Castle Oil in The Bronx was among five fuel oil companies raided by investigators. View Full Caption DNAinfo/Eddie Small

NEW YORK CITY — Five of the city's largest fuel oil companies allegedly swindled the NYPD, the FDNY and some of Manhattan's largest developers in a multimillion-dollar citywide scheme, DNAinfo New York has learned.

The companies are suspected of taking worthless but hazardous waste oil and "blending" it with fuel oil before delivering the diluted product to customers, including NYPD precinct houses, FDNY firehouses, other city agencies, local hospitals and many of the city’s largest residential buildings, as well as smaller homeowners and mom-and-pop businesses across the boroughs, sources said.

In addition to the “blending scheme,” the companies are also suspected of rigging meters on trucks to inflate the number of gallons delivered to customers, thereby charging them for fuel they did not receive, sources said.

“There are multiple scams involved,” one source said, without elaborating. “It’s a big scheme. . . and a big deal.”

Investigators from the Manhattan District Attorney’s Rackets Bureau, the NYPD Organized Crime and Control Bureau and the city’s Office of Business Integrity raided the five companies' offices Wednesday and seized roughly 50 trucks along with a small mountain of files and electronic equipment.

"We think this is a systemic, citywide issue," another source observed.

The joint investigation started more than a year ago, sources said, but no arrests are expected for at least several more months and no mob ties have been found connected to the schemes.

Among the companies raided yesterday was Castle Oil in the Bronx. Sources would not disclose the other companies' names.

Two years ago, several developers in Manhattan filed a lawsuit against Castle, alleging that the company was mixing used engine fuel it purchased from gas stations, garage and oil burner services and mixing it with heating oil, and then passing it off as high-grade heating oil.

Waste fuel not only contains hazardous elements, but it has little commercial value.

According to state law, distributors must use only pure distillate, residual oil, re-refined oil or a blend as heating oil, lawyers noted in court papers.

"Even if oil is re-refined for use as heating oil, it is criminal for sellers of No. 4 and No. 6 to misrepresent the composition of the oil they sell or to fail to disclose that the oil they sell has been reclaimed (used and filtered) or re-refined," lawyers for the developers said in court documents.

Castle officials vehemently denied the allegation in the lawsuit, maintaining that the quality of its fuel met all standards when it left its premises. A representative for Castle was not immediately available for comment.

The NYPD and Manhattan District Attorney's office declined to comment.