Litigation Threatens Future of Shell Convenience Stores

Published in CSP Daily News

NE marketer and partners spar in court, allege theft, death threats and a bill for Yankees tickets

By  Carole Donoghue, Petroleum Editor

NEW YORK -- The court documents are many inches thick and at times read more like a John Grisham whodunit than the traditional fusses that find themselves before a judge.

But what is clear is that the future ownership of several-dozen Shell gas stations and convenience stores in New York is in question following a dispute between wholesaler Sammy ElJamal and his business backers that has led to allegations of theft, an office break-in and threats to hire hit-men.

The charges and counter-charges are part of lawsuits involving two businessmen who helped ElJamal finance the $43.27-million acquisition of 88 Shell sites and supply contracts in New York City, Long Island and Westchester in 2010.

The businessmen want to oust ElJamal as a manager of limited liability companies the three of them formed to complete the Shell deal and have been looking for a buyer willing to pay $25 million for their “properties owned or leased.” In turn, ElJamal has been trying to raise funds to buy out his partners.

Although it is not clear from the documents how many sites would be sold, Shell, while takingno apparent side, has said it may put as many as41 leased units back on the market.

In This Corner

Battling ElJamal in New York state court are entrepreneur James A. Weil and Leon Silverman, a commercial landlord. They allege that ElJamal threatened to have them killed and stole $1.4 million. In one suit, they accuse him of using company funds to pay for his mortgage, country-club fees and $40,000 worth of Yankees tickets. They also claim he has engaged in predatory pricing in a “scorched earth” campaign to devalue the company assets so that he can buy them for less.

Weil alleges in court documents that ElJamal made the death threat during a meeting at a pizza restaurant in May between ElJamal and Brent Coscia, the general manager of the companies.

“During our dinner, Sammy took a paper napkin and wrote $15,000 on it in blue ink. He then passed the napkin to me and said that all he needed to do was to put that amount of money in a brown paper bag and he could have Jimmy or Leon killed,” Coscia said in an affidavit. “Sammy must have sensed my shock and dismay because several of his friends, relatives and business colleagues contacted me within minutes following dinner to say that Sammy did not mean what he had said.”

ElJamal Counters, Alleges Business “Squeeze”

ElJamal alleges the death threat was made, not by him, but by Coscia to him. He filed a police complaint against Coscia, who was then arrested. A judge dismissed the case, Coscia told CSP Daily News, declining further comment pending the case’s conclusion.

Moreover, ElJamal said in court filings, that Weil and Silverman are fabricating facts “to squeeze me out of my own companies.” The company funds he used were for approved expenditures, and the alleged $1.4 million theft was actually the result of losses incurred on failing stations, he said in court documents.

 ElJamal is also suing Weil for libel and slander for $150 million in damages. He alleges Weil damaged his reputation by spreading rumors that he is “a thief, a liar, a fraud and a drug-abuser” who is going to be “indicted and sent to prison.”

He cited his long and successful history in the industry, and his multiple marketing awards from Shell and Mobil. Since the dispute with Weil and Silverman, ElJamal said in court filings, he has received e-mails asking if he is “on the skids,” and whether he is going to jail.

ElJamal said Weil and Silverman made up 20 allegations to justify their attempt to remove him as a co-manager in violation of company operating agreements.

If they push him out, ElJamal said he will be forced into bankruptcy. He is the sole personal guarantor of a $33-million loan from Manufacturers and Traders Trust Co. on the sites and his removal could trigger default language. (Weil maintains the outstanding loan on the sites is $24.3 million, not $33 million.)

The Court

The court has barred both sides from selling any assets until the issues are resolved. A referee has been named to decide day-to-day business disputes between Weil and ElJamal, and Silverman and Weil have been prohibited from removing ElJamal from the companies.

“I have spoken with Mr. Weil and Mr. Silverman,” their attorney Richard Brodsky told CSP Daily News. “We have made no comment on these matters in the past, nor will we do so now.”  ElJamal referred requests for comment to his lawyer, Albert J. Pirro, who did not respond.

