Even as he has fought in court to regain his dwindling fortune, Erie entrepreneur Samuel P. "Pat" Black III had held on to the crown jewel of what was once his business empire: the Hero BX biofuels plant on East Lake Road, an operation Black once valued at $70 million.
The crown jewel has become tarnished.
Black no longer controls the Hero BX plant. The plant has stopped operating, and it and Black's other biofuels plants are in a court-appointed receivership.
The plants are in the early stages of being sold to the highest bidder.
A default on a $58.2 million loan triggered the receivership and the prospective sale of the Erie Hero BX plant and other Hero BX biofuels plants that Black's companies own in Alabama, Illinois and Iowa, according to court records.
Black's businesses owe at least $6.1 million on the $58.2 million loan, which went into effect on Nov. 1, 2021, according to court records. The default led the lender, Siena Lending Group LLC, of Stamford, Connecticut, to terminate the loan in late March and to sue Black's Hero BX-related companies for foreclosure in U.S. District Court in Erie on May 30.
The terms of the loan, according to court records, called for the appointment of a receiver in the case of default — with Black's automatic consent. Citing that consent, Siena on May 30 also filed an emergency motion for a receiver. U.S. District Susan Paradise Baxter approved the motion and appointed the receiver on June 4.
The receiver is Compass Advisory Partners LLC, a Pittsburgh-based consulting firm, according to Baxter's order. It is authorized to take control of the biofuels plants, manage them and sell them. Any revenue from sales would go toward paying off the loan with Siena.
Siena, according to its motion for a receiver, "is prepared to fund a receivership process and has agreed to fund up to $650,000 of operational and administrative expenses during the first 3 months of the receivership, in addition to expenses for a receiver, premiums for property and liability insurance and other related items."
"Receiver shall take immediate possession and full control of the Receivership Assets," according to Baxter's receivership order.
'Fuel for humanity': Hero BX started with hope
Black in 2006 broke ground for the Hero BX plant on East Lake Road, on the site of International Paper's former Hamermill plant. He considered the plant a solid financial and ecological investment.
The phrase "Fuel for humanity," was incorporated into the Hero BX logo.
The Erie plant regularly ranked as one of the nation's top 10 producers of biofuel, also known as biodiesel. It had a rated capacity of 45 million gallons a year, but made as much as 50 million gallons a year using a combination of organic and recycled products, including truckloads of used cooking oil.
Hero BX averaged about 50 employees at the Erie plant, and at least in its early days, Hero BX was profitable. It got a boost from federal subsidies designed to encourage production of biofuel, which is typically mixed with petroleum-based diesel.
In 2017, Hero BX was optimistic as it celebrated its 10th anniversary of biofuels production. Hero BX, the company said in a news release on Dec. 15, 2017, "bears witness to Black's commitment to help revitalize Erie with a return to a booming manufacturing sector."
And as recently as 2018, Hero BX continued to invest in the future of the business.
In May of that year, the company announced a $1 million investment in a new laboratory at the Advanced Manufacturing and Innovation Center at Penn State Behrend’s Knowledge Park. The lab was designed to enable researchers to test and produce biodiesel in a controlled setting.
"This marks the culmination of an idea that began years ago, where the work inside these four walls will serve as a catalyst for change," Black said at the time.
The lab has since closed.
Expiration of tax federal tax credits made Hero BX 'unprofitable'
Changes at the federal level doomed the Hero BX plant, according to Siena's complaint in foreclosure. The Hero BX plants, according to the motion, "ceased operating at the end of 2024 when lucrative federal tax credits for biofuel producers expired, making any further production unprofitable."
The tax credits expired as a result of then-President Joe Biden's Inflation Reduction Act, one of the signature policy achievements of his administration's efforts to fight climate change. The act eliminated a flat $1-per-gallon blenders tax credit for biofuel companies and switched to what is known as the 45Z clean production fuel tax credit, effective in 2025.
