By Stephen Nellis Friday, June 24th, 2011

Randeep Grewal controls the palm-tree-dotted island visible from Highway 101 off the Rincon in Ventura County. Millions of drivers pass its oil drilling pads each year.

Grewal is also the man responsible for 10,000 gallons of spilled oil in North Santa Barbara County.

Grewal has moved on to China to build a $1.6 billion, publicly traded natural gas company called Green Dragon Gas. He has left behind $57 million in unpaid debts, including some $23 million in environmental cleanup costs and a tangled web of corporate entities designed to shield him from liability.

On June 17, one of them, Greka Oil & Gas, became the target of a lawsuit by federal and state regulators seeking millions of dollars in fines and a court order for Greka to clean up its act. The business racked up 21 spills in Santa Barbara County in recent years. It has agreed to pay the county $2   million for them.

In court filings, Grewal — whose companies did not return requests for comment for this story — has denied all allegations that he illegally transferred assets among his companies to avoid paying debts.

But an analysis of his holdings shows that Grewal’s business empire is structured so that profits flow up to him while legal partitions block unpaid debts and legal judgments from reaching into his pockets. Officials seeking to recover assets on behalf of Grewal’s creditors are asking a bankruptcy judge to cut straight to Grewal.

They have filed a lawsuit out of a “refusal to stand silently while Grewal continues to financially rape his creditors,” according to court documents.

Here is a closer look at Grewal’s business dealings and how they affect the Tri-Counties.

A partitioned empire

As the 21st century began, Grewal was CEO of Greka Energy, a publicly traded company listed on the Nasdaq stock exchange. It bought land and oil production facilities in Santa Barbara County. By the early 2000s, it had also begun to amass holdings in China.

In 2003, Grewal took Greka Energy private and quietly began separating its Chinese holdings from its assets in the United States. According to court documents and public company filings, this restructuring left Grewal with control of two parallel business empires, one in the United States and one in China. He controls both through corporate entities in the Cayman Islands.

Through his Cayman Island firms, Grewal owns or controls at least three companies that list addresses in the Tri-Counties. They are Rincon Island Limited Partnership in Ventura, Greka Oil & Gas in Santa Maria and Santa Maria Refining Company in Santa Maria.

Grewal is also the controlling shareholder of Green Dragon Gas Ltd., also incorporated in the Cayman Islands. Through another company in the Netherlands, Green Dragon owns coal beds in China. It extracts methane from them, which in turn provides some of the natural gas to fuel China’s booming economy.

Green Dragon is traded on the Alternative Investment Market of the London Stock Exchange. Last year, the company had revenues of $49.7 million, and its assets grew to $963 million. Earlier this year, Reuters reported Green Dragon’s implied market value was $1.6 billion.

Green Dragon did not return several calls to its Hong Kong headquarters requesting comment.

Entities in bankruptcy

Grewal has been a public figure in building Green Dragon, speaking at investor conferences as the firm’s CEO. But he has eluded dozens of U.S. creditors.

In 2005, one of Grewal’s companies filed for bankruptcy. Creditors claimed they were owed $57 million. The largest single debt was a $30.1 million for a civil court judgment and environmental cleanup costs.

The judgment was entered against Vintage Petroleum, a Colorado firm that sold Santa Barbara County oil assets to a Greka entity. Vintage says it sold the wells with a contract that required Greka to pay for environmental cleanup near Cat Canyon. Greka allegedly failed to do the work. As a result, Vintage faced a lawsuit ending in a $7.1 million judgment against it and an estimated $23 million in cleanup costs. Vintage says Greka owes it for those bills.

In a bankruptcy case, trustees are appointed to seek out possible hidden assets to repay creditors. In 2008, the trustees in Grewal’s company’s case asked a bankruptcy judge in Manhattan to allow them to go straight for Grewal and the top entities he uses to control his business empire. “The actions taken by Grewal, as alleged above, exhibit a wanton, flagrant and reckless disregard for the rights of [Grewal’s company] and its creditors,” the trustees’ attorney wrote in court filings.

The trustees are in the process of gathering information about Grewal’s business dealings. They have agreed with Grewal’s attorneys to seal many documents in the case. A bankruptcy attorney for the Greka companies operating in the Tri-Counties declined to comment.

Regulators sue Greka

Greka Oil & Gas, which has changed its name to HVI Cat Canyon, faces a lawsuit from the federal government alleging that it violated state and federal water laws and ordering it to clean up its act.

The suit, filed in federal court in Los Angeles, alleges that Greka didn’t have adequate plans in place at 12 facilities to prevent, respond to and clean up spills, according to a release from the U.S. Department of Justice. It also seeks several million dollars in fines, though the exact amount will vary based on how often Greka is found to have violated the law.

Mike Stoker, a former Santa Barbara County Supervisor who was defeated in a race for State Assembly, is acting as a spokesman for Greka. He said in an emailed statement that the company “has spent over $78 million in operations to directly respond to regulators’ concerns.”

Stoker said Greka agreed to pay the county fines because it was the “appropriate agency with oversight over these small spills.” He said Greka would contest the fines from federal regulators.

“This lawsuit is about one thing, federal agencies that are attempting to overreach their jurisdiction,” Stoker said in the statement. “We will never agree to pay the federal government because the fact is these small spills did not occur in ‘U.S. navigable waterways’ as defined in the Federal Clean Water Act.”

• Contact Stephen Nellis at [email protected].