Dive Brief:
- Mountain Express Oil’s former chief financial officer recently testified that the company’s former co-CEOs, Lamar Frady and Turjo Wadud, siphoned company funds while they were leading the convenience retailer, according to a May 7 filing with the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.
- Gina Zamarelli, who was hired as Mountain Express’ CFO in late 2022, also told the bankruptcy court that Frady and Wadud’s money transfers were made at the closing of Mountain Express’ various sale-leaseback transactions in 2021 and 2022. This aligns with what Mountain Express’ bankruptcy trustee, Janet Northrup, alleged in her initial investigation into these transfers earlier this year.
- Although Northrup began investigating Frady and Wadud in March for their money transfers, the topic of these siphonings initially arose when the company shifted to Chapter 7 bankruptcy in August 2023.
Dive Insight:
Beyond her testimony that Frady and Wadud funneled money from Mountain Express into their own separate entities during the company’s rapid growth phase, Zamarelli also told the court that the executives did so when Mountain Express was in financial distress.
“On any of the closing statements I saw, there was always a line item for that,” Zamarelli said, as referenced in Tuesday’s court filing.
When Northrup officially announced her investigation into Frady and Wadud’s money siphoning earlier this year, court documents at the time noted that the funds transferred by the two executives totaled at least $3.5 million.
Tuesday’s filing indicates it may have been much more.
According to Tuesday’s filing, counsel for West Hill Ranch — a six-store chain Mountain Express acquired in 2021 and that eventually owned 3% of the Georgia-based company — testified that Frady and Wadud siphoned over $14 million to themselves during their time leading the company.
Between 2021 and 2022, Mountain Express’ acquired 286 properties across 60 sale-leaseback deals totalling more than $825 million.
This news comes just a few days after lawyers representing Northrup accused an executive of Oak Street Capital — which funded Mountain Express’ growth — of engaging in “wrongful conduct” alongside Frady and Wadud. Blue Owl Capital, Oak Street’s parent company, denied any wrongdoing.
Even with the findings the court has revealed in recent months, Mountain Express’ Chapter 7 bankruptcy case is still in the early stages, according to Tuesday’s filing. Northrup remains focused on securing Mountain Express’ books and records, selling assets, engaging in litigation, investigating potential causes of action and taking action to preserve and monetize the remaining assets of the estates.
