Founders deny blame for failed start-up

July 06--Employees of US Energy Services, a pipeline start-up that filed for bankruptcy protection last month, are still trying to figure out what went down in the last two weeks of the company's short life to cause its sudden demise.

US Energy Services LLC opened an office in Butler in mid-March and shut its doors by May 15. Employees discovered the company's offices emptied. The bed-and-breakfast that had hosted two of its three founders since March reported the duo left the night before, leaving an unpaid bill.

In their wake are a debt that some creditors believe exceeds $1 million and about 70 employees without paychecks, some of whom fear that it had all been a scam -- from the first handshake to the final flight.

"It was the wildest thing I've ever been involved with," said Benji Adkins, assistant superintendent at US Energy, who was left trying to explain to 25 men who worked under him that there were no paychecks, no jobs and no more company.

At the helm, the company's three owners are pointing fingers at each other.

"Everything was stolen. Everything from the printers to the showerhead," said Harry Buck, the remaining founder of the company who feels he has been played by Danny Sterk and Stephen Casciola.

"Two weeks prior to it all folding, Steve and Danny pushed me out of the company. They voted me out of the LLC and basically commenced to screw me and every person in the company," Mr. Buck said.

His former business partners said it was in fact Mr. Buck who ran US Energy into the ground in such a short span of time.

"I don't remember, did we vote him out?" Mr. Sterk asked Mr. Casciola last week.

"It never got to that," Mr. Casciola recalled.

It's simple math, Mr. Casciola said. The company's payroll was so inflated, both in the number of employees hired and their above-average pay, that the firm simply ran out of money. Mr. Buck, the only one of the three with pipeline experience, made all the hiring and operational decisions, his partners said. They pleaded with him to slow down the hiring, Mr. Casciola and Mr. Sterk said, but he wouldn't listen.

Mr. Casciola said Mr. Buck even forbade him to oversee activities on the ground.

Mr. Buck said it was the other partners' irresponsible hiring and spending that caused the financial problems.

When Mr. Casciola and Mr. Sterk brought in a potential investor to replace their cofounder, "Harry Buck went ballistic," Mr. Casciola said.

"I tried to remain amicable with Harry Buck," he said. "We never bothered him with the bankruptcy. He never had to sign anything. Why is he mad at me?"

Mr. Buck said he wasn't consulted before his partners filed for bankruptcy in mid-June. US Energy's bankruptcy attorney, John Cook, confirmed he filed the petition on behalf of the majority owners without talking to Mr. Buck.

He said the firm's financial records don't show anything unusual, just money coming in from one company that hired US Energy to lay some pipeline and most of it going right back out to pay employees and suppliers.

"If there's a scam going on, it's hard for me to see where it would have been happening," Mr. Cook said. "I'm not saying that it wasn't because I don't know."

It wasn't until early May, just weeks before the company's collapse, that Mr. Buck and one of his employees, project manager Michael Clevenger, began Googling the other two owners and compiling a dossier of their previous ventures.

They found references to boiler rooms (outbound call centers selling questionable investments) busted by international securities regulators, Mr. Buck said, a lawsuit alleging fraud, and half a dozen aliases possibly used by Mr. Sterk and Mr. Casciola in their various businesses.

Mr. Buck said he wishes he had taken to the Internet before he got involved in the company.

Mr. Sterk and Mr. Casciola said their past is both irrelevant and inaccurately portrayed in the documents found online.

Laying the groundwork

Last year, a friend introduced Mr. Buck, who had been managing a pipeline job for MarkWest Energy Partners in Ohio, to Mr. Casciola. Mr. Buck hired him as an operator for the gig.

The two began kicking around the idea of starting their own company. Mr. Buck said he was getting calls from people who said they were interested in investing in the business. Demand for contractors to build pipelines has exploded in recent years as natural gas production overtook the region's capacity to transport all that product to markets.

"I wanted to start a pipeline company since the first time I set foot on a right of way," he said. "I guess I kind of let the idea of it actually happening and coming together kind of cloud my judgment. But I'm only human."

The company was incorporated in Delaware in November 2013, but didn't get its office space and staff until March. That's also when US Energy got its first and only client, Poly-Cor Enterprises in McMurray, according to the bankruptcy filing.

Jason DiAngelo, Poly-Cor's vice president for pipeline operations, said he met Mr. Buck through a professional contact. Mr. DiAngelo liked his pitch.

He agreed to meet with Mr. Casciola and eventually Poly-Cor gave US Energy a small job building a portion of a pipeline on a MarkWest project that went off without a hitch. The next project was bigger. Poly-Cor advanced about 45 percent of the fee but soon, US Energy was asking for more money to make payroll, Mr. DiAngelo said.

Meanwhile, the company's payroll had increased from 30 employees in March to 72 within less than two months. Pipeliners were culled from across the country, many of them working 12-hour days, sleeping in motels or in their campers, said Stephanie Sellers, US Energy's office manager.

