D&L Files Bankruptcy; Local Companies Left Hanging
YOUNGSTOWN, Ohio -- D&L Energy Inc. and its affiliate, Petroflow Inc., filed Chapter 11 bankruptcy Tuesday, citing “extensively intertwined … business dealings, accounts and finances” of its officers and business entities, the mounting burden of cleanup and litigation costs, and accusing its former CEO, Ben Lupo, of “improperly divert[ing]” company funds to other businesses he operates.
By seeking court protection from its creditors, the embattled companies also jeopardized the financial stability of four local businesses that may never be paid more than $2 million owed for cleaning up the brine water and oilfield waste that D&L illegally dumped into a tributary of the Mahoning River.
Separate petitions were filed in U.S. Bankruptcy Court in Youngstown, along with motions to consolidate the cases. U.S. Judge Kay Woods will hear them.
The Ohio Department of Natural Resources says one of its Youngstown wells triggered the 11 earthquakes that rocked the region in 2011 and 2012.
Lupo and an employee of D&L affiliate Hardrock Excavating, Michael Guesman, face federal criminal charges in connecting with illegal dumping at the Salt Springs Road headquarters of all the related companies. At Lupo’s instructions, prosecutors allege, Guesman dumped the oilfield waste into a storm sewer on the company’s property that leads to a tributary of the Mahoning River. The violation was witnessed by state investigators and within days of the incident, all of D&L and Hardrock operating permits were revoked and criminal charges filed.
D&L’s bankruptcy petition estimates assets in excess of $50 million, and liabilities in the range of $1 million to $10 million. Lupo, who resigned as CEO after he was criminally charged, and his wife, Holly, own 85% of the company; Susan Faith the remaining 15%.
In court documents, D&L states it owes more than $5.2 million to its 20 largest creditors.
Topping the list is Sunpro Inc. of North Canton, owed $1.5 million for “cleanup and containment costs related to dumping of fracking wastewater in [the] Mahoning River tributary.” D&L describes Sunpro’s claim as “disputed” along with nearly all claims listed as owed to local businesses. Among them: $357,199.98 to McJunkin Red Man Corp. of Youngstown (trade debt); $631,856.09 to Tom’s Sewer & Drain Service Inc. of Girard (also for cleanup and containment); and $52,635 owed Patriot Water Treatment Inc. of Lisbon for “utility service.”
Professional services rendered by two local accounting firms are similarly described as disputed by D&L: $15,484 listed as owed to Packer Thomas, Canfield; and $57,564 owed to Yurchyk & Davis CPAs Inc., also of Canfield.
D&L owes Huntington National Bank of Pittsburgh $1.3 million related to what documents describe as a “blanket lien” with “$50 million secured.”
Petroflow’s 20 largest claims add up to $904,000. Topping this list is Bessemer Supply Inc. of Bessemer, Pa., owed $23,543.50 in trade debt, which Petroflow disputes. Other local companies Petroflow owes include Computerized Mudlogging Services of New Middletown, $20,899.51; and Brier Hill Slag Co. of Youngstown, $4,075.
D&L and Petroflow are asking to delay the bankruptcy court’s customary “first day hearing,” set for Friday, to give the companies more time to untangle their financial affairs.
An affidavit submitted by CEO Nick Paparodis, appointed following Lupo’s resignation, states D&L “currently employs 18 hourly and/or salaried employees;” Petroflow has no employees. “Gross revenues (excluding any amount received by way of a sale of debtors’ assets) for D&L’s business are projected to be approximately $2,206,800 for the 2013 fiscal year,” he states.
“In addition to the liabilities associated with the cleanup process and the loss of good will,” the affidavit continues, "it has come to D&L’s attention that Faith, Lupo 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.”
Lupo’s actions resulted in D&L incurring substantial cleanup costs, its “general business reputation has suffered greatly,” Paparodis states, and business has decreased.
Since the dumping incidents became widely known, he states, D&L has been besieged with phone calls and other correspondence from its customers and vendors while it responds to “numerous legal proceedings.” the affidavit states. Therefore, D&L and Petroflow have “effectively ceased” operations.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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