NY Marketer Ousted

ElJamal removed from management of his fuel companies

Carole Donoghue, Petroleum Editor

NEW YORK -- Sammy ElJamal’s business partners have booted him out of day-to-day management of three New York fuel firms, CSP Daily News has learned. The move came after Eljamal failed to post a $1 million bond as a condition for an earlier court order that would have stopped his ouster from the companies.

ElJamal has been locked in litigation with entrepreneur Jim Weil and large commercial landlord Leon Silverman over the future of New York Fuel Distributors LLC, Metro NY Dealer Stations LLC, and New York Fuel Holdings LLC, companies that own, lease or supply 85 Shell stations in New York.

Retailers operating the stations and vendors supplying them were notified of Eljamal’s ouster by a June 12 emailed letter signed by Silverman and Weil. The letter said that Eljamal is no longer a manager of the companies and “has no authority to make any business decisions for them.”

“Please be certain that if you act on any instructions given by Mr. Eljamal that the company will not be responsible to pay any debts incurred or honor any deals made by him,” the letter noted. “Any contact from Mr. Eljamal regarding company business should be totally ignored and reported to the undersigned.”

Weil and Silverman have tried to force ElJamal out of the management of the businesses for a year, alleging that he has misappropriated funds and does not have the skills to operate a business that large.

Eljamal was granted a preliminary injunction blocking his ouster on condition that he post a $1 million bond but failed to do so. He told the court that three bond companies had refused to help him unless he provided audited financial statements of the companies. He said he couldn’t do that because Silverman and Weil wouldn’t give him access to the books.

Further, he said if he were removed from his management position, it could trigger defaults in station sales agreements with Motiva Enterprises and Manufacturers & Traders Trust that could force him to repay $33 million in loans and propel him into bankruptcy. There would also be “severe contamination” of his reputation in the oil industry, he said.

However, the Supreme Court refused to grant him a stay of the $1 million bond requirement after Weil and Silverman obtained promises from Motiva and MM&T so that they would waive requirements that Eljamal continue in a management position with the New York companies.

Meanwhile, Eljamal and his first lawyer in the case, Al Pirro, have parted company. Eljamal fired Pirro because he declined to make a motion demanding that the judge in the New York case recuse himself because of an alleged conflict of interest involving a member of the judge’s family, according to sources. Pirro subsequently obtained a court order placing a lien on Eljamal for nearly $202,000 in legal fees.

Similar litigation involving Eljamal and his business partnership with Silverman that includes control of 22 stations is playing out in Connecticut. In that case, Silverman has alleged that Eljamal used funds from the Connecticut company to repay close to $1 million in loans made to him in a personal capacity. Silverman alleges that Eljamal also paid himself $750,000 from 2008 to 2010 in compensation or his services from company funds that he wasn’t entitled to.

Additionally, Eljamal, Silverman alleges, has mismanaged the firm by using inefficient trucking policies and procedures that are costing the company $50,000 to $100,000 a year. He has failed to get the company’s Shell-branded stations ready for Shell’s new Fuel Rewards Network loyalty offer, or to make investments necessary to comply with PCI regulations. The company’s reputation with dealers was damaged too, according to claims, when Eljamal allowed a letter of credit to lapse, causing Shell to cut back on the amount of fuel the company could buy for its stations.

Silverman testified at one point that if Eljamal is not removed from management duties, “in the next eight to 10 months there will be no business to refinance.”

Eljamal has disputed the claims against him, saying he had permission to use company funds to repay the loans. He said he is entitled to the salary he drew because, in addition to being a manager of the companies, he acted as a sales executive, too. A company accountant had suggested that he take a salary in order to show some payroll for a company that had such a large amount of revenue--put at $42 million. Additionally, the LLC lapsed not because of his actions but due to a delay in Citibank processing required paperwork.

At the moment, he continues to hold an ownership stake in the firms, although Weil and Silverman have previously sought to sell the companies’ assets. Settlement talks that might have resolved the disputes and given ElJamal time to raise money to buy the stations appear to have collapsed, sources say.