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Getty Trustee Hits Former Owners With $6.5M Clawback Suit

December 5, 2013 | By Matt Chiappardi | Law360

The liquidation trustee for the estate of Getty Petroleum Marketing Inc. has filed an adversary complaint against the men who purchased the company from a unit of OAO Lukoil for $1 in 2011, claiming the buyers drained $6.5 million from the company mostly to line their own bank accounts.

In the complaint filed Nov. 26 in the U.S. Bankruptcy Court for the Southern District of New York, trustee Alfred T. Giuliano claims Bjorn Aaserod and Joseph Scott Karro grabbed millions of dollars from GPMI's coffers to pay for personal tax obligations and expenses and heaped huge compensation packages upon themselves before putting the company into bankruptcy.

"Having acquired GPMI for essentially nothing, and then having appointed themselves as the sole officers and directors of GPMI, Aaserod and Karro immediately began using GPMI's remaining few dollars to feather their own nest," the complaint said. "The utter lack of value received by GPMI in exchange for the payments renders them voidable and recoverable as fraudulent conveyances."

Giuliano alleged that in the nine months between the time Aaserod and Karro bought GPMI - in a deal that also included a $25 million equity infusion from Lukoil to prop the company up post-closing - the men transferred nearly $4 million from the "woefully insolvent" company into accounts under their control to take care of their own bills.

Some went to pay their personal tax bills, and another chunk, nearly $68,000, was charged to GPMI's American Express account for Aaserod and his family to take trips across Europe while the company was in dire financial straits, according to the complaint.

Aaserod and Karro approved top-level executive positions for each other that included above-market base salaries - a total of $100,000 per month split between both men, which Giuliano is not currently seeking to recover - with generous bonuses and a GPMI prefunded lump sum pension contribution, the trustee alleged.

"To add insult to injury ... they also awarded themselves a 'success fee' of $900,000.00 - paid again from GPMI's coffers - for buying the company," the complaint stated.

After GPMI filed for Chapter 11 protection in December 2011, the men siphoned nearly $191,000 from the company to pad their pension funds, according to the adversary action.

Aaserod and Karro also had a nondebtor subsidiary of GPMI that they controlled, Cambridge Petroleum Headquarters LLC, pay nearly $2.6 million directly to them, much of which also went to the men's pensions, Giuliano alleges.

Court records do not list attorneys for Aaserod or Karro in the action, and they could not be immediately reached for comment Thursday.

The matter is scheduled for a pretrial conference in New York City during January.

The adversary complaint was launched about a week before Giuliano unleashed a wave of adversary actions looking to clawback nearly $8 million in payments to entities such as law firms, insurance companies, and petroleum services companies during the 90-day prebankruptcy preference period during which certain transfers may be recovered.

GPMI filed for Chapter 11 protection reeling from the loss of an arbitration dispute where it was ordered to pay ethanol company Bionol Clearfield LLC $227 million in damages connected to a plant in Pennsylvania, according to court records.

U.S. Bannkruptcy Judge Shelley C. Chapman confirmed the debtor's liquidation plan in August 2012.

During the case, GPMI was embroiled in a feud with former owner Lukoil over claims its U.S. unit fraudulently transferred all of Getty's profitable gas stations, subleases and subsidiaries in 2009 to its sister company Lukoil North America LLC in exchange for an allegedl much-undervalued $120 million payment.

The dispute appears to have been brought to a close in July, when Lukoil agreed to pay $93 million to settle the claims, according to court records.

Giuliano is represented by Andrew N. Goldman, Charles C. Platt and Michael G. Bongiorno of Wilmer Cutler Pickering Hale and Dorr LLP.

Counsel information for the defendants was not immediately available.

The bankruptcy case is In re: Gett Petroleum Marketing Inc. et al., case number 1:11-bk-15606 in the U.S. Bankruptcy Court for the Southern District of New York.

The adversary case is Alfred T. Giuliano as trustee of The Getty Petroleum Liquidating Trust v. Cambridge Securities LLC, et al, case number 1:13-ap-1720 in the same venue.

-- Additional reporting by Michael Lipkin and Daniel Wilson. Editing by Chris Yates.

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