OVERLAND PARK, Kansas -- Facing legal actions that include a challenge to its recent filing for Chapter 11, officials with the 42-store Gas-Mart USA chain revealed new details about the infighting that played a role in the company’s current financial crossroads.
According to the company’s president, David George, a key dispute is over a buy-sell agreement involving the two 50-50 shareholders, with Gas-Mart officers on one side (David George, Michael George and the George Family Trust) and Abraham J. Gustin Revocable Trust and Gregory Gustin (Abe Gustin died in 2010) on the other.
The disagreement dates back five years, George told CSP Daily News, and deals with the value of that original agreement. The main issue, he said, is “the monetary demand for their claim—over 20 times what other buy-sell agreements” are valued at.
That said, George admits the company did have cash flow problems, which eventually led to their bankruptcy filing on July 2. As reported in CSP Daily News, George and his team have taken measures to reorganize the chain’s operations and intend to emerge from Chapter 11 in a year to 18 months.
In the meantime, filings from the Gustin camp have made allegations of misappropriation of funds, alleged activity without the approval of a mutually agreed upon “custodian” and allegations that the bankruptcy itself is invalid. Lawyers representing the Gustin families did not return a request for comment by press time. George did not comment on these specific allegations.
George, however, did comment on one of the allegations. The court documents allege that Gas-Mart’s current CEO, John Tittle Jr., “did not like having to work under [the custodian John] Sopinski.” Tittle met with Sopinski in late June to discuss restructuring plans that Tittle was supposed to be formulating, stated the documents. Tittle told Sopinski that he wanted to buy the business after it got turned around with the Georges as his partners, and that “Sopinski’s salary should be cut in half because the company could not afford both of their salaries and he was not really necessary,” the documents stated.
According to George, the shareholders did go to court and made a deal to place “someone in here to give guidance on the company.”
With the opposing shareholders not living where the business operated and not active in its operations, George said the opposition wanted representation. “They put a guy in here who was drawing a large salary,” George said. “He’s the highest paid person here and wasn’t contributing to the company. He was a watchdog for the other partners for two and a half months, taking away from our time and the hours in the day.”
George said they welcome Sopinski and described the company as an “open book,” but said, “We just can’t pay the salary [they’re] demanding.”
The legal wrangling has taken “so much of management’s time” and the company has had to bare the “financial cost of that,” George said.
In recent weeks, however, George said the company has refocused its efforts on developing a plan to emerge from bankruptcy. Having secured a $1.5 million debtor-in-possession (DIP) loan from a local bank, they’ve entered into negotiations with suppliers to restock both fuel and grocery inventories.
“It’s been an extreme amount of work,” George said. “And we have a strong plan to emerge [from bankruptcy].”
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