A federal judge in New York late Thursday ordered the appointment of an independent U.S. monitor to oversee GPB Capital Holdings, an alternative-asset management firm, and related businesses including Prime Automotive Group — one of the largest private dealership groups in the country.
The move came after GPB reached an agreement with the U.S. Securities and Exchange Commission, which filed a motion Monday asking for emergency appointment of a monitor. A hearing on the motion had been scheduled for Friday.
The commission on Feb. 4 filed a complaint against GPB, two related companies, GPB CEO David Gentile and two associates on allegations of securities fraud. Just days later, the commission sought the monitor to help protect the assets of GPB's 17,000 investors nationwide who the SEC and federal prosecutors claim were misled in funding $1.8 billion in a "Ponzi-like scheme."
Gentile resigned as CEO a day after the SEC issued its complaint and Gentile and two associates were charged by the U.S. Justice Department with conspiracy to commit wire fraud, conspiracy to commit securities fraud, and securities fraud. Gentile was arraigned Tuesday and pleaded not guilty to those charges as well as wire fraud.
Several states also have brought actions against GPB and individual defendants.
U.S. District Chief Judge Margo Brodie approved Joe Gardemal, managing director for consulting firm Alvarez & Marsal Holdings in Washington, D.C., as the monitor. He will remain in place until the court terminates his agreement.
Gardemal is a certified public accountant and certified fraud examiner with more than 20 years of experience in valuations in the auto industry. He has worked with dealerships and manufacturers and as an SEC expert on dealerships.
He is expected to report back to the court within 60 days his recommendations for GPB and its portfolio companies. He could recommend various entities should remain in monitoring, that they be under the control of a receiver and/or that GPB or any of its related companies should file for bankruptcy.
Gardemal will be able to approve or disapprove corporate transactions and extensions of credit, according to the court order.
The SEC wanted the monitor to protect GPB's assets, including the more than three dozen Prime dealerships which it says represent at least 70 percent of GPB's revenue. The commission had said GPB may be at risk for termination by manufacturers amid a change in control or that dealership sales could be forced and lead to "fire-sale prices."
"The principal source for potential investor recovery is revenue generated by the several dozen automobile dealerships owned by GPB Capital," the SEC said in a memorandum of law in support of its motion for the monitor. "These dealerships have contractual relationships with lenders and manufacturers that are now at risk of termination because of, among other things, Gentile's arrest."
GPB spokeswoman Nancy Sterling said in a statement to Automotive News this week that "the appointment of a monitor for GPB, which does not own the stores, should have no impact whatsoever on any of the dealerships."
Prime Automotive, in a statement released later Friday, said: “Prime is very pleased that the selected monitor has extensive automotive experience which will be valuable to our business. We look forward to working closely with him.”
The dealership group, based in Westwood, Mass., ranks No. 11 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 45,050 new vehicles in 2019.