'Turn Key' Tactic?

Large Mid-Atlantic marketer Mamo target of more dealer litigation

Carole Donoghue, Petroleum Editor

WASHINGTON -- Fast-growing wholesaler Eyob "Joe" Mamo is being hauled into court again, this time by a group of Shell and Exxon-branded dealers who allege that he is using "extortion" to squeeze them out of their stations.

The dealers operate 27 stations in Washington, D.C., and northern Virginia and have been in business at the same sites from 10 to 40 years. They say they can no longer compete in the marketplace since Mamo acquired their stations in divestiture deals from Exxon and Shell.

Mamo's business practices are part of a pattern to get them to "turn in their keys" so that he can convert their sites to commission operations or to a 7-Eleven c-store, they allege. They say their retail gasoline volumes have declined 30% to 50% since Shell and Exxon assigned their stations to Mamo companies in 2008 and 2009.

The case now pending in federal court in Virginia is the fifth lawsuit filed by dealers against Mamo since the Virginia-based wholesaler started acquiring service station packages from refiners. He has bought approximately 160 outlets in the past 10 years in the Washington metro market, and has 70 more outlets in New York City, the dealers claim.

According to the lawsuit, many of the dealers are foreign-born and are racial or ethnic minorities who arrived in the United States with few assets and worked for many years to build up their dealerships.

Mamo, who was born in Ethiopia, declined to discuss the lawsuit. "I cannot comment on ongoing litigation, but we intend to win, again," he told CSP Daily News.

The dealers say Mamo sells gasoline at his own company and commission-operated stations for 20 to 30 cents per gallon less than he charges them and holds onto their credit-card receipts for three to seven days in order to take advantage of the float. He delivers gasoline to their stations whether they need it or not and then immediately drafts their account, putting them in a financial bind.

At the same time, he has been raising their rents, even though property values have been declining since 2007, the dealers complain. He is slow to repair the equipment they need to serve their customers--one retailer claims to have waited for four months for a bay lift to be repaired--which means fewer c-store sales and a decline in repair work.

One retailer having financial difficulties says he was told by a Mamo employee that he could become a commission dealer if he agreed to withdraw from the lawsuit. An appraiser was then sent out to assess his property so that it could be turned over a 7-Eleven c-store operator.

The previous cases against Mamo were filed under standard commercial business statutes, but the new litigation alleges that Mamo's business practices violate the Racketeer Influenced & Corrupt Organizations (RICO) Act and federal antitrust laws.

His strategy is part of a pattern of behavior that has continued for at least two years and is aimed at creating a monopoly over gasoline retailing in the Washington, D.C., market, it is alleged. Along with Shell and Exxon stations in the D.C. market, Mamo has recently acquired a controlling interest in four BP dealerships and three Crown stations, further cementing his companies' "monopoly power," they claim.

The dealers are seeking triple damages, along with punitive damages and an injunction that requires Mamo and his companies to "price wholesale gas consistent with industry custom and standards," promptly repair their sites and turnaround credit card payments "in a timely manner."

Attorneys for Mamo say the dealers' decision to sue under the RICO statute, which was designed to target organized crime schemes, is "ridiculous."

"It is preposterous to contend that a dispute over rents, maintenance and gas prices at service stations would rise to the level of habitual criminal activity," said Mamo's lawyer, Al Alfano. "They're just throwing mud at a wall to see what sticks."

The Mamo companies named in the suit include Mount Vernon Petroleum Realty, Capitol Petroleum Group, Nova Petroleum Realty, Burke Petroleum Realty, Mount Vernon Petroleum Realty and Anacostia Realty.

Click here for previous CSP Daily News coverage and see Related Content below.