Abbott alleges diluted gasoline

By Bryan Cohen | Aug 18, 2011


HOUSTON (Legal Newsline) - Texas Attorney General Greg Abbott filed a lawsuit Thursday against a petroleum company for allegedly defrauding customers by diluting medium and premium grade gasoline with regular unleaded fuel.

Petroleum Wholesale L.P., Sun Development L.P. and related defendants allegedly sold improperly diluted premium gasolines at 143 of their Texas-based locations. These allegedly fraudulent acts are violation of the Texas Deceptive Trade Practices Act.

Abbott alleges that the fuel dilution scheme, known as cross-dumping, was discovered during a prior enforcement action that alleged that the defendants calibrated their gasoline pumps to deliver less fuel than was actually disclosed to customers. Abbott alleges more than 1,000 instances in which the defendants illegally cross-dumped fuel at 143 locations across Texas. Many of the alleged cross-dumping incidents occurred at service stations in and around Harris County, Texas.

The incidents allegedly occurred from 2005-2008. As of the filing date of the state's enforcement action, the defendants had refused to provide the state with documents evidencing their conduct after 2008.

In addition to operating Sunmart Travel Centers & Convenience Stores, the defendants also operate approximately 80 service stations that are licensed by the state to sell fuel under branding agreements with three major fuel companies. Because branded stations feature brand-name products with performance-enhancing additives such as valve cleaning and fuel injection products, those gasolines are marketed for their superiority over other fuels.

As a result, if customers pay for a brand-name gasoline but actually receive generic or additive-free gasoline, they are being deceived about the nature of the product they are purchasing. According to the enforcement action by the state, the defendants allegedly also sold unbranded fuel at branded stations and hid the conduct from their branded fuel providers.

Abbott also alleges that the defendants improperly sold conventional fuel in locations that required reformulated fuel. Reformulated fuel includes detergents and oxygen and has a chemical composition that is intended to reduce carbon-monoxide emissions. The federal Clean Air Act requires densely populated areas that exceed certain levels of air quality, like Houston, to sell reformulated fuel.

The state's enforcement action seeks a temporary and permanent injunction against the defendants in addition to civil penalties up to $20,000 for each violation of the Texas Deceptive Trade Practices Act.

The cross-dumping case is the state's third enforcement action against Petroleum Wholesale. In November, a Harris County jury rendered a verdict of at least $30 million against Petroleum Wholesale L.P. and PWI GP LLC for illegally and deliberately calibrating their gasoline pumps to deliver less than a full gallon of fuel. A Harris County district court is currently reviewing the state's motion to reinstate the jury verdict in that case. The first enforcement action was resolved in December 2009, when the company was ordered to pay $100,000 for failing to properly protect its customers' personally identifying information, which is in violation of state identity theft prevention laws.

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