Federal prosecutors pursuing criminal charges against senior GPB Capital executives on Monday said they had interviewed an accountant and auditor for the private placement firm, potentially raising questions of whether those executives had used investor money for personal expenses.
In February, the Justice Department unsealed a criminal indictment in the Eastern District of New York charging three GPB executives, David Gentile, Jeffrey Schneider and Jeffrey Lash with securities fraud, wire fraud and conspiracy.
Focused on independent broker-dealers, GPB was a leading seller of high-risk private placements in the past decade. It promised investors its funds, which invested primarily in auto dealerships and trash hauling businesses, would generate annual returns to clients of 8%.
It raised $1.8 billion from 17,000 investors starting in 2013 through sales of private partnerships, but it has not paid investors steady returns, called distributions, since 2018. More than 60 broker-dealers partnered with GPB to sell the private placements and charged customers charged clients commissions and fees of up to 11%.
Regulators alleged in February at the time of the criminal charges that GPB increasingly relied on so-called "Ponzi financing," or using new investors’ capital contributions to pay prior investors the monthly distributions.
In a court filing earlier this week, attorneys for the Department of Justice said that federal officials had interviewed Alan Materazo, a partner at the accounting firm Margolin Winer & Evens, in April.
The mention of the accountants puts the spotlight back on earlier allegations of Gentile, Schneider and Lash using clients' money for their own personal benefit.
According to a complaint from February filed by Gurbir S. Grewal, the Attorney General of New Jersey, GPB Capital and its principals for years incurred expenses without a clear business purpose and for their own personal enrichment.
In particular, both Gentile and Schneider made luxury purchases for their personal use at the expense of the GPB Funds, the New Jersey complaint alleges.
Documents prepared by GPB Capital’s former auditors, Margolin Winer & Evans show those expenses include about $47,000 on private jets; $2,500 for Gentile’s wife’s travel expenses; and approximately $58,000 in travel expenses for Jachirijo, a company 100% owned by Gentile, according to the New Jersey complaint.
Other expenses uncovered by the accountants included $12,040 in charges for all-terrain vehicle rentals in Florida; and $29,837 for an American Express bill that, the accounting firm noted, included Gentile's 50th birthday, the complaint alleges.
Gentile is the owner and former CEO of GPB Capital, and Schneider is the owner of GPB Capital’s placement agent Ascendant Capital. Lash was a former managing partner at GPB. An independent monitor was appointed in February by a federal judge to oversee the company.
An attorney for Gentile, William F. McGovern, declined to comment. An attorney for Lash, Derrelle Janey, did not return a call to comment. Schneider could not be reached to comment.
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