"It was very exciting because they were very busy. All three partners seemed very excited about the opportunity," she said.

The paychecks were generous. Mr. Adkins said the company's rate for him, $37 per hour, was the most he'd ever gotten paid in his 17 years of working in the pipeline industry. Wages were higher than average across the board.

"It was good for a minute, but it went real bad real fast," he said.

The company was growing, but some things didn't add up.

Ms. Sellers, who ran the office, never cut a check. She said all expenses were paid by Mr. Sterk and Mr. Casciola; workers were paid through the PayChex payroll service.

"They wouldn't give me the financial information," she said. "I needed to know what the beginning balance was. I heard that they were given money up front, a lot of money, but I had no way to confirm that."

At the same time, Mr. Buck started to question money matters and shared some of his concerns, she said.

During Ms. Sellers' last week there, she was told that payroll would be delayed a few days. The owners told her the company wasn't getting paid because workers were slow to finish their assignment and that rain delays had messed with the schedule.

Mr. Sterk and Mr. Casciola said it was a combination of runaway payroll expenses and Poly-Cor's refusing to pay the money US Energy was promised. Poly-Cor said it stopped paying because the work wasn't being done.

Meanwhile, Mr. Buck and Mr. Clevenger began circulating a folder of clippings about Mr. Sterk and Mr. Casciola among the staff.

Jessica Wagers, US Energy's payroll specialist, asked Mr. Sterk about the boiler rooms and allegations she read about. She said he admitted that he had once been sued, but said the boiler room chatter was made up. Then he said "if he was wanting to steal money, do you think he'd be here where the company was bankrupt?" Ms. Wagers recalled.

US Energy's financial problems were well known to employees at that point and the argument made sense.

"Then he wrote my husband a check," she said, to cover a round of pizzas for the workers Travis Wagers supervised as welding foreman at US Energy. This was a big deal because, "It would take an act of Congress to get him to sit down and write a check," she said.

Ms. Wagers called the bank to make sure there was enough money in the account to cash the $140 check. She was told, unofficially, to refrain.

When paychecks were finally issued the week of May 12, employees were paid for a fraction of their due. "After that, they just refused to pay us at all. And then they just jumped ship," Ms. Wagers said.

After the two partners left, Ms. Sellers started Googling their names. "I started to get a funny feeling," she said. "Who are these people?"

Mr. Sterk, whose name on US Energy's website is spelled Stark (he has also used the pseudonym Daniel Worthington, according to an investigation by the St. Louis Post-Dispatch), was charged by Thai authorities with running so-called boiler rooms in Bangkok in 2001 along with Mr. Casciola, who varies the spelling of his name and also goes by Steve Corso. The partners said the misspelling of both of their names on US Energy's website was not intentional.

According to the Thai Securities and Exchange Commission, the two were principals of International Asset Management Co. Ltd, which sold securities without a license, defrauded foreign investors and often changed numbers to avoid being contacted by those investors after commissions were paid.

A 2004 investigation by the Post-Dispatch reported that Mr. Sterk and Mr. Casciola fled Thailand, evading arrest and setting up new operations in Eastern Europe.

Mr. Casciola's Google+ bio says that he's "able to overcome false accusations, both personal and business related, the stronger my determination to succeed."

Mr. Casciola was energetic and personable, Ms. Sellers recalled. Mr. Sterk, a man in his 60s, was more reclusive. He spent most days in his office making international calls, Ms. Sellers said. "He had two cell phones. He was always on his computer. 'I have several other businesses,' he would always boast."

Several US Energy employees described Mr. Sterk as the brains of the operation.

Some employees said they suspected he was pulling in investors for US Energy, but Mr. Buck said he was never notified of the efforts.

Identical ads placed in early May on Craigslist and a job site called PandaHi with Mr. Sterk's phone number, since disconnected, stated: "We are an energy distribution company that will have sales in the multimillions and are desiring strong telemarketing pros to 'raise capital' to fuel our expansion."

The ad promised "warm to hot leads" for closers, weekly commissions and the "highest closing ratios since we'll fly your prospective clients into Pittsburgh to close your sales face to face, thereby increasing your closing percentage."

Mr. Sterk said he placed the ad on Craigslist after all three owners discussed "doing a private placement for European investors to possibly take advantage of the opportunity. And in order to do that, which Harry agreed to, we first needed to see what the market was in Pittsburgh for financial people."

Mr. Buck said he didn't learn about the ad until the company folded. "I told them the whole time that we did not need investors," he said.

The ads said the company had its "own large call center that has been trained by us to produce hot leads for our account executives," a reference Mr. Sterk first said he did not recall but then said probably meant US Energy would be buying "fresh, warm leads from call centers in the Far East."

His name, in the ad, was spelled "Mr. Stark."

