Irving Oil Puts Northeast Marketer Into Bankruptcy

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April 3, 2006
Irving Oil Puts Northeast Marketer Into Bankruptcy

Canadian refiner Irving Oil has petitioned to force a Maine marketer into Chapter 7 bankruptcy, claiming the company owes it more than $8.39 million for product, Oil Express learns.

In a federal court lawsuit, Irving Oil Terminals accuses Kathleen S. Marston Thompson of "gross mismanagement" of her company, P.P.C.O.M, Inc., which is "dire financial condition" as a result.

Not only does P.P.C.O.M. owe Irving for fuel, but it has also failed to pay $3.15 million in state fuel taxes, and a bank that is owed $1 million is now trying to sell the company's assets to Fabian Oil, a firm owned by Thompson's brother-in-law, Irving alleges. Irving says it's concerned that proceeds from the sale may be diverted to others as P.P.C.O.M. winds up its business. The remaining assets -- accounts receivable -- would still leave Irving short $6 million.

Irving was not alone in its March 23 bankruptcy court petition to wind up P.P.C.O.M. A Portland, Maine firm, Total Energy Solutions, L.L.C., maintains that it is owed $1.83 million, and Augusta-based Augusta Fuel Co., says it is owed $1.11 million. Bob's Cash Fuel, an Edison, Maine company, says it is owed $145,578.

Irving signed a credit agreement with P.P.C.O.M in 1997, giving the Oakland, Maine firm a $1 million credit line. Under the deal, P.P.C.O.M was to pay Irving by EFT for product within 10 days of invoice date. An 18% service charge was due on any amount not paid within 30 days. In August, 2003, P.P.C.O.M also inked a security agreement and gave Irving an $800,000 security deposit.

However, a bank holds a first priority lien on the same assets as Irving. TD Banknorth N.A., has been trying to collect on the accounts receivable and other money owed to P.P.C.O.M in order to apply them against the $1 million it loaned the jobbership.

Irving says it tried to talk to Thompson about the debts, but didn't get very far. In February, she ordered two Irving execs who turned up for an appointment arranged the day before to get off her property When they asked if she would make a payment of 90% of what she then owed, she refused to discuss the matter, and told them to come back the next day with account records to support their claims.

When the Irving execs returned the next day, Thompson refused to look at the spreadsheets they had brought with them, said she was too busy to discuss the matter, and was unwilling to pay anything, Irving alleges. She has also failed to turn over to Irving her company books and records, and information about the proposed sale.

By March 6, P.P.C.O.M. owed Irving $8.39 million, not including interest and other fees, just for product purchased. Irving has asked for P.P.C.O.M's accounts to be frozen and any assets sales to be halted. It wants to see the company's accounts going back to January 2000, and says a receiver should be appointed. Irving estimates P.P.C.O.M's assets, including receivables, are worth $2.3 million.

A federal court on March 8 ordered P.P.C.O.M to maintain the status quo and give Irving immediate access to the company's books. However, Irving subsequently discovered that P.P.C.O.M had a leased tank containing 435,250 gallons of heating oil, valued at $800,000. P.P.C.O.M said it was not the owner of the oil, since a number of school districts and municipalities had pre-paid for the fuel. The court ordered that control of the fuel and the tank be turned over to Irving, which is to deliver it only to pre-paid customers, after school districts said they would be forced to close schools without the fuel.