Three executives of investment funds, including one that owns a handful of Maine car dealerships, have been arrested and charged with fraud by prosecutors in New York.
David Gentile, the founder, owner, and chief executive of GPB Capital Holdings; Jeffry Schneider, of owner and CEO of Ascendant Capital; and Jeffrey Lash, a former managing partner of GPB, all were arrested Thursday. Gentile is from Manhasset, New York, Schneider is from Austin, Texas, and Lash, who left the investment fund in 2018, lives in Naples, Florida.
GPB Capital is the parent company of Prime Automotive Group, which owns and operates several auto dealerships including Prime Toyota and Prime Volkswagen in Saco.
All three executives were due to make appearances at courts in their home states, except for Gentile, who was expected to appear Thursday in federal court in Boston.
The three have been charged with wire fraud and securities fraud by prosecutors in the Eastern District of New York.
They are also currently embroiled in a lawsuit with former Prime Automotive CEO David Rosenberg, whose late father, Ira Rosenberg, built a string of auto dealerships in Maine and then sold them to GPB Capital. Rosenberg was named head of the dealerships under the new ownership but then was fired after he reported his concerns about the financial dealings of the fund that had bought the dealerships.
Rosenberg is also suing because he says, the investment funds have not bought back his remaining ownership stake in the dealerships as had been agreed to.
According to the charges filed this week, GPB Capital had told investors that they would get monthly distributions, totaling 8 percent annually of their investments, from the profits of the dealerships. But instead, prosecutors allege, some or most of the money actually came from funds that new investors were depositing.
A scheme in which funds from newer investors are used to pay older investors is known as a Ponzi scheme and is illegal. It’s named after Charles Ponzi, a con artist operating in the United States and Canada in the 1920s who was caught perpetrating such a scheme.
In all, about 17,000 people invested nearly $1.8 billion in GPB Capital, and money from operations began falling short of the amount needed to pay the monthly distributions in 2015. According to the prosecutors, GPB Capital began using new investors’ money to make up the shortfall at that point, similar to a Ponzi scheme, in which new investments enrich longer-term investors and the fund managers.
GPB Capital stopped the monthly distributions completely in December 2018, the lawsuit says.
Schneider worked with Gentile and Lash on the finances, it says, and headed a firm that steered investors into GPB funds.
In a statement, GPB Capital said it has been cooperating with investigations into its finances and was “extremely disappointed” that charges were filed.
The fund said it denies the allegations and “remains confident that the firm acted in good faith during many years of managing funds for investors,” it said.
“GPB will continue to work toward increasing asset values and cash flows, while ensuring that the operating companies, their employees, and their commercial partners continue to deliver excellent value to our customers, and ultimately to our investors,” the company said through a spokesperson.
GPB Capital also faces civil lawsuits filed by scores of investors who claim they were defrauded by the fund.
The company also has been under threat of losing its dealer agreements with automakers including Volkswagen and Toyota because of Rosenberg’s ouster from the company, which the auto manufacturers said was not allowed under the dealer agreements without their consent.
Prime Automotive represents 56 dealerships organized into five regional groups across eight states, including nine dealerships in Maine. Prime Automotive was created in 2017 when GPB Capital purchased a majority ownership stake in Prime Motor Group, founded by Ira Rosenberg, and merged it with another dealership chain.