Bankruptcy

On June 20, US Energy filed for Chapter 7 bankruptcy protection. The petition, filed in Western District of Pennsylvania, claimed the company had outstanding debts of $351,528. Mr. Cook, the bankruptcy attorney, said last week he's updating the document to increase that debt figure. An employee contacted him after seeing the initial complaint and said the list of creditors was longer and their amounts due higher.

Late last week, Poly-Cor joined the case claiming it is a creditor, while US Energy says it is, in fact, a debtor and owes the now-defunct company $224,000.

By Mr. DiAngelo's calculations, US Energy owes Poly-Cor more than $1 million -- $450,000 of the money the company fronted and the rest that Poly-Cor is spending to complete the unfinished job for its client.

"That's the question you have every time you have a contract case," Mr. Cook said. "Somebody says I quit because you didn't pay me and the other party says you quit so I have to pay someone" to finish the job.

Mr. DiAngelo said he hopes to prove to the bankruptcy judge that committed some kind of fraud, which, he said, would disqualify the company from bankruptcy protection and allow Poly-Cor to go after the partners' personal assets.

Mr. Cook's take on that is: "That's asinine."

"They're thieves," Mr. DiAngelo said. "They showed up and basically conned us."

A week after the initial bankruptcy filing, US Energy filed an addendum saying it might have enough assets to cover its debts.

Mr. Cook explained the money could come from two outstanding revenue sources. The first is the $224,000 that US Energy feels it is still owed by Poly-Cor.

The other is an insurance payout that Mr. Cook said may materialize from a claim on damage to the pipeline and stolen equipment from the site. This is the result of a May 8 vandalism incident initiated, according to Lancaster Township police records, by several disgruntled US Energy workers and other contractors on the project, including at least one from Poly-Cor.

The mastermind, according to the criminal complaints, was an inspector for Poly-Cor.

The blame game

Many US Energy employees believe Mr. Buck was conned by his cofounders.

Mr. DiAngelo isn't sure.

"I think they're all no good if you ask me," he said.

Mr. Buck was the only one of the three who tried to correct the situation after it had unfolded, Mr. DiAngelo conceded. But, "as far as I'm concerned, he's a partner in the company so he's at fault as well," he said.

When Mr. Clevenger and Mr. Buck brought their folder of newspaper articles about Mr. Sterk and Mr. Casciola to Poly-Cor, Mr. DiAngelo said he didn't care.

He didn't look at the papers. It wasn't his problem what these guys had done in the past. He needed his job finished, he said.

Mr. Buck said that was no longer within his control.

The weekend before the duo fled, Mr. Buck went home to northeastern Pennsylvania to make sure his family was alright. He said Mr. Casciola had threatened his family, a claim Mr. Casciola said was absurd.

When Mr. Buck returned, the office had been emptied, he recalled.

Mr. Sterk and Mr. Casciola disputed employees' accounts that they somehow absconded in the middle of the night.

"The last three days, I worked 36 hours and slept in my car in the rain. I was ready to go to the emergency room" Mr. Casciola said. "We didn't run away. We left. At that point, there was nothing -- the company was bankrupt. There was no money coming in.

"If I ran away, I ran away because I was disappointed," he said.

Mr. Buck said he did his best to stay in the area to tie up loose ends. He got a job with another contractor inspecting pipelines for MarkWest but was soon let go.

"The people at Poly-Cor got me fired," he claimed.

Mr. DiAngelo denied that. He said he pointed out that Mr. Buck was one of the owners of the company behind the trouble and said, 'I don't think that's a very good idea,' but he claimed he had no power to compel another company to terminate an employee.

Soon, Mr. Buck made his way to North Dakota to work in the Bakken Shale.

A few weeks ago, Mr. DiAngelo finally reached Mr. Casciola on the phone.

"He started crying," Mr. DiAngelo said. Mr. Casciola said the company simply ran out of money and couldn't finish the project. He blamed everyone else, Mr. DiAngelo said. Everyone else blamed him and Mr. Sterk.

"Do I think these guys pulled a scam? Yes, I do," Mr. DiAngelo said. "But you've got to prove it. It's not what you know, it's what you can prove."

Mr. Cook said it's unlikely the case will be that juicy.

"The way bankruptcy works is just because people don't get paid, doesn't mean something is wrong," Mr. Cook said. "That happens in bankruptcy all the time. Businesses fail. People don't get paid. You go on with your business."

Both Mr. Casciola and Mr. Sterk said they feel bad for the employees who ended up unpaid and unemployed, but said there was nothing they could do.

"I apologize for trying as hard as we possibly could to succeed in the company, but as they know, as everybody was aware, Harry Buck ran payroll out of control, and that's how we crashed," Mr. Casciola said. "I'm a God-fearing man. I have a family. I go to church."

Anya Litvak: [email protected] or 412-263-1455.

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