The Biden administration left office without final rules in place for the 45Z policy, which has created uncertainty for biofuel companies. As biofuel producers wait on those regulations, some federal lawmakers have pushed to retroactively extend the $1-per-gallon blenders tax credit and another tax credit.
Even if the previous tax credits return, Black will no longer own the Hero BX plants where the credits would be used.
Hero BX part of Black's court skirmish with adopted daughter
The appointment of the receiver comes as Black continues his year-long legal clash with his one-time heir apparent, Sumi James-Black, whom Black adopted as his daughter in 2019, when he was 77 and she was 44.
Black, 83, is suing James-Black, 50, over claims that she led a civil conspiracy that defrauded him of about $200 million from 2017-22. The other defendants in the massive lawsuit, filed in U.S. District Court in Erie in May 2024, are the Erie law firm of Knox, McLaughlin, Gornall & Sennett, which handled Black's legal affairs during the five-year period named in the suit; and Nicole Buzzard, a certified public accountant.
Buzzard was vice president of management and accounting at Black's Erie Management Group, the entity that runs Black's businesses. They included what had been his biggest financial asset — the Hero BX biodiesel plant on East Lake Road, valued at $70 million, according to court records.
Black says he discovered the Sumi-James' fraud scheme shortly before he fired her in August 2022 as the interim CEO and chief operating officer of Erie Management Group.
Black is claiming James-Black and the other defendants committed civil violations of the Racketeer Influenced and Corrupt Organization Act, known as RICO, the 1971 federal law that targeted organized crimes. The defendants are arguing the evidence is insufficient to support the RICO claims, and they want the case tossed. The motions for dismissal are pending before Judge Baxter.
The federal fraud case includes claims related to the Hero BX plant in Erie. Black is contending, among other things, that James-Black duped him into giving her an option to buy the facility.
A trust established in September 2020 gave James-Black a first option to purchase Hero BX if the business went on the market. The trust allowed James-Black to buy Hero BX on a promissory note — a promise to pay — with no cash down.
Black and his lawyers are claiming that the trust, with its "extremely favorable" terms for James-Black, is another example of her "many acts of stealing" Black's assets, according to the federal lawsuit. Black's lawyers are claiming the option agreement is valid.
A lawsuit over the option is pending in Erie County Common Pleas Court. Uncertain is how the appointment of the receiver will affect the option. Siena made no mention of it in its motion for a receiver.
Lawyers for Black, James-Black offer widely different views
One of Black's lawyers blamed the James-Black's option agreement for the woes that forced Hero BX into receivership.
"The plan has always been to sell it, but it got held up by the option, so a receiver was necessary," attorney Anthony Angelone said of the Hero BX plant in Erie. "What led to all of this is in the underlying federal case."
A lawyer for James-Black said Pat Black was responsible for the financial problems that resulted in the receivership.
"I am reminded of the scene in the 'Wizard of Oz' where Toto pulls back the curtain and reveals that Oz was only ever an illusion," attorney John Mizner said. "With the latest consent order, everyone can see that Pat Black's boast that he would 'help revitalize Erie with a return to a booming manufacturing sector' was also just an illusion.
"Instead of revitalizing Erie, his companies have racked up millions and millions of dollars in unpaiddebt."
Receivership another sign of Pat Black's financial decline
For Pat Black, the foreclosure of the Hero BX plants means he has lost what court records described as his last remaining considerable asset — the Hero BX plant in Erie.
Black was once one of wealthiest people in Erie. As Black's own lawyers said in the RICO lawsuit, Black has been put in "the position where he is essentially out of liquid assets" — a description of his financial standing before the Hero BX receivership.
Black inherited his fortune.
His father, Samuel P. Black Jr., started the Black Insurance Group. He left behind more than $318 million when he died at 99 in 2001.
That money is now virtually all gone as Pat Black, with the Hero BX plants no longer in his portfolio, fights his adopted daughter in court over his legacy.
Original article by: Ed Palattella at epalattella@timesnews.com or 814-870-1813 or Jim Martin at jmartin@gannett.com.