National Fuel alleges ex-employee led purchasing scheme that defrauded company of at least $1 million

Feb. 6—Evan Crahen was hired at National Fuel in 2009 and rose through the ranks, promoted to senior manager in the purchasing department in 2020.

The job made him the highest ranking non-officer in that department, a position that came with a six-figure salary, bonuses and restricted stock units.

But in November, Crahen's employment with the Amherst-based energy company was terminated due to what National Fuel called "dishonesty during an internal audit."

As National Fuel dug deeper, its attorneys claim in court records, it found Crahen "was manipulating the purchasing process," allegedly leading a scheme that defrauded the company of as much as $1 million by funneling purchases to suppliers that charged inflated prices — including one business that his wife owned and operated.

Now, National Fuel is suing Crahen and his wife, along with another former company employee and multiple former vendors and their proprietors as the company seeks to root out the extent of the alleged fraud in its purchasing department.

The company also wants the court's approval to obtain information from the named vendors, which it argues would provide it with more information regarding items that were purchased outside of its purchasing and procurement rules, said National Fuel spokesperson Karen Merkel.

"Since discovering these purchases involving the defendant vendors and two former employees, the company has reviewed its purchasing practices to prevent incidents of non-compliance in future purchasing activities," Merkel said.

In court records, Crahen's attorneys denied the allegations of fraud and dishonesty, as well as the claim that Crahen "established a purchasing procedure scheme to deceive and defraud National Fuel."

"Our clients categorically deny the claims and mischaracterizations set forth in the complaint and look forward to vigorously defending themselves in court," said attorney Barry N. Covert, who represents Crahen, Crahen's wife, Bethany Crahen, and a business that Bethany Crahen owns and operates called JPKM Supply Solutions.

Attorneys for the other named defendants also denied the charges and said they looked forward to clearing their clients' names in court.

How the investigation started

National Fuel fired Crahen on Nov. 7 after the company said its investigation found he had "submitted false, backdated memoranda to National Fuel during an internal audit regarding certain internal controls."

Around the same time, the company also was looking into the expense reimbursements of another employee, Jesse Burns, the assistant manager of purchasing who was supervised by Crahen.

National Fuel, according to court records, claims Burns submitted "numerous deceptive, dishonest, fraudulent, misleading and/or inflated expense reimbursements, for which he obtained approximately $3,000."

"Through its investigation, National Fuel determined that Burns and Crahen were acting as a team: Burns submitted improper reimbursements, and Crahen approved them, no questions asked," the company's attorneys wrote in the complaint.

Burns was fired Nov. 15 and is also named in the lawsuit.

Burns' attorney B. Kevin Burke Jr. said they deny the allegations made against Burns and "look forward to clearing his name in court."

"All of the reimbursements that we submitted were approved by our supervisor," Burke said.

After Burns' termination, National Fuel decided to evaluate Crahen's expenses.

What the company claims it found: From September 2021 to May 2022, Crahen had requested and received reimbursements in connection with three conferences he never attended, totaling at least $3,825. Crahen's attorneys denied that allegation in court records.

But those were small amounts compared with what National Fuel allegedly discovered next.

'An emergency investigation'

National Fuel began "an emergency investigation" in November after it found Crahen "was manipulating the purchasing process, with one or more other individuals employed by one or more suppliers," the company attorneys wrote in court records.

The alleged scheme led to purchases of products that were overpriced, mislabeled or that did not originate from the manufacturer identified on the orders, National Fuel attorneys claim.

The company's claims focus on purchases made from two companies that Crahen and others allegedly represented as diverse suppliers: Grand Island-based Ribet Supply/Ribet Products and JPKM Supply Solutions.

National Fuel claims Crahen diverted purchases from established vendors in favor of the two suppliers, which charged higher prices for products in violation of the company's "commercially reasonable, longstanding and prudent pricing practices."

When other employees questioned the prices, National Fuel claims that Crahen criticized them for being anti-diversity and justified the purchases as furthering the company's diversity and inclusion goals. Crahen's attorneys denied that allegation in court records.

