he FBI investigation into GPB Capital Holdings made headlines last week. However, the investigation by New York City regulators who oversee the private trash industry perked the interest of the press.
GPB Capital buys businesses through the money raised by brokers and financial advisors selling GPB private placements to their clients. With 4,000 retail investors, beginning in 2013, GPB raised over one billion dollars through their GPB Automotive Portfolio and GPB Holdings II Funds. They also purchased automotive dealerships in New England, Pennsylvania, New York and Texas.
In December of 2018, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) began their own investigations into GPB Capital Holdings, LLC. The investigations by the federal regulators came after the Massachusetts securities regulators announced their own investigation into GPB in September of 2018, and the sales practices of over 60 independent broker/dealers who allegedly offered private placement investments in GPB Funds to their clients. Private placement investments are complex and high-risk for the investor.
It was reported that both the FBI and the New York City Business Integrity Commission arrived at GPB’s Manhattan offices to collect materials allegedly pursuant to a search warrant by the U.S. Attorney’s office. One of their roles is to regulate the trash hauling industry. GPB is also being investigated by the Securities and Exchange Commission (SEC) as well as the New Jersey Bureau of Securities.
The majority of GPB investments are in auto dealerships, but GPB Capital also buys private trash haulers. This included the 2017 acquisition of Five Star Carting.
According to news reports, this raises concerns for the dozens of independent broker-dealers who sold GPB private placements. Some of the concerns regarding Five Star Carting were its alleged labor and safety records. According to the reports, there was a reported $400,000 settlement in a wage-related class-action lawsuit alleging unsafe trucks with faulty steering and brakes at Five Star.
According to an article in ProPublica, GPB Capital’s director of waste strategy is Rod Proto, the former president and COO of Waste Management. Proto was allegedly fired in 1999 and then charged with insider trading by the SEC according to the article. Proto agreed to pay a $3.7 million fine in 2003 and was banned from serving as an officer or director of a public company for five years.
The SEC’s inquiry was focusing on the accuracy of disclosures which were made by GPB to their investors, the distribution of capital to investors, and the performance of various funds according to reports.
In September, the Massachusetts Secretary of the Commonwealth, William Galvin, announced an investigation into 63 broker-dealer firms selling private placements from GPB. According to an article from InvestmentNews, some of the 63 independent broker/dealers in the Massachusetts’ investigation were Royal Alliance Associates Inc., Sagepoint Financial Inc., FSC Securities Corp. and Woodbury Financial Services Inc. It is alleged that Newbridge Securities, Ladenburg Thalmann, and Hightower Securities also sold GPB Funds.
It is important to note that the GPB Funds are private placement investments. These investment can be very risky, complex and unsuitable for some investors. Private placements are, and should only be available, for accredited investors. These investors must have a net worth over $1 million, individually or jointly, excluding their residence, or an income greater than $200,000, or $300,000 jointly, for the previous two years and earning the equivalent in the present year.
The broker/dealers who sold these highly complex and risky funds may be liable to for your investment losses in GPB Funds. If you’ve suffered investment losses in GPB Funds due to your broker/dealer’s recommendations, contact Soreide Law Group and speak to an experienced securities lawyer at no cost regarding the possible recovery of your financial losses through a FINRA arbitration at: 888-760-6552.
Soreide Law Group represents clients nationwide before FINRA. We operate on a contingency fee basis—no fee to you if no recovery.