Car Dealership Alt Investments in Turmoil as GPB Capital Holdings Alleges Business Partner Fraudulently Converted Funds

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While Automotive News portrayed GPB Capital Holdings' success in the auto dealership investment market in the July 2017 article, "GPB Thrives Under The Radar," GPB filed a lawsuit just one week earlier against former car dealership business partner Patrick DiBre, alleging fraud, conversion, breach of contract, and breach of fiduciary duty, in connection with auto dealership-related alternative investments, leaving investors who purchased such alt investments stuck in the middle of the GBP-DiBre feud.

GPB also alleged DiBre partnered with a former GPB associate to create a new offering, Grand Central Automotive Partners, accusing DiBre of self-dealing, price manipulation, and intentionally withholding money from GPB in an attempt to prevent GPB from making targeted distributions to its fund investors.

According to the suit, GPB Capital Holdings LLC (CRD #169825)—whose sales in 2017 surpassed the $600-million mark—paid DiBre more than $40 million in exchange for seven automobile dealerships he owned, and for DiBre's assistance in the manufacture-approval process to transfer the dealerships to GPB. To finance this, GPB in turn offered alt investments in the auto dealerships, which broker-dealers and registered investment advisers then sold to their retail customers.

The InvestmentNews reported the GPB Automotive Portfolio raised $369.2 million from more than 3,800 investors, paying out a total of $43.4 million (or 11.75%) in sales commissions, including 7% to individual brokers plus other costs and fees; the article summarized the high-commission illiquid GPB auto alternative investments thusly: "the private placements are expensive."

GPB alleges that DiBre committed a "plethora of bad acts," such as failing to pursue the agreed-upon manufacturer approvals, and then commencing an action against GPB when the firm removed him from the dealership business for these alleged "bad acts," all as broker-dealers and other registered investment advisers continued selling GPB alt investments to customers.

Although other specific broker-dealers and registered investment advisers were not named in court papers, GPB's complaint named Nissan of North Plainfield, Garden City Nissan, Nissan of Huntington, Nissan of Duarte, Nissan of Richmond, Nissan of Middletown, and Volkswagen of Huntington as the seven DiBre dealerships.

GPB alleged that DiBre committed embezzlement and misappropriated money from Garden City Nissan and Nissan of North Plainfield, falsified and obfuscated financial data, and interfered in the transfer of his dealerships to GPB, effectively preventing the transfers from closing while remaining in possession of over $42 million that GPB paid for dealerships purportedly still in DiBre's name and possession; the complaint makes reference to offshore accounts, and alleges that DiBre concealed money related to the auto purchases, diverting funds for his own benefit.

The complaint alleged DiBre engaged in self-dealing through a series of fictitious invoices on behalf of APNJ Holdings Inc., a company he owns, and then leaving GPB, taking GPB Chief Financial Officer William Jacoby with him, naming Grand Central Automotive Partners as a new offering created by DiBre, and Honda of Aventura, Volvo of Glen Cove, and Honda of Freehold as additional dealerships listed in the agreement papers.

GPB alleges that DiBre began work on the Grand Central Automotive offering while Grand Central's CFO, Jacoby, was still associated with GPB and contractually obligated to work exclusively for GPB.

Grand Central Automotive Partners, in partnership with Alexander Alternative Capital GP, formed a $500 million fund in May 2017 to acquire interests in North American auto dealerships, boasting a projected base case of 12% annual yield and a structured limit partnership offering 8% in annual preferred returns; Grand Central Automotive partner Michael Corcelli is the founder of Alexander Alternative Capital GP.

If you have invested through a broker-dealer or registered investment adviser in GPB Capital Holdings' auto dealership alternative investment, GBP Automotive Portfolio LP, Grand Central Automotive, or with any broker or financial adviser who has unsuitably recommended an illiquid, high-commission alt investment or private placement that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.