New York's Cooperative and Condominium Community
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A slick oil scam uncovered.
How can your board avoid oil scams – what you should know about the oil delivery process, new devices, and precautions to prevent being cheated by an unscrupulous firm.
It was a slick scam, in both senses of the adjective – and it could have serious consequences for co-ops and condos that heat their buildings with fuel oil. For 17 years, two major New York City oil delivery companies – Mystic Tank Lines, in Queens, and the T & S Trucking Corporation, in Brooklyn – have allegedly been cheating customers to the tune of $75 million.
According to the FBI, fleet truck drivers were under orders to keep back a portion of every delivery by having their meters programmed to shortchange customers by three percent. The stolen fuel would allegedly be resold for cash, at a discount, to oil retailers. The scheme earned the owner of Mystic Tank Lines as much as $35,000 per week, and a million gallons of oil changed hands from May 2006 to April 2007. Over the 17-year period, the company received $50 million in exchange for stolen oil, the authorities said.
How can your board avoid such scams? One way is to know more about the oil-delivery process. When an oil-delivery truck arrives, the driver and the superintendent should go to the basement of the building together, suggests Carla Romita, senior vice president and director of marketing at Castle Oil. Then, the driver should push a long metal dipstick marked off in inches through a small hole in the top of the tank. The super should note how many inches the tank holds; a chart allows him to convert the inches into gallons.
In practice, it can be a dirty job to get to the dipstick hole, or it may be almost impossible if, for example, there is too little headroom above the tank to allow the super to manipulate the long dipstick. In that case, he can consult a petrometer gauge, which uses a probe to estimate the weight of the oil and offers a rough idea of the volume. These gauges are notoriously imprecise, however, and could easily be as much as five percent off.
If you’re using No. 6 oil, there’s another wrinkle. There are three main grades: 2, 4, and 6. No. 2 is the cleanest and the most expensive; No. 6 is the dirtiest and the cheapest; and No. 4 is a mixture of the other two. Unless you are installing a new boiler, you don’t get to choose which oil you use; your boiler and burner will be manufactured to burn one. No. 6 is heavy, sluggish, and dirty. Craig Rosenman, great-grandson of the founder of Stuyvesant Oil and one of the current owners, estimates that it is about 40 percent less expensive than No. 2 and provides more heat per gallon than any other grade. The downside is that, because it is very dirty, the equipment using it requires more costly maintenance. And it can’t be pumped until it’s heated. So, with No. 6, a building receives a delivery that seems greater than it is because the oil has expanded at the higher temperature.
James Meiners, operational manager at the Castle Oil terminal, explains: “It comes in heated from the ships or barges and then we have heating coils in the bottom of the storage tanks.”
Trucks load up at racks in the terminals. Between them, Castle and Stuyvesant have over 60 million gallons of oil in their storage tanks. That sounds like a huge amount, but in the winter months, Stuyvesant’s 24 million gallons can be turned over in just three days.
For most buildings, there is no way of checking on the actual temperature of the oil. Unscrupulous dealers could claim their oil is 115 degrees Fahrenheit when it may be only 90 degrees. The temperature correction will then be too small, and, again, the customer could be paying for oil that isn’t delivered.
Once the driver has checked the tank in the building, he starts the truck engine and leaves it running throughout the delivery to power the pump. Then he inserts a ticket into an automatic meter at the back of the truck. The super should check that the meter is set to zero before the delivery begins. If the meter hasn’t been zeroed, you could be paying for gallons that you aren’t receiving. Finally, the driver walks the hose out to the fill-point for the building.
At some properties, the driver gets an auditory feedback from the tank. As the incoming oil displaces the air, it rushes through a vent outside the building and blows a whistle. When the whistle stops, fuel delivery has to stop. But not every tank has such a whistle.
After delivery, the meter automatically prints out the number of gallons that have been pumped in. Before signing it, the super should go to the basement again with the driver and “stick” the tank a second time to check that the gallons marked on the ticket match the gallons added to the tank.
The New York City Department of Consumer Affairs (DCA), Division of Weights and Measures, requires every oil delivery truck to be checked annually for meter accuracy. In 2006, with over a thousand trucks inspected, 92 percent were found to comply. For the DCA test, the driver has to arrive at the testing station in Brooklyn with one of his tank compartments fully loaded. The fuel is pumped into a precisely measured tank at the station and the meter is checked to see that it accurately registers the amount. Then there’s a stress test of a critical piece of the delivery equipment.
