hardrock and D&L, had instructed employees to dump contaminated material into the sewer.
Lupo and the employee, Michael Guesman, are charged with one count of violating the U.S. Clean Water Act, and ODNR has revoked all of D&L's operating permits. Both men have pleaded not guilty.
ODNR ordered that the site be cleaned, and Sunpro Inc. of Akron was contracted to perform the cleanup. Glass said his companies were called to clean the sewer and pipe, which isn't Sunpro's specialty.
"We'd never worked for them before," Glass said of D&L. "We were there about six weeks and it was tough work."
The contamination was as thick as 18 inches in some areas of the drain. "It was bad,” Glass said. “We were there for six weeks every day, for 12 to 16 hours a day, trying to get it done."
Moreover, Glass said that D&L assured him that he would be paid. "I did this because they promised me that I wouldn't get screwed, that insurance would pay for it,” he said. “Now, they don't want to pay."
Tom's Drain filed a complaint last month in Trumbull County Common Pleas Court. Sunpro has filed a separate lawsuit in Mahoning County.
Sunpro is owed $1.5 million by D&L, according to court documents.
In those documents, D&L claims it owes $5.2 million to its top 20 creditors.
In addition to Tom's, the court lists other local businesses that stand to be affected by D&L's bankruptcy: McJunkin Red Man Corp. of Youngstown is owed $631,856 from a trade debt while Patriot Water Service, Lisbon, is owed $52,635.
Two local accounting firms, Yurchyck & Davis CPA’s Inc., Canfield, and Packer Thomas, also of Canfield, are owed $57,564 and $15,484 respectively, documents say.
Lupo resigned as president and CEO of D&L in February and replaced by current CEO Nick Paparodis. According to court documents, Lupo and his wife, Holly, own 85% of the company; Susan Faith owns the remaining 15%.
D&L operates 580 conventional oil and gas wells in northeastern Ohio and western Pennsylvania, according to an affidavit Paparodis submitted to the court. It is also involved in the construction and development of deep injection wells in Ohio that are used to store wastewater from hydraulic fracturing operations.
Last year, an investigation by the ODNR found that a D&L injection well in Youngstown was the likely source of a series of earthquakes that shook the Mahoning Valley between March 2011 and January 2012.
The company has sold portions of its deep rights between 2011 and 2012 in Ohio and Pennsylvania for $17 million, and owns the deep rights to approximately 17,000 acres, according to court documents.
D&L lists assets in excess of $50 million and liabilities in the range of $1 million to $10 million, according to the filing.
In his affidavit, Paparodis said that the company was forced into bankruptcy because of the substantial litigation and cleanup costs that would be incurred as a result of Lupo's actions.
And, Paparodis alleges that Lupo, Faith or others may have "improperly diverted funds of the debtors to other peripheral business entities owned or operated by one or more of these individuals for little or no consideration."
Debtors were then forced to incur cleanup costs and field "voluminous amounts" of phone calls and correspondence, which affected productivity at the company, the affidavit said, while litigation costs associated with federal and local cases mounted.
As such, D&L "cannot continue to operate without the protections of the bankruptcy court."
That's little consolation for Glass, who says his industrial business is doing well with the oil and gas industry, but the local drain and sewer business is now at risk.
"We're taking it one day at a time," he said. "Hopefully, our customers that use our service will step up. It's a shame. He does something like this and thinks he's going to get away with it."
MORE:
D&L Files Bankruptcy; Local Companies Left Hanging
Copyright 2013 The Business Journal, Youngstown, Ohio.
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