President Trump’s Freedom Fuel expands to Detroit amid lawsuit

Freedom Fuel Network, the gas station chain promoted by President Donald Trump and opened in July with deeply discounted prices, has expanded with a new location in Detroit as a lawsuit over the chain’s alleged supplies heats up in Philadelphia federal court.

Detroit stores were selling regular unleaded gasoline for $3.47 a gallon, the cheapest gasoline in Michigan, with an average price of $4.09 a gallon, according to price tracking site GasBuddy. Harper Avenue Station is the first Freedom Fuel station outside of New Jersey and Pennsylvania, and the network has 29 locations.

Freedom Fuel stations are no longer the cheapest stations in those states, according to GasBuddy data.

A Georgia fuel supplier argued in a court filing this week that businessman Saeed Kazmi and his company, KRSM, which allegedly sold some of the fuel it purchased from his supplier to Freedom Fuel Stations, is in violation of 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 pending a lawsuit in which KRSM allegedly failed to pay for the fuel.

And in a new court filing Thursday, the supplier, Mansfield Oil Company of Gainesville, Ga., told the judge there was a funding shortfall of about $2.25 million in the account.

The filing also states that, contrary to KRSM’s representation that Mansfield Oil owns the account, it learned from M&T that the account “currently belongs to another Kazmi-related entity named ‘Universal.'”

“The revelation that the account is now owned by ‘Universal’ also raises serious concerns that funds are disappearing while KRSM is unable to maintain the court-ordered amount of $2.75 million,” Mansfield said in the filing.

Freedom Fuel is not a defendant in the lawsuit, but the allegations come after questions were raised about how Freedom Fuel could afford to offer deep discounts amid supply constraints and rising fuel prices due to the U.S.-Iranian war.

Mansfield’s lawsuit, filed Aug. 19, alleges Kazmi and KRSM obtained more than 1.1 million gallons of Mansfield’s fuel from supply terminals in Pennsylvania between May and July.

In July, Mr. Mansfield sent an invoice for about $4 million in fuel costs, but KRSM failed to pay, according to the complaint.

At least some of the fuel was sold to Freedom Fuel Stations, which opened in Pennsylvania and New Jersey in early July, according to the complaint. The civil complaint does not say how much of Mansfield’s fuel ended up in those stations.

“KRSM was able to sell such fuel at such low prices and garner such publicity because it never paid Plaintiffs for such fuel,” the complaint states.

Politico reported that Kazmi’s brother, Shamik Kazmi, owns at least six Freedom Fuel stores in New Jersey.

CNBC has reached out to attorneys for KRSM, Syed Kazmi, Mansfield Oil and Freedom Fuel Network for comment on the court filing.

“KRSM disputes the allegations in this lawsuit, which is an accounting dispute over the mispricing of fuel invoices by Mansfield Oil,” KRSM attorney Mauro Tucci told CNBC in an Aug. 30 email.

“I will not be commenting further on this pending litigation,” Tucci said in a statement.

“With a hugely successful network and a thriving savings community, we’ve heard you and we’re going to expand even further,” Freedom Fuel announced Thursday on its website to the Detroit station.

President Trump posted about Freedom Fuel and its low prices on July 1, saying other retailers should follow suit.

“There has been overwhelming media interest in the Freedom Fuel Network following President Trump’s strong support for Freedom Fuel gas stations,” the site says.

“Despite the spread of misinformation and unfounded speculation, let’s set the record straight. Freedom Fuel Network proudly lowers prices to benefit our communities and strengthen our local economies,” the site says.

“Like the president, we will continue to put America first. God bless America.”

—CNBC’s Ryan Ermey contributed to this article