Gas station owners from around the country are calling the auction last month of dozens of stations formerly owned by Mequon-based petroleum magnate Darshan Dhaliwal "rigged," according to interviews and federal bankruptcy court documents.
In an interview with the Journal Sentinel, Dhaliwal acknowledged Monday that the man who won the bidding and is slated to purchase the 66 stations, Bachan Singh, is his first cousin once removed.
Dhaliwal first denied the relationship, saying he and Singh were friends, but later confirmed that his father and Singh's grandmother are brother and sister. Dhaliwal denied any improprieties in the sale.
"If you start with Adam and Eve, you and I are related," Dhaliwal said.
In a motion filed in federal court, Dhaliwal's attorneys stated, "The Purchaser is unrelated to any of the debtors or any insider. . . . There is no evidence that any party was denied information about the Property, or that there was fraud or collusion."
Bankruptcy codes define a relative as extending out three generations.
A hearing to finalize the sale - part of the bankruptcy case Dhaliwal's company, Bulk Petroleum, filed in February 2009 - is set for Tuesday.
The 66 gas stations sold for $11 million on Feb. 17 to Singh's company, Convenience Stores Leasing & Management. The company was first registered with the Wisconsin Department of Financial Institutions in January.
Singh owns other gas stations in the area.
The purchase agreement calls for Singh to use Bulk Petroleum as the supplier of fuel for all the stations for five years. Under Bulk Petroleum's proposed reorganization, Dhaliwal would be president of the company but a minority owner. Singh will pay the wholesale rack rate for the fuel plus 2.1 cents per gallon, according to the documents.
An alternate bid of $11.25 million by another prospective buyer, which didn't include the gasoline supply agreement, was rejected. Documents do not indicate who made the alternate bid.
"I feel that some very unethical and perhaps worse events took place and that I was duped into attending nothing more than a choreographed fraud," Jess Thompson of Lawrenceburg, Ky., wrote in a March 2 letter to U.S. Bankruptcy Judge Susan Kelley. "It's abundantly clear this auction was perfectly angled to benefit Bulk Petroleum and defraud the various financial institutions involved of millions."
Another potential buyer, Jon Sterling, wrote to the judge complaining that the auction was "rigged from the get go!"
"Myself and many others wasted thousands of dollars in Phase I environmental studies, gas tank testing, travel and other due diligence proceedings," Sterling wrote.
Sterling, of Florida, and others complained that the auction, which began early in the day Feb. 17, ran until nearly 4 a.m. the next day. The stations were being auctioned individually with winners being declared. Singh then showed up late in the evening and offered to buy everything, they said. The losing bidders felt their offers were improperly voided.
Singh, when reached by phone on Monday, declined to comment.
Hilco, an Illinois-based real estate firm, marketed the properties and held the auction. Representatives from the company did not return phone calls Monday.
Hilco performed "desktop appraisals" on the properties in late 2009 and concluded they were valued at an estimated $16 million to $26 million, according to the court documents.
Bulk's largest creditors - including Amcore Bank and Summit Credit Union, formerly named Great Wisconsin Credit Union - collectively contend that Bulk and its affiliated companies owe them about $61 million.
Dhaliwal said that he and Singh see each other socially once every few months and that they traveled to India together about two years ago when Dhaliwal's mother died.
He said he did not finance Singh's purchase of the stations or prearrange the sale.
"If any of this was true I would admit it," Dhaliwal said.
Officials with the U.S. Trustee Program, which is involved with the bankruptcy proceedings, did not return calls Monday.
Dhaliwal has deep political ties and has given to Republicans and Democrats in city, county, state and federal office.
In 2007, he pledged to raise $1 million for former Gov. Tommy Thompson in his bid for the presidency. Dhaliwal never paid as Thompson's candidacy fizzled.
Thompson's son, Jason Thompson, worked for Dhaliwal before joining a Milwaukee law firm.
Dhaliwal's financial problems resonate beyond the petroleum business.
In 2006, he promised to make a $2.5 million donation to Cardinal Stritch University. Officials at Stritch said some money was received, but not the full amount.
The same year, Dhaliwal pledged $4.5 million to the University of Wisconsin-Parkside to expand its communication arts building. He hasn't paid anything on that promise since 2006, when he gave $450,000.
In 2008, Dhaliwal was sued by oil giant BP in federal court on allegations of swindling customers out of brand-name gas at as many as 120 stations nationwide, including a handful in Wisconsin.
The lawsuit alleged he was charging brand-name prices for gas not formulated with the promised protectants and detergents designed to extend the life of vehicles.
A settlement was under negotiation when Bulk Petroleum went into bankruptcy in February 2009.
Your link to the biggest stories in the suburbs delivered Thursday mornings.
Enter your e-mail address above and click "Sign Up Now!" to begin receiving your e-mail newsletter Get the Newsletter!
- Mequon-Thiensville residents authorize land sale
- North Shore Police Reports: July 10, 2014
- Referendum among proposed solutions to school district's financial woes
- Mequon Police Report: July 10, 2014
- North Shore Police Report: July 3, 2014
- Cafe Hollander will anchor Mequon Town Center
- North Shore Police Report: June 19
- Hackett award recognizes inclusion at Donges Bay
- Farmers markets start cropping up
- Mequon-Thiensville Police Report, June 19, 2014