Getty Realty Scrambles to Supply Northeast Stations

Retailers want to know where their security deposits have gone

Carole Donoghue, Petroleum Editor

JERICHO, N.Y. -- Getty Realty is desperately trying to arrange supply for more than 250 stations in New England that it had leased to now-bankrupt Getty Petroleum Marketing Inc. (GPMI) and its sub-tenant, Green Valley Oil, CSP Daily News has learned.

Several jobbers are interested in supplying at least some of the sites and have been talking to Getty Realty about them. Pennsylvania-based Lehigh Gas Corp. is already handing out credit applications to retailers, saying that it will get fuel into their tanks as soon as possible, CSP dealer sources said.

Other companies willing to consider supplying some of the sites--and possible tenancy deals--include Chestnut Petroleum, Global Partners LLP, Drake Petroleum and Virginia-based jobber Joe Mamo, sources say. Mutual Oil is also on that list. Mutual leased 28 stations to GPMI in January 2003 and will get those back when GPMI officially surrenders the sites, currently scheduled for April 30.

Getty Realty has already sent offering packages to some of the marketers.

Of equal importance to desperate dealers is the whereabouts of the security deposits they paid Green Valley Oil, amounts that ranged from $30,000 to $50,000 and more per site. They fear their money might have been commingled with other funds by Green Valley or GPMI and may be lost forever.

Consumer protection and business regulation officials with the state of Massachusetts are investigating the security deposit situation, according to some sources. A spokesperson for the office of Attorney General Martha Coakley said it does not confirm or deny when investigations are under way.

The stations whose supply has been cut off are branded with BP or Getty or fly Russian refiner Lukoil's flag.

Green Valley has been delivering only partial loads of fuel to many of the sites since January, leaving the retailers with dry tanks, little income, and mounting bills. BP eventually terminated Green Valley's supply contract on April 12 for 218 BP-branded sites in Massachusetts, Connecticut, New Hampshire and Rhode Island, halting the last drops of Green Valley's sporadic deliveries to the stations.

Retailers who operate as commission agents make their money from c-store or bay sales, plus a small commission on gasoline sales. Some say it will be hard for them to hang on until April 30, and others have appealed to judge overseeing the GPMI bankruptcy process for, as one dealer put it, "humanitarian aid" to help them survive.

"We've been out of regular for days and we only have premium left in the tanks," said Worcester, Mass., retailer LeAnn LeTourneau. "Every penny we saved was put into that station and we haven't been able to collect a paycheck for weeks. We're now on the verge of losing our house," she told CSP Daily News.

Some attorneys question whether Getty Realty can get fuel into the sites by May 1 to create a bridge until it signs new leases agreements with other distributors. "Some of the dealers won't be able to survive that long," warned one lawyer.

Meanwhile, franchised dealers at more than 30 stations in Connecticut that were supplied by Green Valley have taken matters into their own hands by debranding their sites and buying fuel elsewhere but many of the commission operators do not have the financial wherewithal to do the same.

Jobbers have hesitated to step into the supply void until it was clear that they would not run into legal action from Green Valley or BP. There have also been concerns about how safe it would be to drop loads into the tanks of commission agents when there appears to be no mechanism to recover sales revenues, given that the jobbers have no current financial relationship with the retailers. The same issue arises on credit card sales.

"It's a very difficult situation, there's little that we can do right now. We're anticipating getting fuel into these sites as soon as possible," said an official with Mutual Oil.

Retailers have repeatedly asked Green Valley to account for their security deposits. One BP dealer in Massachusetts has now asked a federal judge to order that Green Valley's bank account be attached to the tune of $87,000, representing the $33,000 he paid as a security deposit and his subsequent lost earnings due to supply problems.

Commission on weekly gasoline sales that had averaged just over $600 since delivery problems with Green Valley started in January gradually fell to less than $95 a week for dealer Robert Cahoon, and then to zero after April 12. With limited gas available, Cahoon saw his weekly repair and concession income fall from $10,800 to $2,575 before deliveries stopped entirely. As of this week, he is out $18,000. As a result of Green Valley's erratic deliveries since January, the dealer says he has had to lay off employees and shut down his station at times, he says in court filings.

Green Valley is officially based in Providence, R.I. and is operated by distributor Oleg V. Aliferov, formerly associated with Arfa Enterprises, a Pennsauken, N.J., company. Aliferov served as Arfa's chief financial officer but said in 2009 that he never held an ownership stake in the company. He did not return calls requesting comment.

However, according to court records, Cahoon regularly paid his rent and other revenues to Green Valley by EFT into a bank account in the name of Arfa Enterprises at Sovereign Bank. Arfa was established in 1985 by Semyon Logovinsky, now the wholesale vice president of GPMI, who said in 2001 that he had turned over Arfa to Alex Prahkin, the son of a former business associate. In 2007, Alex Prahkin said in a trade press article that Arfa was moving around170 million gals/yr.

Dealers supplied by Getty Petroleum Marketing Inc. in New York, New Jersey and Pennsylvania have also asked that GPMI be forced to account for their security deposits, amounting to more than $11.4 million. In court documents, 350 of the dealers say they fear that GPMI has failed to hold the deposits in trust and may have converted or spent the money for its own use.