GPB Capital has recently been telling the 60 or so broker-dealers that sold $1.8 billion of high-risk private placement to wealthy clients that it would deliver audited financial statements for its funds by the end of September. Now, the beleaguered company, facing investigations by the Securities and Exchange Commission and the FBI, will blow through that deadline, telling firms and investors this week that it expects to complete the audits by the end of this year.
Launched in 2013, GPB has a history of missing such deadlines and leaving investors in the dark. In the spring of 2018, the firm failed to produce audited financial statements for two of its largest funds, GPB Holdings II and GPB Automotive Portfolio, and then last summer it said it was overhauling and restating the 2015 and 2016 financial statements of certain funds as part of an accounting review. By last fall, its auditor and accountant, Crowe, resigned.
[Recommended video: How advisers can be a game changer for women investors]
In a letter to investors on Tuesday, GPB blamed fresh problems for the delay.
"Most recently, new challenges have surfaced impacting our ability to meet our targeted goal of delivering audited financial statements by Sept. 30, 2019," according to the letter, which was not signed by a company official. "We realize this news is disappointing, and we will continue to update you as we work through the next few months and establish a final completion date."
The firm's managing director of communications, Brian Weisenberger, wrote in an email that "In response to the allegations Mr. Rosenberg made, which GPB Capital is defending against, GPB Capital's Audit Committee has proactively engaged a law firm to independently investigate the accusations."
"The need for an independent investigation has led to further audit delays," Mr. Weisenberger wrote, "as both the audit committee and the auditor of the affected partnerships are requiring that the independent investigation be completed prior to releasing the audited financial statements."
GPB's focus has been to buy auto dealerships and waste management businesses with the intent of generating high, single-digit returns for investors. It was an overnight sensation among the 60 or so independent broker-dealers that sold the GPB funds, but it has rapidly fallen on hard times.
It was a difficult summer for GPB, its investors and the broker-dealers that sold the private placements.
In June, the company reported estimated sharp declines in value for its two biggest funds, the previously mentioned GPB Holdings II and GPB Automotive Portfolio, which combined raised more than $1.2 billion from investors.
And in July, one of the firm's business partners, David Rosenberg, chief executive of Prime Automotive Group, filed a lawsuit against the company and accused GPB of engaging in "a massive securities fraud," in which it used money from investors to prop up the performance of auto dealerships it owns, as well as to finance payments to other investors.