NEW YORK -- A partnership that buoyed a marketer and two businessmen into becoming a significant Shell distributor in New York and Connecticut has become mired in a morass of lawsuits, bringing into question the future control of dozens of stations.
In a special investigative report, CSP Daily News yesterday reported on a series of lawsuits and countersuits between jobber Sammy ElJamal and business partners James A. Weil and Leon Silverman, who collectively accumulated more than 100 sites over the past few years.
While all the legal action is taking place in New York, ElJamal and Silverman are also fighting over two Connecticut limited liability companies, the future of a fuel distributorship and eight Shell stations that the two acquired in 2008. The companies involved in that case include Wholesale Fuel Distributors Connecticut LLC, Connecticut Dealer Station Management LLC and Connecticut Dealer Stations, as well as a Silverman entity called 372 Wilton LLC.
CSP Daily Newshas learned that discussions about a possible settlement are under way in the case after an attempt by ElJamal to get the litigation dismissed failed. He has since appealed that decision.
Silverman’s Allegations
Silverman is seeking a court declaration that ElJamal defaulted on his obligations and that he alone has the right to make decisions for the LLCs without ElJamal’s vote. ElJamal countered that Silverman guaranteed $15 million of debt for the stations and any default would make him liable for the loan.
In an affidavit in that case, Silverman referred to “illegal and dishonest acts” by ElJamal regarding the Connecticut stations. He alleged that ElJamal has failed to make three escrow payments totaling more than $3 million over the past year. Silverman said that failure puts ElJamal in default of the operating agreements of the Connecticut LLCs and gives Silverman the right to buy ElJamal’s share of the LLCs.
Silverman further alleges that ElJamal used funds belonging to the Connecticut entities to pay his home mortgage and country club dues. “It may be necessary for the Connecticut companies to inform law enforcement and the IRS of these unnecessary and illegal payments,” he said in court documents.
In his complaints, Silverman further accused ElJamal of misuse of funds. For example, he said ElJamal paid himself a salary totaling more than $344,000 for his services as manager of the LLCs in 2009 and 2010, in violation of the operating agreements, and that ElJamal improperly paid his father’s American Express bill and authorized $40,000 for New York Yankees tickets.
Silverman also alleged that ElJamal wrongly charged the American Express account for $28,700 and $1,700 in golf-club fees to the Connecticut businesses.
ElJamal’s Response
ElJamal, in court documents, countered with the following:
- Silverman and his partner, James A. Weil, approved the $40,000 Yankees expense, and claims of misconduct are therefore baseless. He explained that he purchased the tickets through his Wholesale Fuel Distributors CT and $32,000 of the cost was reimbursed by the New York LLCs.
- As for the $28,700 American Express bill, $10,700 was for airfares and hotels in connection with the closing of the Shell station deal in New York. His father was listed as a user, but the card actually belonged to one of his other companies, which paid $18,000 of the bill. The rest of the charges were apportioned among the New York LLCs but was accidentally paid out of the Connecticut company funds by the company’s CFO.
- The $1,700 he paid to the Trump National Golf course was not misconduct but rather for the purchase of golf-related gifts for oil-company regional represepntatives and other vendors. He bought them at the golf shop because they were marked down by 50% and were to impress company reps, which is an “ordinary and reasonable client promotion expense.”
- Addressing the $344,000 he allegedly paid himself in salary, ElJamal said he never took a salary for his management responsibilities. However, at one point he decided that the company needed someone for sales and marketing and, “after much consideration,” determined that he would do the job himself. Because he was already working for the company 10 to 15 hours a day, seven days a week, ElJamal said in court filings, he was “deserving of compensation” for the additional work. Had consultants instead been hired, they would have charged the company more. The payments he took were declared in company financial statements and disclosed in audits. The operating agreements give him “unfettered and absolute discretion” to take any action on behalf of the companies, he claimed.
A Deal?
CSP Daily Newssources say that under a settlement currently under negotiation between ElJamal and Silverman, the two parties would agree to a six-month standstill on the litigation while ElJamal seeks a new lender or fresh equity to raise $6 million to buy Silverman out of the Connecticut stations.
If ElJamal cannot secure the funding, he would assign all his rights in the management and supply agreements to Silverman. As part of the proposal, ElJamal would be granted two 90-day automatic extensions on condition he pay $600,000 for the first extension and $400,000 for the second, sources said.
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