The lawsuit, filed by Kansas City, Mo., attorney Mike Pospisil on behalf of former Crescent Oil majority owner and CEO Phil Near, alleges that Titan Global Holdings — which purchased Appco in September 2007 — took control of Crescent last October and “pilfered the Crescent companies of assets and cash” but never paid for the company.
It also ties Titan’s management of Appco in closely with Crescent — claiming Titan promised that Crescent and Appco, as essentially sister companies, would make one another stronger, and that Titan’s “destruction of Appco had a very real, profound and pertinent adverse on what happened to Crescent and ultimately Near.”
Near was to be paid nearly $1 million in October for his 52 percent stake in Crescent, and Titan’s lender, Greystone Business Credit, was to take over Crescent’s multimillion dollar debt with Marshall and Illsley Bank (M&I), which had been personally guaranteed by Near.
None of that ever happened, the lawsuit alleges, and so M&I on Jan. 30 declared Crescent in default on a $30 million-plus debt. Crescent filed Chapter 11 bankruptcy Feb. 7 — two days before Appco did the same.
Then, at the end of March, Titan CEO Bryan Chance terminated Near and several other members of Crescent’s top management.
The suit — which names Chance, Titan investors Frank Crivello and David Marks, and Titan lender Greystone as defendants along with the company itself — claims that Chance, Crivello and others promised that under Titan leadership, Crescent and Appco would enjoy “synergies” that would improve the performance of both.
Indeed, Titan suggested as much in a release that touted the “synergy” of Appco — which operates 57 convenience stores — and Crescent, which has 55 of its own stores and supplies gas to about 300 more. Working together, Titan said, the companies would take its “Energy Group” on an upward path to success, focusing on renewable fuels along the way.
An Oct. 24 news release had the following to say about the situation: “‘The addition of Crescent, its management team and its points of distribution add significant scale to penetrate our existing and acquired markets with renewable sources of energy,’ said Bryan Chance, President and Chief Executive Officer of Titan Global Holdings. ‘Crescent and Appco provide each other with strong synergies. Crescent’s broad petroleum distribution expertise coupled with Appco’s retail operational prowess will contribute to improved performance at both owned operations.’”
In actuality, by that time Appco was less than two months from cutting off its own 160-strong dealer network, and already was racking up debts to creditors that are now protected by its Chapter 11 filing.
“Unfortunately,” the suit states, “after Near executed the agreement, and after defendants represented to Near that the synergy between Appco and Crescent would be phenomenally successful, Near discovered that all defendants (including Greystone...) were looting the once extremely successful operations of Appco to the tune of millions and millions of dollars, leaving it bankrupt and unable to continue operations.”
The suit also claims that Titan used Near’s good reputation with Kansas fuel vendors to buy fuel for Appco on Crescent’s lines of credit. Appco’s bankruptcy filings do, indeed, show Crescent as an “unsecured creditor” that Appco owes nearly $1.5 million for fuel.
Appco was supposed to sell the fuel purchased through Crescent and then pay Crescent back, the suit states. Instead, it says, Titan’s management “caused Appco to refuse to pay Crescent for the fuel it purchased on Crescent and Near’s lines of credit. This was due, in large part, to the defendants’ instructions to Appco and the defendants’ looting of Appco.”
Meanwhile, Appco is operating under bankruptcy rules but is up for sale. Bankruptcy Judge Marsha Parsons stripped control of Appco from Titan on April 14 and put it in the hands of Andy Weber, a “chief restructuring officer” who is tasked with trying to market and sell Appco.
Titan itself has seen its stock price tumble since February, when the last two of its owned companies that hadn’t gone under or bankrupt declared Chapter 11. Titan’s stock — the company is publicly traded — started 2009 at 30 cents a share, had tumbled to about 15 cents by the time Appco and Crescent declared bankruptcy, and has traded for around a penny for the past month. The Kansas lawsuit states that part of the payment to Near from Titan was to be in the form of 325,000 shares of Titan stock, which Titan valued at $3 per share.
The sale also was to leave Greystone as Crescent’s creditor and relieve Near of all personal guarantees for the M&I debt, but the suit says that since Greystone never closed on the deal, Near remains on the hook for millions of dollars in debt.
“None of the promises made by defendants were fulfilled,” the suit claims. “Near has yet to receive anything of value for his ownership interest in Crescent. Instead, defendants have pilfered the Crescent companies of assets and cash (and) ... driven Crescent — once a very successful business with a reputation second to none — into bankruptcy and have placed Near on the verge of ... the same.”