According to the lawsuit, Crahen, on behalf of National Fuel, started making purchases from Ribet Supply in October 2021. The supplier forms and related documents submitted for Ribet Supply in March 2022 allegedly indicated sales to National Fuel would be less than $250,000 annually and that Ribet Supply was a woman-owned business.

National Fuel attorneys claim Ribet Supply ended up selling nearly $250,000 in goods per quarter to National Fuel and no certificate as a woman-owned business was ever provided to the company. Added up, National Fuel claims it purchased about $2 million worth of products "at steeply inflated prices" from Ribet Supply over a two-year period.

"National Fuel's purchases through Ribet Supply from October 2021 through November 2023 were inflated by approximately $1 million," the company's attorneys wrote.

In the lawsuit, National Fuel notes that Ribet Products — which has the same address as Ribet Supply — was a supplier for National Fuel from about 2002 to 2019 when it was run by the late Gary Burkhart. During those years, National Fuel said Ribet Products generally sold less than $10,000 annually worth of light sockets and other hardware items to the company.

In its complaint, National Fuel also is suing Ribet Supply's proprietor, Hanna Burkhart, and her son, Robin Szyprowski, who National Fuel says "at all times has been the face of Ribet Supply" to the company.

Attorney Aaron Knights, who represents Szyprowski, Burkhart, Ribet Supply and Ribet Products, said the "claims that have been asserted against my clients in this lawsuit are outrageous and categorically false."

"This case arises out of issues National Fuel had with its former employees," Knights said. "My clients — who have never been employed by National Fuel — provided supply-chain services to National Fuel in an arms-length business relationship and have been improperly named as defendants in the case. I look forward to my clients' vindication in court so that they can put this baseless lawsuit behind them."

In November 2022, JPKM Supply Solutions became a supplier for National Fuel and, like the paperwork for Ribet Supply, claimed to be a woman-owned business but never submitted a certificate to support that.

Still, National Fuel's purchasing department approved JPKM as a diverse supplier for its strategic sourcing program, which the company said allowed Crahen to circumvent the competitive procurement process and award purchase orders to JPKM at his discretion.

A review of purchase records from JPKM showed significant increases in the average weighted unit cost for products, National Fuel claims. In February and March 2023, for instance, National Fuel claims it found 90% increases in the price it paid for tape, 116% for screwdrivers and 57% for winter gloves.

Between November 2022 and December 2023, National Fuel said it spent more than $1 million purchasing products from JPKM.

In its investigation, the company said it retained private investigators, who found that the post office box that JPKM listed as its "remit to" address on its supplier paperwork was registered to Crahen and his wife, Bethany Crahen.

That "strongly suggests that JPKM is owned and/or operated by Crahen and his wife, a fact that Crahen concealed from National Fuel," the company's attorneys wrote.

Crahen's attorneys denied the allegations related to JPKM. In an affidavit filed in court records, Bethany Crahen identifies herself as the sole owner and operator of JPKM.

An unexpected visit

Court records state that Crahen was notified in mid-October that National Fuel was conducting an internal investigation related to the purchasing department.

Crahen was put on temporary suspension without pay — up until his termination Nov. 7, following 15 years of employment and of rising up the ladder at National Fuel.

Then in mid-December, about five weeks after his termination, three investigators arrived unannounced to the Crahen home, his attorneys wrote.

Quickly, Crahen learned they were there to question him regarding his employment with National Fuel.

When he saw one of them had a portable stenography machine, Crahen asked them if he should have legal representation — a question that caused the investigators to leave the home but not before they handed him a preservation notice and advised him that his wife also should consider hiring an attorney.

By Dec. 19, Crahen and his wife met with and retained the law firm of Lipsitz Green Scime Cambria. The couple said they also retrieved and preserved all documents pursuant to the preservation notice.

National Fuel's complaint was filed the next day.

Beyond the allegations involving Ribet Supply and JPKM, National Fuel said in its complaint that its "investigation concerning the scope of the fraudulent activity is ongoing."

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