Metro Fuel creditors pursue involuntary bankruptcy for Pullo brothers

By Jim Witters

Wilmington, Del., June 12 - Metro Fuel Oil Corp.'s official committee of unsecured creditors is seeking the involuntary bankruptcy of Paul J. Pullo, Jr. and Gene V. Pullo as a way to prevent New York Commercial Bank's $16.87 million state court judgment from superseding the creditors' claims, according to a June 12 filing with the U.S. Bankruptcy Court for the Eastern District of New York.

Judge Carla E. Craig accepted a stipulation read into the record during a June 12 emergency hearing and ratified "the restraining notice in the state court action during the involuntary gap period or until modified by further order of the (bankruptcy) court," according to a docket entry.

As previously reported, the committee was granted legal standing June 6 to pursue claims on behalf of the debtors' estates.

If the Pullos do not voluntarily or involuntarily obtain bankruptcy protection before June 13, the New York Commercial Bank's judgment liens against the Pullos' assets will become unavoidable.

If that happened, New York Commercial Bank would be a secured creditor of the Pullos, and all other holders of unsecured guaranty, contract, tort and avoidance claims against the Pullos would not receive any recovery until New York Commercial Bank has been paid from the Pullos' assets.

The committee said the Pullos have indicated that they were not prepared to file voluntary bankruptcy, meaning the committee must be prepared to coordinate involuntary bankruptcy filings against the Pullos before June 13.

A liquidating plan "continues to represent the best option for preserving value for all creditors," the committee said in a previous court filing.

The committee plans to file adversary proceedings against the Pullos, to be followed by expedited requests for prejudgment remedies against the Pullos under New York law to prevent the dissipation of their assets.

The committee requested that the Pullos cases' be jointly administered with the Metro Fuel Oil cases, invoking the automatic stay and preventing the running of the 90-day preference period on New York Commercial Bank's judgment lien.

Potential claims

The potential claims against the Pullos include avoidance and recovery of fraudulent and preferential transfers stemming from direct asset transfers to pay real estate holdings obligations, avoidance and recovery of excessive compensation to the Pullos while the debtors were insolvent, recharacterization of the Pullos' so-called loans to the debtors as equity contributions and/or the return of inappropriate dividends and claims arising from the commingling of the debtors' and the Pullos' assets by the inappropriate use of the debtors' personal and administrative infrastructure to fund and manage the Pullos' non-debtor businesses, the committee said in its filings.

The Pullos also face breach of fiduciary duty claims in connection with years of mismanaging the debtors' businesses, according to court documents.

Metro Fuel Oil is a Brooklyn, N.Y.-based energy company that supplies bioheat, biodiesel, heating oil, central air conditioning units, ultra low sulfur diesel fuel, natural gas and gasoline throughout the New York City metropolitan area and Long Island. The company filed for bankruptcy on Sept. 27, 2012 under Chapter 11 case number 12-46913.

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