“If you’re going to defraud people with oil, basically how you do it is you sell them air,” says John Browne, supervising inspector of the petroleum products squad at the Weights and Measures station in Brooklyn, who has been at the division for 22 years and knows all the angles. “Every truck has an air-eliminator device that is supposed to stop you from doing that.”
If the eliminator is functioning correctly, it stops the fuel flowing as soon as it senses that air is traveling through the meter together with the oil. The tolerance level is about a gallon.
Ross Andersen, director of the New York State Bureau of Weights and Measures, describes the four basic methods that have been used to skim oil: meters can be recalibrated to register more oil than is being delivered; bypass piping can be built into the truck so that oil is diverted from the delivery hose back into the truck; delivery tickets can be forged; and – perhaps the toughest to detect – air can be mixed in with the oil to inflate the meter readings.
“The problem with the meters is they are measuring space, and they don’t care whether it’s oil taking up the space or a mixture of oil and air,” Anderson says.
Big trailer trucks can carry up to 8,000 gallons of oil. If you have ever noticed how the water begins to slosh around in your water bottle when it’s half-empty, imagine several thousand gallons of heavy oil sloshing around behind you when you’re at the wheel. To avoid that, the tank is always split up into compartments.
As the oil is pumped out, the driver pushes up a lever to close each compartment after it empties. It isn’t completely empty, though. It’s full of air. The “product depletion” test checks that air is prevented from getting into the meter and being registered as oil. The meter-calibration chamber is then wired shut and lead tags seal the wires in place. If the truck passes all the tests, the inspector attaches a lead and wire clamp over the adjustment controls of the meter and places an official circular seal to the meter. If the seal and clamp are not intact when the truck arrives at your building, you should not accept the delivery.
On a recent visit to the testing station, four out of eight trucks tested were failed by the inspectors: one because the meter was not calibrated correctly and three because too much air was being allowed to pass before delivery was shut down. Tests are strict and failure means a truck is immediately condemned. This, in effect, means that until the truck can pass the tests, the company is not allowed to use it to deliver oil.
This year, a significant change has been introduced. Spot checks, which are currently carried out at the terminals as the trucks load, will also now be performed in the field. Browne has five mobile units that must stop to make an on-the-spot inspection whenever they see a truck unloading. While the oil is being pumped out of the truck, the inspector checks with a stopwatch to see that it is moving at the same rate as it did at the test station. If it’s going faster, it could be producing too much foam, which expands the volume registered.
Browne raises one other important issue: “These deliveries are being made during the winter for the most part when the boiler is running. So, it is kind of tough to judge whether or not you’ve gotten what you paid for when you’re burning the stuff as it’s being dropped into your tank.”
There is a new device, however, that can reportedly eliminate these problems. For the past year, Greg Carlson, manager of the Fairview cooperative in Queens and executive director of the Federation of New York Housing Cooperatives & Condominiums, has been trying out ultrasonic sensors that monitor the volume of oil in the building’s two 20,000-gallon tanks. When a delivery is made, the Verifier automatically collects all the data, recording the time and the exact duration of the delivery; the amount of the delivery in inches and in gallons; and the temperature of the oil in the fill pipe entering the tank. In essence, it’s an electronic dipstick. A computer panel provides constant readouts of the data and can be read directly in the boiler room or dialed into remotely. The device does double duty also in providing an hourly track of oil usage and a low-fuel alarm. (Price: $3,200.)
Warren Zarestsky, the vice president/communications at U.S. Energy Controls who developed this device, asserts that it would put a stop to any shortchanging.
“The whole delivery system was developed when oil was ten cents a gallon. Now the price has skyrocketed and even small discrepancies can add up to serious money. We guarantee accuracy to a tenth of an inch.”
As a precaution against leaking oil tanks, the Environmental Protection Agency requires that every building keep a daily log of oil usage and inventory. If your super is diligently maintaining these records, they can provide a good idea of whether you are getting the oil you’re paying for. If the boiler is running out of oil frequently, and there’s no obvious reason such as additional demand, that’s a warning sign: check your deliveries carefully.
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