November 10, 2015 / 6:10 PM / 3 years ago

New York charges 44 with sweeping fraud in heating oil industry

NEW YORK (Reuters) - New York City officials on Tuesday charged 44 people and nine companies with systematically cheating thousands of residential and commercial heating oil customers out of tens of millions of dollars for nearly a decade.

Manhattan District Attorney Cyrus Vance told a press conference that the companies would charge customers for more fuel than was delivered using rigged trucks in a practice known as “shorting.”

The defendants include company owners and executives, truck drivers and dispatchers. They face charges of grand larceny, fraud, falsifying business records and enterprise corruption, which is similar to racketeering.

Indicted companies are F&S Distribution, G&D Petroleum Transportation, G&D Heating Oil, Casanova Fuel Oil, Express Petroleum, 4th Avenue Transport, All-Boro Transportation, Enterprise Transportation and Century Star Fuel.

Company representatives either declined to comment or could not immediately be reached on Tuesday.

The indictments reference approximately $34 million in wrongful proceeds, although Vance said it was likely the companies had collected far more in illicit profits.

In a separate report issued on Tuesday by the city’s Department of Investigation and Business Integrity Commission, officials said widespread fraud within the heating oil industry costs $18 million a year, including $4 million stolen from the city.

The buildings shorted of fuel included hundreds of city properties such as schools and police stations, Vance said. Even his own offices were victimized, he said.

State and federal prosecutors have brought similar cases in the past.

“The heating oil industry in this city is rife with wholesale theft,” said Dan Brownell, head of the Business Integrity Commission, which regulates the city’s wholesale public markets.

The investigation, which started with a 2013 tip from a whistleblower, involved wiretaps, surveillance and fuel measuring devices to track theft, Vance said.

In some cases, as trucks pumped oil into buildings, drivers would use a magnet to deliver air, rather than fuel, according to the indictments. In other cases, drivers installed a bypass valve that would redirect some oil back into the truck while still charging customers for its delivery.

Investigators seized four dozen trucks as part of the probe.

Several city and state agencies took part in the investigation.

“Let me be clear. This investigation is very much ongoing and additional arrests are expected,” said Mark Peters, commissioner of the Department of Investigation.

Reporting by Joseph Ax; Editing by Scott Malone, Toni Reinhold

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