Trump-promoted Freedom Fuel expands to Detroit as lawsuit over supplier's unpaid fuel heats up
The Freedom Fuel Network, a chain of gas stations that launched in July with steeply discounted prices touted by President Donald Trump, has expanded with a new location in Detroit as a lawsuit over the chain's alleged supply heats up in Philadelphia federal court.
The Detroit location, where a gallon of regular unleaded was selling for $3.47, is the cheapest gas in Michigan, where the average price is $4.09 per gallon, according to the price tracking site GasBuddy. The Harper Avenue station is the first Freedom Fuel station outside of New Jersey and Pennsylvania, where the network has 29 locations.
Freedom Fuel stations are no longer the cheapest stations in those states, GasBuddy data shows.
In a court filing this week, a Georgia fuel supplier alleged that businessman Syed Kazmi and his company KRSM — which purportedly sold some of the fuel it bought from the supplier to Freedom Fuel stations — are violating a judge's Aug. 28 order by failing to maintain a balance of at least $2.75 million in an M&T Bank checking account as a suit over KRSM's purported failure to pay for the fuel plays out.
And in a new court filing Thursday, the supplier, Mansfield Oil Company of Gainesville, Georgia, told a judge the account is underfunded by about $2.25 million. That filing also says Mansfield Oil has learned from M&T that, contrary to KRSM's representations that it owns the account, the account "now belongs to some different Kazmi-related entity named 'Universal.'"
"The revelation that the account is now owned by 'Universal' also raises serious concerns that funds are being dissipated while KRSM fails to maintain the $2.75 million amount Ordered by the Court," Mansfield said in the filing.
Freedom Fuel is not a defendant in the lawsuit, whose allegations came after questions were raised about how Freedom Fuel could afford to offer steeply discounted prices amid supply constraints and higher fuel prices resulting from the U.S. war with Iran.
Mansfield's suit, filed Aug. 19, alleges Kazmi and KRSM obtained more than 1.1 million gallons of Mansfield's fuel from a Pennsylvania supply terminal between May and July. After Mansfield sent an invoice asking for payment for about $4 million for the fuel in July, the suit alleges, KRSM failed to pay it.
At least some of the fuel was sold to Freedom Fuel stations, which began operating in Pennsylvania and New Jersey in early July, the suit alleges. The civil complaint does not say how much of Mansfield's fuel ended up in those stations. "KRSM was able to sell such fuel for such low prices and garner such publicity because it never paid Plaintiff for such fuel," the suit says.
Politico has reported that Kazmi's brother, Shamikh Kazmi, owns at least six Freedom Fuel locations in New Jersey. CNBC has requested comment on the court filings from lawyers for KRSM, Syed Kazmi, Mansfield Oil and the Freedom Fuel Network.
A lawyer for KRSM, Mauro Tucci, told CNBC in an email on Aug. 30 that "KRSM disputes the allegations in this case, which is an accounting dispute over fuel invoices mis-priced by Mansfield Oil." "We will not be commenting further on this pending litigation," Tucci said. Read more CNBC politics and policy coverage House Intelligence Committee warns of 'Black Swan' AI risks Trump says U.S. growth could hit 20%.
It's happened only once since WWII Supreme Court lets Trump build White House ballroom as lawsuit continues On its website Thursday, Freedom Fuel announced the Detroit station by saying, "Due to the massive success of the network and the savings communities are seeing at the pump, we heard you — and we're expanding further," Freedom Fuel said.
Trump on July 1 had posted about Freedom Fuel and its lower prices, which he said other retailers should emulate. "We have received an overwhelming wave of media interest in Freedom Fuel Network following President Trump's strong endorsement of the Freedom Fuel gas stations," the site says.
"Despite the misinformation and baseless speculation circulating, let us set the record straight: Freedom Fuel Network is proudly lowering its prices to benefit our community and strengthen our local economy," the site says. "Just like the President, we remain committed to putting America First! God bless the U.S.A." — CNBC's Ryan Ermey contributed to this article