GPB Capital Holdings Under Scrutiny by FINRA, SEC, FBI

GPB Capital HoldingsPublicly available records and news reports by InvestmentNews and other publications indicate that GPB Capital Holdings is the subject of investigations by the Financial Industry Regulatory Authority and the Securities and Exchange Commission, as well as the Federal Bureau of Investigation. The firm is reportedly facing questions about disclosures it made to investors regarding its funds and distributions, including in GPB Holdings, GPB Waste Management, and GPB Automotive. Fitapelli Kurta is interested in speaking to investors who have complaints regarding investments made in GPB Capital Holdings.

According to the company’s website, GPB Capital Holdings is an alternative asset management company headquartered in New York. It was formed from Gentile, Pismeny & Brengel LLP (GP&B), public accounting and corporate advisory firm created in 1972. GPB has raised $1.5 billion in capital, according to its website, with more than 5,500 employees in its 160+ portfolio companies. Its portfolio includes automotive dealerships in New England, Pittsburgh, Houston, upstate New York, and the New York metropolitan area; information technology companies such as Maintech, HealthPrime, Antata Health, DecisionOne, DeepBlue, and Biotex Pharma Investments II; debt strategies for companies such as CardioFocus, Guided Therapeutics, Hycor, and Tactual Labs; exited debt strategies for companies such as Anexio, BioPharma, Bluvision; Duostech; Emmaus Life Sciences; Jaguar Health, and Theragen; and waste management companies such as Buckeye Water Service Company; Five Star Carting; City Green Organics; Mud Masters; Skinquarter Land; and Staten Island Carting.

In September 2018 GPB Capital Holdings made headlines when Massachusetts Secretary of State launched a probe into broker-dealers who sold private placement investments sponsored by the firm. News reports at the time stated that Massachusetts securities regulatory authorities had received a tip about the activities of one firm involved in the sale of GPB investments; the firm had also at the time announced it would temporarily stop bringing in new funds and suspend redemptions “while it concentrates on accounting and financial reporting.” A ThinkAdvisor article reported that two private placements had failed to meet SEC filing deadlines they were required to meet; it also noted a private lawsuit filed by the company against “a former business partner” who allegedly did not complete an auto dealerships sale worth $40 million. The Massachusetts investigation was reported to include 63 broker-dealers involved in the sale of GPB private placements, focusing on such matters as disclosures, marketing, and sales.

This followed an April 2018 announcement by GPB Capital Holdings that it would halve its annual distributions from 8% to 4%, and an August 2018 announcement that firms involved in the sale of GPB Automotive interests should not rely on the investment’s financial disclosures. And it preceded the November 2018 resignation by the firm’s auditor, Crowe LLP, and the firm’s announcement that it was suspending distributions to limited partners. According to contemporaneous reporting by InvestmentNews, Crowe LLP resigned “due to perceived risks that Crowe determined fell outside of their internal risk tolerance parameters.” The company subsequently brought on EisnerAmper LLP as its auditor. The company had announced previously that it would cease new fundraising so it could focus on accounting and financial reporting for its two biggest funds, GPB Automotive Portfolio and GPB Holdings II. “While growth has led to many successes, it has also come with challenges,” GPB Capital CEO David Gentile said in a letter to broker-dealers selling the firm’s investments. “There is much work to be done with respect to integrating the high volume of recent acquisitions into their respective platforms in order to execute on our performance objectives.”

As a July InvestmentNews report noted, GPB Capital Holdings’ offerings included nine private placements filed with the SEC. The largest private placements were GPB Automotive Portfolio and GPB Holdings II, both of which had more than 3,000 investors as of May 2017, according to the report, with more than hundreds of millions raised from investors. “Both now have more than double that number of investors,” according to the SEC, with GPB Automotive having raised more than $622 million and GPB Holdings II more than $645 million since 2015, per SEC filings. Both funds paid a combined total of $100.1 million in commissions to brokers, according to that report, which noted that they were also late in the filing of financial statements with the SEC, whose rules require funds with more than $10 million in assets and more than 2,000 investors to file financial statements within 120 days after their fiscal years end. Broker-dealers who sold those two largest funds, according to InvestmentNews, include Royal Alliance Associates, FSC Securities Corporation, Woodbury Financial Services, and SagePoint Financial.

Authorities have also launched investigations of at least one company in GPB Capital Holdings’ Portfolio. According to a March 2019 report by ProPublica, the FBI raided the offices of Five Star Carting, a New York City-based waste management company and the third-biggest private trash collection company in the city. The company has a “troubled labor and safety record,” according to ProPublica, which noted that it has paid a $400,000 settlement in a class-action lawsuit concerning wages and that government inspections revealed unsafe vehicles. GPB Capital acquired Five Star Carting in 2017, though ProPublica noted that it is not clear whether the FBI raid was at all connected to separate investigations of GPB Capital. The March InvestmentNews report added that in addition to the SEC and FINRA inquiries, an FBI visit to firm offices in New York City in February also included officials from the city’s Business Integrity Commission. The BIC’s regulatory purview includes private trash carting, as well as “public wholesale markets” and “shipboard gambling industries.”

Then there’s the matter of the lawsuit GPB Capital Holdings filed against its former partner Patrick Dibre. As InvestmentNews reported in February 2018, the lawsuit, filed in New York Supreme Court in Nassau County, included claims for fraud and breach of contract. GPB Capital Holdings reported raised “between $600 million to 800 million” through sales by independent broker-dealers, with brokers receiving a commission of 7%. Mr. Dibre was an owner of New York-based automotive dealerships who reportedly “held himself out to” GPB Capital Holdings as a potential partner in the growth of its auto dealership portfolio, and the company provided him advances of $42 million between 2013 and 2015 “for auto dealerships he allegedly ever delivered.” According to the report, “The process for seeking a carmaker’s approval of the sale of a dealership is initiated by the seller,” and “Mr. Dibre allegedly failed to provide the required notices to start the sales process of five dealerships, according to the complaint.” In its complaint. GPB Capital Holdings alleged that Mr. Dibre told car manufacturers that GPB had been involved in “malefactions and malfeasance,” recommending that they do not approve the firm’s ownership and operation of dealers.

If you or someone you know has a complaint regarding GPB Capital Holdings, call Fitapelli Kurta at 877-238-4175 for a free consultation. You may be able to recover lost funds. Fitapelli Kurta accepts all cases on contingency: we only get paid if and when you collect money. You may have a limited window to file your complaint, so we encourage you to avoid delay. Call 877-238-4175 now to speak to an attorney for free.