There is a gag order in the case that prevents either side from talking to the media or to BP, Shell and its subsidiary, Motiva Enterprises, 7-Eleven, Dunkin’ Donuts, ExxonMobil dealers or vendors, lenders or contractors doing business with the company.

Meanwhile, attempts are being made to reach a settlement in a related lawsuit Silverman has filed against ElJamal involving a distributorship and eight gasoline stations in Connecticut. Silverman and ElJamal purchased 22 Fairfield County stations or supply contracts from Shell in 2008. [Read more about this case in tomorrow’s issue of CSP Daily News.]

Claims and Counterclaims

The dispute over the New York sites started less than a year after ElJamal, Silverman and Weil closed on a deal to acquire Shell’s New York assets.

ElJamal put up approximately $2 million for the acquisition, and investors, led by Silverman and Weil, contributed $21 million, according to court papers.

The firms involved in the dispute include NY Fuel Holdings LLC, NY Fuel Distributors LLC, and Metro NY Dealer Stations.

Weil alleged in court documents thatElJamal lacked the experience to run a wholesale business of that size. He cited as one example ElJamal’s decision to spend $250,000 to acquire a gas station that had only five years left on the lease, which meant the company would lose its investment if the ground lease wasn’t extended.

Weil also questioned ElJamal’s business judgment. ElJamal began to aggressively increase prices to dealers as soon as the Shell deal was finalized, Weil alleged. Gasoline sales fell in some cases below the minimum required by Shell, according to the documents.

Weil and Silverman contend they decided to oust ElJamal after his alleged “looting” of $1.4 million. They claim in court records that the money was owed by FuelCo, a separate company owned by ElJamal and his father, Musa ElJamal.

FuelCo was operating five Shell stations on a commission basis, for 8.7 cents per gallon. It was supposed to deposit the proceeds from sales into a separate bank account. Weil alleged that the money was withheld from the LLCs.

ElJamal does not deny that some money was owed but said it represents just part of $547,000 in losses FuelCo incurred by keeping failing stations open. “There can be no theft if there is no money, and that is exactly what is going on in this case,” ElJamal said in an affidavit. ElJamal repaid the company approximately $900,000. It is not clear if that dispute has been resolved.

The Shell Stations

In an affidavit, Weil said he and Silverman gave ElJamal a right of first purchase on the Shell sites. They gave him 45 days to accept the offer, but he did not.

ElJamal at one point did offer to exchange his interests in the New York LLCs for title to eight stations, a payment of $3 million and a written release of his personal obligations to Shell and Manufacturers and Traders Trust, court records show. Weil did not accept the offer.

Then, in late August, Shell received inquiries from third parties wanting to buy 41 of the leased sites. As a result of “issues currently involving the principals” controlling the LLCs, Shell had decided “to begin actively marketing the sale” of the store, Shell attorney Scott C. David said.

Coscia has alleged that ElJamal ignored the terms of dealer contracts, saying ElJamal tried to make some dealers reimburse the company for credit-card fees, even though the contracts, which he had prepared and signed on behalf of the LLCs, did not provide for such reimbursements.

According to affidavits, ElJamal also manipulated rents and prices. He allegedly charged one lessee who competed with a FuelCo station 45 cents per gallon more for gasoline. He also is said to have set gasoline prices for some commission dealers below what he charged lessee dealers. “Such predatory pricing could have subjected the company to lawsuits,” Weil said.

To avoid potential litigation, ElJamal allegedly struck special deals. For example, a Yonkers lessee dealer who complained about predatory pricing was given a six-month full-rent rebate and special pricing that resulted in his getting supply at below the company’s cost, according to documents.

ElJamal said in court filings that Coscia is part of Weil and Silverman’s “inner circle” and concocted the claims against him because Coscia knows ElJamal will fire him if he can.

Weil also said that ElJamal was often out of the office on trips to exotic locales, such as Hawaii and Puerto Rico. ElJamal said he was out because he had to spend months checking on Shell’s 45 sites in New Jersey, at Weil’s request. ElJamal, Weil and Silverman were the winning bidders for those sites, but Weil later withdrew the bid. The stations were sold last week to Mid-Atlantic marketer PMG.

[Read more about this case in tomorrow’s issue of CSP Daily News.]