Case No. RF346-00018
February 4, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Supplemental Order
Applications for Refund
Names of Petitioners:Anchor Gasoline Corporation/Mid Continent Systems, Inc.
Anchor Gasoline Corporation/Seago Enterprises, Inc.
Atlantic Richfield Company/Seago Enterprises, Inc.
Dates of Filing: December 30, 1992
April 5, 1993
January 30, 1997
Case Numbers: RF346-18
RF346-48
RF304-15507
This Decision and Order concerns two competing Applications for Refund from the monies which Anchor Gasoline Corporation (Anchor) remitted to the Department of Energy under the terms of the September 22, 1988 Consent Order between DOE and Anchor. One application was submitted by the trustee in bankruptcy on behalf of Mid Continent Systems, Inc. (Mid Continent). The other application was submitted by Mr. D.G. Seago on behalf of Seago Enterprises, Inc. (Seago). This Decision and Order grants the application filed by Mid Continent and denies the application filed by Seago. This Decision also rescinds a refund that was granted to Seago in the ARCO special refund proceeding.
I. The Anchor Proceeding
A. Background
The Anchor Consent Order settled all claims and liabilities regarding Anchor's compliance with the Federal Petroleum Price and Allocation Regulations during the period August 19, 1973, through January 27, 1981 (the consent order period). On April 2, 1992, the Office of Hearings and Appeals of the DOE instituted special refund procedures for the distribution of those funds. See Anchor Gasoline Corp., 22 DOE ¶ 85,071 (1992) (Anchor). The special refund procedures allow purchasers of Anchor products which were regulated during the period of price controls (e.g., motor gasoline, middle distillates, and natural gas liquids) to file Applications for Refund from the Anchor consent order fund.(1) Refunds can be sought only for regulated products purchased between August 19, 1973, and January 27, 1981, the end of the period of petroleum price controls. See Anchor at 88,215.
Evaluating applications in this proceeding involves both an allocation of an appropriate portion of the consent order fund to each applicant, and an evaluation of economic harm or injury suffered by that
applicant. Id. at 88,216; see also Sid Richardson Carbon & Gasoline Co., 12 DOE ¶ 85,054 (1984). In order to determine the portion of the fund to be allocated to each claimant, we assume that overcharges were distributed equally over every gallon of regulated products sold by Anchor during the consent order period. We divided the value of the consent order fund by Anchor's total sales of covered products during that period. Anchor at 88,216. This calculation produced a "volumetric factor" of $0.006942 per gallon. When this factor is multiplied by an applicant's total eligible purchases the result is the claimant's allocable share of the consent order fund. Unless an applicant demonstrates that it was disproportionately affected by Anchor's alleged practices, it cannot receive a refund greater than this allocable share. Id. at 88,216.
Resellers and retailers claiming refunds of less than $10,000 and end users are presumed to have been injured by Anchor's alleged overcharges and need not submit a detailed showing of injury. Mid-level resellers and retailers whose full volumetric refund would exceed $10,000 may elect to receive the higher of $10,000 or 40 percent of their full volumetric share up to a maximum of $50,000 without providing detailed demonstrations of injury. Id. at 88,218. To qualify for a refund, such an applicant must only submit evidence of its volume of its purchases of Anchor petroleum products during the consent order period.
B. Analysis
Seago seeks a refund based upon 12,592,658 gallons of Anchor products that it claims to have purchased during the refund period. Mid Continent bases its application upon purchases of 21,516,860 gallons of Anchor products. The Mid Continent claim includes all gallons claimed by Seago. In view of the conflicting claims, we invited both parties to submit evidence to support their claim to the refund.
Evidence submitted by Mid Continent indicates the purchases in question were made by Seago Enterprises, Inc., which was owned by Mr. Seago. However, in August 1974, that firm merged into Mid Continent which became the surviving corporation and the former Seago Enterprises ceased to exist. Mr. Seago does not dispute that a merger occurred.
