GPB Capital is a New York-based alternative asset management firm that seeks to acquire income-producing private companies. GPB Capital provides their portfolio companies with the strategic planning, managerial insight and capital needed to enable strong businesses to work towards the next level of growth and profitability.
GPB Capital emerged from the corporate advisory and public accounting firm Gentile, Pismeny & Brengel LLP (“GP&B”), which was founded in 1972. Its principal is a CPA.
GPB raised $1.5bnfor over 160 portfolio companies (that number includes individual automobile dealerships). Funds were raised from 12,000+ clientsin $50-100k increments.
The two largest funds are GPB Holdings IIand GPB Automotive Portfolio, representing roughly $1.27bn. Brokers received 7-8% commissions on capital they raised. The other funds are: GPB Holdings LP, GPB Holdings III, GPB Waste Management, LP (Armada Waste Management, LP), GPB Cold Storage and GPB NYC Development LP.
· Approximately 60 independent brokers have sold GPB funds.
· Ascendant Capital LLCmay have been the principal “captive” broker-dealer, that received a commission on all capital raised for the automotive funds.
· Newbridge Securities, Ladenburg Thalmannand Hightower Securitiesalso sold GPB Funds.
Chronology of Events in GPB
GPB’s lawsuit against Patrick Dibre alleges that Dibre:
- Breached fiduciary duties by manipulating transactions to sell his dealerships to GPB at inflated valuations;
- After GPB’s acquisition, diverted profits, sales, funds and corporate opportunities of the dealerships.
- Purposely drove down dealership values to be able to later acquire the dealerships back from GPB at deflated valuations.
Patrick Dibre’s counterclaims from March 2018 allege “unclean hands” - that GPB was a Ponzi scheme. Dibre alleges, among other things that GPB:
- Recorded purchase prices of dealerships at inflated values, to then direct the difference in price back to Gentile and Schneider;
- Received improper ‘stipends’from subsidiaries of GPB for Gentile and Schneider;
- Improperly directed funds belonging to GPB, in the form of reinsurance funds and manufacturer rebates, to entities controlled by Gentile and Schneider, including one called LSG;
- Improperly expensed personal expensesto GPB, including luxury cars and private jets;
- Paid selling commissions at the rate of 20% of the proceedsof security offerings to, among others, Ascendant Alternative Strategies, LLC.
- Made improper payments to an accounting firm controlled by Gentile’s father, which were later transferred to Gentile’s family trust.
- Never owned the car dealerships, as was represented to investors. In fact, GPB exercised control over the dealerships through loans, and the dealerships issuance of convertible bonds. The dealerships were never transferred to GPB due to rigorous control by the car manufacturers.
- The distributions paid out to investors were paid using subsequent investor monies, because the dealerships did not have sufficient cash flow to cover the distributions, thus exhibiting a Ponzi scheme.
In addition to the governmental actions, there are currently two outstanding matters:
Dibre Litigation: July 2017 – GPB lawsuit in New York State Supreme Court of Nassau County (Case no. 606417/2017) against former partner Patrick Dibreover the sale of several of Dibre’s dealerships to GPB. In March 2018, Lash filed counterclaimsalleging that GPB was in fact a Ponzi scheme.
Lash Litigation: October 2018 – Former director of GPB Automotive Holdings Jeffrey Lash commenced suit against GPB Capitalin United States District Court for the Eastern District of New York – Islip (Case no. 18-cv-05622) for breach of contract. Lash was the director and 15% owner of the fund between 2013 until the end of 2017. One of the causes of action alleges that GPB did not remove Lash’s name from the dealership records as promised in his second resignation agreement. Lash voluntarily dismissed the case in November 2018.
We are continuing to develop facts and legal theories on this matter on behalf of investor clients and encourage you to contact Joe Sarachek (646 517-5420 ext. 101) or Zachary Mazur (646 517-5420 ext. 106).