Getty Buyers Sue Akin Gump For Conflict in Lukoil Dea

September 16, 2014 | By Beth Winegarner | law360.com

Akin Gump Strauss Hauer & Feld LLP was slapped with a malpractice suit on Monday in New York bankruptcy court by two investors who purchased Getty Petroleum Marketing Inc. from a unit of OAO Lukoil, who claim Akin Gump gave them shady advice while representing parties on both sides.

Cambridge Securities LLC owners Bjorn Aaserod and Joseph Scott Karro - who are accused of grabbing millions of dollars from Getty Petroleum's coffers after the purchase - say Akin Gump advised them in the deal while also representing Lukoil Americas Corp. Akin Gump never told Aaserod and Karro about the conflict, and also falsely told them that Getty Petroleum was solvent at the time of the deal, according to their complaint, filed on Monday in the adversary proceeding against them.

Akin Gump's advice led Aaserod and Karro to face allegations that they pocketed $6.5 million from Getty Petroleum while the company was tanking, their complaint said.

"Akin Gump's erroneous advice was the result of Akin Gump's negligence in that Akin Gump's conduct fell below the ordinary and reasonable skill and knowledge commonly possessed by a member of the profession engaged in a practice which includes providing advice and services of the type here at issue," the complaint said.

Akin Gump began representing Aaserod in 2004, and took on Karro in 2008 when he joined Aaserod in business. The firm helped them acquire an ethylene gas transport business in 2010, and advised them during the dissolution of Cambridge Global Capital Partners LLC later that year, the complaint said.

In December of 2010, Akin Gump told them there was an opportunity to purchase Getty Petroleum from Lukoil Americas, which the firm also represented. Through February 7, 2011, Akin Gump helped them negotiate a stock agreement to purchase the company - without mentioning that it had a conflict of interest in the deal, the complaint said.

On February 7, Akin Gump told them to obtain separate counsel to finalize the stock agreement, which they did. The agreement was finalized on February 11, 2011. On Valentine's Day, Akin Gump said that it would be representing Cambridge Securities LLC and Getty Petroleum after the closing date, the complaint said.

But Akin Gump gave them bad advice, leading them to believe the company they purchased was in good shape, they said.

"Akin Gump further advised Messrs. Aaserod and Karro that GPMI was solvent and that Messrs. Aaserod and Karro could and should operate GPMI in a manner consistent with such solvency," the complaint said.

They seek a ruling that would force Akin Gump to indemnify Aaserod and Karro, and to pay Getty Petroleum's trustee any money it's awarded based on their service agreements in the adversary proceeding against them. They also seek reimbursement of their legal fees.

An attorney for Aaserod and Karro declined to comment on the lawsuit on Tuesday.

Representatives for Akin Gump didn't respond to requests for comment on Tuesday.

Getty Petroleum was pushed into bankruptcy in December 2011 by an arbitration ruling that ordered it to pay ethanol company Bionol Clearfield LLC $227 million in damages connected to a plant in Pennsylvania, according to court records.

Getty Petroleum trustee Alfred T. Giuliano went after Aaserod and Karro in November of 2013, claiming that in the nine months between the time they bought the company - 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 trustee's complaint.

Aaserod and Karro are represented by Lloyd M. Eisenberg of Eisenberg & Carton and Avrum J. Rosen of The Law Offices of Avrum J. Rosen PLLC.

Representation information for Akin Gump was not available on Tuesday.

The adversary case is Alfred T. Giulliano as trustee of The Getty Petroleum Liquidating Trust v. Cambridge Securities LLC, et al., case number 1:13-ap-01720, in the U.S. Bankruptcy Court for the Southern District of New York. The bankruptcy is In re: Getty Petroleum Marketing Inc. et al., case number 1:11-bk-15606, in the same court.

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