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MEQUON, Wis. -- The sale of 66 gas stations and convenience stores from bankrupt Bulk Petroleum, based here, is being called "rigged" by some parties in the case and federal bankruptcy court documents, as the potential buyer is related to the assets' former owner, the Milwaukee Journal Sentinel reported.
The ex-owner, Darshan Dhaliwal, acknowledged Monday that Convenience Stores Leasing & Management, which won the auction with a $11 million bid and is slated to purchase the stations, is owned by Bachan Singh, is his first cousin once removed, according to the report. Singh owns other gas stations in the area.
Dhaliwal confirmed that his father and Singh's grandmother are brother and sister, but denied any improprieties in the sale. 7
"If you start with Adam and Eve, you and I are related," Dhaliwal said in the report. He added he did not finance Singh's purchase of the stations or prearrange the sale.
"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, which was cited by the Journal. "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 alleging the auction was "rigged."
"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 and others noted that the auction, which began in the morning of Feb. 17, ran until nearly 4 a.m. the next day, the report stated. The stations were being auctioned individually with winners being declared, but Singh allegedly appeared up late in the evening and offered to buy all the assets. The losing bidders felt their offers were improperly voided, the newspaper reported.
Singh, when reached by phone on Monday, declined to comment to the paper.
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 the newspaper reported.
The Illinois-based real estate firm, Hilco, marketed the properties and held the auction. Representatives from the company did not return calls by the paper. And officials with the U.S. Trustee Program, which is involved with the bankruptcy proceedings, did not return calls Monday.
A hearing to finalize the sale -- part of Bulk Petroleum's bankruptcy case, which was filed in February 2009 -- is set for Tuesday. The purchase agreement calls for Singh to use Bulk Petroleum as the supplier of fuel for all the stations for five years.
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