We have previously considered an applicant's eligibility for a refund where changes of ownership are concerned. Where the purchases were made by an individual or a partnership, this Office has generally presumed that the owners during the price control period should receive the refund unless the sales contract clearly indicates otherwise. See, e.g., Texaco Inc./Tenbarge Oil Co., 21 DOE ¶ 85,121 (1991). Where, as here, the purchases were made by a corporation, the right to the refund generally remains with the corporation even if ownership of the corporate shares has changed. This general rule can be overridden by clear contractual provisions transferring the refund to a purchaser of corporate assets or permitting a previous shareholder to retain the right to the refund. Id.; Texaco Inc./General Gas & Oil Co., 22 DOE ¶ 85,130 (1992).
In the present case, it is undisputed that the firm which made the Anchor purchases (Seago) merged into, and became part of, Mid Continent. For purposes of determining the right to a refund, a merger is similar to the sale of corporate shares. Thus, under the general policy described above, upon merger the right to the refund would belong to Mid Continent. As Mr. Seago has submitted no evidence of any contractual or other provision that would have permitted him to retain the right to the refund or which would have transferred that refund to another firm, we find that the right to the Anchor refund belongs to Mid Continent, not to Mr. Seago. The refund application filed by Seago shall therefore be denied.
We have reviewed the application filed by Mid Continent and find it meritorious. The firm has submitted evidence that it purchased 21,516,860 gallons of Anchor products during the refund period. This results in an allocable share of $149,370. Rather than attempt to demonstrate the amount of injury that resulted from Anchor overcharges, the firm has elected to use the presumption of injury described above and accept a maximum presumption refund of $50,000. In addition, the firm shall receive a proportionate share of the interest that has accrued on the consent order funds. The total refund approved in this Decision is $72,213 ($50,000 in principal plus $22,213 in interest).(2)
Although we have carefully examined Mid Continent's claim and supporting data, the determinations reached in this Decision are based on the representations made by the firm. If the factual basis underlying any of our determinations is later shown to be inaccurate, this Office has the authority to order appropriate remedial action, including rescission or reduction of the refund ordered.
II. Seago's ARCO Refund
Seago's application in the ARCO special refund proceeding was granted on June 1, 1995 (Case No. RF304- 13736) and modified on June 30, 1995 (Case No. RF304-15478). Seago received a refund of $21,068 (including interest) based upon its ARCO application. Atlantic Richfield Co./Seago Enterprises, Inc., 25 DOE ¶ 85,041, correcting 25 DOE ¶ 85,038 (1995). The "Seago Enterprises, Inc.," to which the ARCO refund check was issued is also owned by Mr. Seago, but is a different corporation from the firm that made the ARCO purchases and which was merged into Mid Continent. As discussed above with respect to Seago's Anchor refund claim, the right to refunds belongs to Mid Continent. Consequently, neither Mr. Seago nor the firm currently named Seago Enterprises, Inc., was entitled to the ARCO refund.
There is a second reason why Seago was ineligible for an ARCO refund. As with the Anchor proceeding, the maximum ARCO refund that a firm may obtain by relying upon a presumption of injury is $50,000, plus interest. In considering whether this $50,000 maximum has been reached, we consider all applications filed by related firms. The record indicates that Mr. Seago owns a majority interest in Mid Continent. Mid Continent is therefore considered related to any other firms owned or controlled by Mr. Seago in considering whether this $50,000 maximum presumption refund has been reached. On November 14, 1991, Mid Continent was granted a $50,000 refund in the ARCO proceeding. Atlantic Richfield Co./Mid Continent Systems, Inc., 21 DOE ¶ 85,424 (1991). Consequently, Mr. Seago and his related companies had already received the maximum refund available under the presumption of injury at the time the Seago refund was approved.
The refund process depends upon the accuracy of the information submitted by the applicants. Mr. Seago gave in his ARCO refund application no indication that the "Seago Enterprises, Inc." to which he asked the refund check to be made payable was a different firm from the firm with the same name that had made the ARCO purchases. In addition, he certified that "Neither myself, my company nor a related firm has filed . . . any other refund application in the ARCO proceeding." This was clearly incorrect as Mid Continent, a firm in which Mr. Seago owns a majority interest, had already received a refund in the ARCO proceeding. As a result, Mr. Seago and his firm Seago Enterprises, Inc., received refund to which they were not entitled. We stated in the determination granting the ARCO refund that:
The determinations made in this Decision and Order are based on the presumed validity of statements and documentary material submitted by the applicant. The determinations may be revoked or modified at any time upon a finding that the factual basis underlying the Application for Refund is incorrect.
