Heating Oil Companies Feel the Heat

By MARK SULEYMANOV

Representatives of the Business Integrity Commission — a watchdog city agency — testified at a City Council committee hearing on Thursday as to why they should regulate the heating oil supply business to help stem widespread corruption by “bad actors” in the industry.

BIC officials cited their work with the police department and the Manhattan DA’s Office last November in an investigation that led to indictments of nine heating oil supply companies and 44 of their employees and owners, exposing alleged corruption where employees and owners would shortchange customers through practices such as “shorting” and “blending.”

Shorting involves truck drivers  manipulating anti-theft devices installed on their trucks to deliver “less oil than they charged for.” Blending involved illegally mixing waste oil with good oil before it’s delivered to customers. Waste oil produces less heat and burns quicker, which requires customers to need more oil shortly after getting a delivery.

“Gallon by gallon, the defendants stole an average of 10 to 15 percent of their heating oil deliveries, amounting to tens of millions of dollars each year,” BIC Chairman Daniel B. Browned said in his testimony before the Committee on Sanitation and Solid Waste Management, “As one law enforcement informant who spent decades in the heating oil supply industry explained, ‘They steal so much they think it’s legal.’”

Part of BIC’s presentation included traced phones calls between employees and their bosses discussing their tactics to cheat customers out of the oil they paid for.

The indictments allege that the defendants stole oil from schools, apartment buildings, churches, homeless shelters, police stations, and firehouses. In total, the companies caught in the case robbed customers out of $75 million worth of oil.

Hearing the testimony, Councilman Andy King spoke with a renewed interest, realizing he and his family may have been victims of these practices when he was growing up.

“I remember my mom yelling at us about not using too much heat,” King said. “And after hearing this, I now remember the oil sometimes lasting two months, other times barely lasting two weeks.”

Brownell proposed that all heating oil companies in the would be required to get a license from BIC. He threw out a rough estimate of a potential two-year license for every company that could cost upwards of $5,000. All employees would also have to apply for licenses and BIC would reserve the right deny applicants they deem “lack good character, honesty, and integrity.”

A large groan passed through the 16th-floor committee room at 250 Broadway as several owners of heating oil companies realized their costs may skyrocket. 

Brownell noted that BIC would still have to speak with the Office of Business and Management before settling on a fixed price.

“Yeah, so they can charge us $10,000?” quipped Daniel Schildwacther, the president of Schildwachter Oil, a heating oil company based in the city.

Rocco Lacertosa, the chief operating officer of the New York Oil Heating Association (NYOHA) spoke out against BIC, stating their plan would “cripple” small heating oil businesses.

“This bill would destroy good people and make it impossible for mom and pop union heating oil businesses to compete with global utilities,” Lacertosa said. “Placing an already heavily regulated industry under the BIC bureaucracy will regulate good actors out of business and will not accomplish our shared goal of punishing bad actors.”

Councilman Costa Constantinides pressed Brownell about specifics on the pricing and how BIC would regulate all the companies. However, Brownell stated that the exact number of companies was unknown.

However, witnesses argued that the proposed legislation “does not infringe on the powers or duties of the DCA, DEP, FDNY or any other agency.”

“DCA would have access to a complete list of all heating oil companies operating in the City and their roster of trucks,” Brownell said. “This would allow DCA to check to see whether any owners have failed to have their trucks inspected.”

Committee Chairman Antonio Reynoso and many others in the room, agreed a stronger system needed to be implemented.

“People want a solution to a problem that has been around for 30 years,” Reynoso said. “BIC isn’t the problem, the bad actors are.”