Nearly 70 companies — 20 of which are still active and sharing the same address — are all owned by or affiliated with Ben W. Lupo and have been enmeshed, at one point or another, in the state’s oil and gas operations, beginning in 1975.
The address, 2761 Salt Springs Road, was the site last week of an incident in which Lupo, owner of D&L Energy and Hardrock Excavating, directed an employee of Hardrock to dump thousands of gallons of drilling waste down a storm drain on the property, according to preliminary reports and an Ohio Environmental Protection Agency notice of violation signed by Lupo.
The U.S. EPA on Friday said that workers at the site had collected approximately 40,000 gallons of oil and brine from the storm-sewer system, a nearby creek and the Mahoning River.
Last week’s incident was not Lupo’s first environmental infraction, but more importantly, it’s drawn scrutiny to his business dealings.Records from the Ohio Secretary of State’s Office and other public documents show those dealings to be a complex network of separate entities, set up to maximize profits and shield his interests within the protection of limited liability corporations.
To be sure, Lupo has not been alone in his endeavors — he has partners. Yet his business practices, made clear by court documents, demonstrate a pattern of alienation that has led to numerous civil suits and litigation over the years.
REACHING OUT, STANDING OFF
Under the umbrella of D&L Energy Group, the mixture of companies helps Lupo market his services as a safe bet. By providing everything from the site work that readies injection and extraction wells to waste disposal, storage-tank rentals and drilling services, Lupo is able to cast himself as a jack of all trades, pitching his holdings on D&L Energy Group’s website as a benefit to investors and big-name companies seeking to simplify their operations.
For example, the group could posit the expertise of Northstar Oilfield Services, which provides consulting services in the oil and gas industry, and then meet the other needs of clients as they’re requested by offering nearly all of the capabilities required to bring a well through the completion and production stages.
“All these companies had different purposes; they were set up differently. That way, the group could market Northstar’s services, for instance, and a number of ancillary services underneath it,” said Randolph S. Snow, an attorney for the Akron-based law firm Black, McCuskey, Souers & Arbaugh, which represents one of Lupo’s partners in a lawsuit against him.
“In this way, the group is acting like a broker that companies like BP and Hess Oil can approach for their needs,” Snow added.
In Northstar’s case, 51 percent of the ownership interest belongs to Lupo’s partner, Susan Faith — who as both Snow and court documents make clear — has no part in last week’s incident.
In fact, a lawsuit filed in Mahoning County Common Pleas Court on behalf of Faith and 15 other plaintiffs, all of which include companies affiliated with Lupo, show that Faith had misgivings about Lupo’s business practices in 2011 when the suit was filed.
“Benedict Lupo has operated such companies for his own personal benefit and for the benefit of companies to which he owns a majority interest,” reads the complaint, first filed in November 2011.
One such company, of which Lupo owns 85 percent, is D&L Energy, which late Wednesday had its operating permits revoked by the Ohio Department of Natural Resources for failing to comply with state law, when regulators discovered the company was allowing an unregistered truck to haul brine.
Up until about October 2011, according to court documents, Faith was the president of D&L Energy, until Lupo ordered her termination and wrested control of the company from Faith.
In the course of these actions, Lupo also took over Hardrock Excavating, the company state regulators say is the primary suspect in this month’s dumping.
Though the case is still pending with a jury trial set for later this year, in December 2011, Snow said Lupo and Faith agreed to divide management duties among their multiple companies. Lupo was handed D&L and Hardrock, and Faith took over entities such as Northstar and Zorro Oilfield Services, yet ownership interests did not change.
Those interests for Faith and Lupo, in most instances, range from 33 percent to 51 percent, depending on the company. As a result, Faith decided to file a lawsuit over her concerns about how Lupo was running the businesses.
“As a manager and a stakeholder, she had a fiduciary obligation to look after what would happen with each of those companies,” Snow said. “She was concerned about the ongoing operations of those companies and wanted her interests, as well as those of the companies and the customers protected.”
Snow added — offering few details — that Faith has raised serious concerns over last week’s incident.
For the most part, it’s not uncommon for a proprietor to set up multiple business entities under the wing of one interest — to do business and turn a profit.
Yet questions will be raised about an operator such as Lupo, especially after a 2012 Vindicator investigation showed D&L was the subject of 120 environmental violations for its work at 32 injection and extraction wells in Ohio and Pennsylvania.
Repeated efforts to reach Lupo last week were unsuccessful.
Setting up limited liability corporations, says Steven E. Ness, an attorney at the Business Law Center, a Minnesota-based law firm specializing in representing closely held businesses, is a matter of separating dollars and cents.
“When multiple companies are being operated under separate entities by the same owner, it helps segregate the businesses from one another — it provides liability protection,” Ness said. “It’s used for tax purposes and provides unique and distinct ownership so that you can protect individual interests and the profits of each company.”
Ness added that limited liability corporations help facilitate the sale of a single business because “it’s not encumbered and entangled under one umbrella, it’s easier to sell assets when it’s not one large conglomerate, as well.”
Just days after a series of earthquakes rattled Youngstown on Dec. 31, 2011, records with the Ohio Secretary of State’s Office show that Lupo changed the name of Northstar Disposal Services LLC to Mohawk Disposal Management LLC. Injection wells are one way to dispose of the waste generated from the fracking process. The wells have been linked to small earthquakes and targeted for other environmental concerns. Months after the earthquake, ODNR released a report that strongly suggested D&L’s Northstar 1 well was the cause of the quake.
A HISTORY OF VIOLATIONS
As the public outcry over Lupo’s role in the dumping incident continued throughout the week, a lengthy track record shows the transgression was not his first.
In November 2011, according to ODNR records, a well site in Coitsville where D&L was operating was found to be leaking drilling mud, used to help keep drill bits clean and cool during the drilling process, into an open field near a body of water.
In another instance, in 2004, a well site in Portage County’s Shalersville Township was discovered to be the home of three storage tanks —filled with oil and brine — that had overflowed beyond protective dikes designed to contain such a spill.
D&L has a history of 23 violations in Pennsylvania, with one leading the state’s Bureau of Oil and Gas Management to discover a well in Mercer County where sediment discharged into a tributary that carried water into the Shenango River.
In addition, court records also show that Lupo has been the subject of multiple tax liens brought by the Ohio Department of Taxation. Those liens have since been cleared.
Asked this week if ODNR was aware of Lupo’s multiple businesses, Bethany McCorkle, chief of communications at the agency, said they were, but noted those other companies would not be met with additional scrutiny unless the current criminal investigation leads regulators to act otherwise.
For now, Lupo will be granted a hearing, at his request and under state law, with ODNR’s Division of Oil and Gas Resources Management.
D&L Energy spokesman Vince Bevacqua also has said that an appeal to the agency’s decision to revoke the company’s permit will also be considered.