Such remedial action is appropriate here.(3) Accordingly, the refund granted to Seago will be rescinded, and Mr. Seago and the firm currently named Seago Enterprises, Inc., will be jointly required to repay the amount of the ARCO refund, together with the $1,876 in interest it would have earned had it remained on deposit in the ARCO escrow account. The amount of this repayment obligation is $23,246.
It Is Therefore Ordered That:
(1) The Application for Refund filed by Seago Enterprises, Inc., in the Anchor refund proceeding (Case No. RF346-48) is hereby denied.
(2) The Application for Refund filed by Mid Continent Systems, Inc., in the Anchor refund proceeding (Case No. RF346-18) is hereby granted as set forth in Paragraph (4) below.
(3) The Decision and Order issued by DOE on June 1, 1995 as modified by the Decision and Order issued on June 30, 1995 to Atlantic Richfield Co./Seago Enterprises, Inc., (Case Nos. RF304-13736 and RF304-15478, redesignated as RF304-15507) is hereby rescinded as set forth in Paragraph (3) below.
(4) The Director of Special Accounts and Payroll, Office of Departmental Accounting and Financial Systems Development, Office of the Controller of the Department of Energy, shall take appropriate action to disburse from the DOE deposit fund escrow account maintained at the Department of Treasury and funded by Anchor Gasoline Corporation (Consent Order No. 740S01247Z), $72,213 ($50,000 in principal plus $22,213 in interest) to:
Mid Continent Systems, Inc.
? Bassman, Mitchell & Alfano
P.O. Box 65511
Washington, DC 20035
(5) Mr. D.G. Seago and Seago Enterprises, Inc., are hereby directed to remit $23,246 to the Department of Energy at the following address:
Department of Energy
Office of the Controller
Cash Control Branch
P.O. Box 500
Germantown, MD 20874
Payment should be made by check payable to the U.S. Department of Energy and should refer to Case No. RF304-15507. In the event that payment is not made within 30 days of the date of this Decision and Order, interest shall accrue on the unpaid amount at the rate generally assessed by the Department of Energy on overdue receivables. Other charges generally assessed on overdue receivables shall also apply.
(6) Upon receipt of the payment specified above, the Director of Special Accounts and Payroll, Office of the Controller of the Department of Energy shall take appropriate action to deposit these funds into the DOE deposit fund escrow account funded by Atlantic Richfield, Inc., Consent Order No. RARH00001Z. For purposes of this account, the payment shall consist of $11,971 principal and $11,275 interest.
(7) The determinations made in this Decision and Order are based upon the presumed validity of statements and documentary material submitted by Mid Continent Systems, Inc. The determinations may be revoked or modified at any time upon a finding that the factual basis underlying any of the Applications for Refund is incorrect.
(8) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: February 4, 1997
(1)For purposes of this proceeding, any reference to Anchor includes Anchor Gasoline Corporation and its wholly- owned subsidiary, Canal Refining Company. See Anchor at 88,210.
(2)Mid Continent is subject to a Remedial Order for violating the price regulations. See Mid Continent Systems, Inc., 13 DOE ¶ 82,505 (1985). To date, the Remedial Order's requirement that the firm repay approximately $1.7 million has not been satisfied. Generally, where a refund applicant has an unsatisfied remedial obligation, this Office deposits the refund into an escrow account until that obligation has been satisfied. In the present case, Mid Continent has filed for bankruptcy and the bankruptcy court now exercises jurisdiction over the firm's assets and liabilities. DOE is listed as a creditor in that proceeding. We previously held that given these circumstances, Mid Continent's refunds should be paid to the bankruptcy trustee. Atlantic Richfield Co./Mid Continent Systems, Inc., 21 DOE ¶ 85,424 (1991).
(3)Mr. Seago notes that he paid 35% of the refund as a commission to Federal Refunds, Inc. (FRI), a private filing service through which he filed the application. Mr. Seago's payment of a commission to FRI is a private matter between him and FRI, and does not constitute a defense to this repayment obligation. Moreover, there is no reason to expect that Mr. Seago will be unable to recover the commission paid to FRI.