Hammond-based Jupiter Aluminum Corp. claims two former high-ranking employees conspired with outside businesses to steal more than $8 million.
Jupiter Aluminum, which buys scrap metal to produce aluminum coils, filed a lawsuit Monday in the U.S. District Court in Hammond.
According to the suit, the company first discovered the scheme in 2014 when an audit showed that the company processed about 8.82 million pounds less of scrap metal than it had purchased.
An investigation centered on Phillip Sabaitas, who was then the receiving/inventory supervisor for Jupiter, and the company’s CFO Loren Jahn. The lawsuit alleges that they used their position with Jupiter to work with two companies – Scrap Metal Services, in Burnham, Ill., and GMI Services, in Crown Point – to game the system.
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According to the lawsuit, Jupiter puts out daily calls for scrap metal with a set price of what it will pay. Various contractors will then respond with how much and what type of metal they have. Once the companies reach an agreement, the contractor will deliver the metal.
Jupiter weighs the truck once when it arrives and again after it’s emptied, using the difference to determine how much metal was delivered and how much to pay the contractors.
The company’s security company also keeps track of every truck that comes in and what company the trucks are with. Jupiter says in the lawsuit that there are 90 loads that Jupiter paid for but that never showed up, according to the security logs. The lawsuit argues that 26 of these “ghost trucks” were supposed to be from Scrap Metal and GMI and that Jupiter paid them $562,714 for scrap metal that was never delivered.
The lawsuit alleges that the two companies delivered the rest of the missing scrap metal but then conspired with Sabaitas, who oversaw the deliveries, to steal the metal back before Jupiter could process the shipments. Although the company isn’t sure how they did this, it says that the delivery drivers could have possibly weighed in with their full shipments, left and delivered the metal to another company for more pay and then returned empty, using that information to double bill for the same load.
Jupiter claims that Sabaitas had a close working relationship with Scrap Metal’s Vice President of Intermodal Michael Thomas and is a childhood friend of Gary Longoria, owner of GMI. Both men are also named as defendants.
The lawsuit says that both Sabaitas and Jahn lied to the company when asked about the missing metal, with Jahn claiming at one point that he had looked into the discrepancy and fixed it. Jupiter discovered several months later that it had actually continued and gotten worse. According to the lawsuit, Jahn later failed a polygraph test when he was asked about his role in the conspiracy and if he had received any kickbacks.
Scrap Metal said in a press release that it has worked with Jupiter for the past year in the investigation and complied with various requests from the Hammond company.
“Jupiter’s claim that SMS is responsible for its alleged inventory shortage are unfounded,” the release says. “The company values its relationships with all its business partners, and we are confident that this business dispute will be resolved in our favor.”
GMI Services could not be reached for comment.
Jupiter has nine claims in its lawsuit, including racketeering. It’s asking for unspecified damages to be determined at trial.