Prime Automotive Group is looking to sell its 31 dealers, including the seven it owns in Maine, reports the trade publication Automotive News.
The Massachusetts-based company has been in the throes of controversy for years, culminating in February when the head of its parent company, GPB Capital Holdings, was arrested and charged with fraud.
Automotive News said another Northeastern dealership submitted an offer for some of the dealers two months ago but was turned down and said Prime Automotive was only interested in selling all of its dealers in one. single transaction.
A spokeswoman for Prime Automotive Group declined to comment on the report on Friday but did not refute her findings. The company’s holdings in Maine include Prime Toyota, Prime Volkswagen, Prime Ford, Prime Chrysler Dodge Jeep RAM and Prime Honda, all in Saco.
Prime Automotive is ranked among the 20 best-selling dealer groups in the United States and sold more than 31,500 new cars last year, Automotive News said.
In addition to fraud charges and investor lawsuits, Prime Automotive is being sued by David Rosenberg, whose late father, Ira Rosenberg, built a series of dealerships in Maine and then sold them to GPB Capital in 2017.
David Rosenberg, who was originally appointed head of dealerships by the new owner, was fired after raising concerns about the financial transactions of GPB Capital and Prime Automotive. Rosenberg’s lawsuit alleges that GPB Capital did not buy back its stake in Prime Automotive as stated in its employment contract.
Prime Automotive or entities related to GPB Capital are also the subject of lawsuits from a Texas law firm, which alleges the company defrauded investors of $ 1.8 billion; and the Commonwealth of Massachusetts, which said 180 state investors lost $ 14 million.
These lawsuits echo many of Rosenberg’s allegations. He said the parent company promised to pay investors out of profits, but instead used new investor money to pay those who put in money before. This way, he said, it worked like an illegal Ponzi scheme.
Toyota and Volkswagen have both threatened to revoke their franchise agreements with their Saco-affiliated Prime Automotive dealerships over alleged breaches of contract stemming from David Rosenberg’s ouster. The automakers have demanded that the dealerships be sold or that Rosenberg be reinstated as CEO.
Automotive News cited sources familiar with Prime’s plans who said the auto group would like to complete the sale of its dealers by the end of the year.
The industry newspaper said the company reported financial problems as late as June, but was able to renegotiate a credit deal that is expected to allow it to meet its financial obligations until mid-2022, according to a regulatory filing with the United States Securities and Exchange Commission.
The fraud charges, which are still pending in federal court, concern nearly $ 700 million raised from investors for Prime Automotive to buy dealerships. Investors were promised an 8% annual return, but those payments ceased in 2018.
The SEC also filed a lawsuit for similar allegations against GPB Capital, which it said was exploiting “a Ponzi scheme” with investor money. Some states and investor groups have also filed lawsuits against GPB Capital.
The SEC said investors had been told their annual distributions would come from the company’s profits, but as of 2015 at least some came from funds new investors deposit in the company. In a Ponzi scheme, older investors are paid with funds from newer investors, rather than legitimate business income.
The three executives who were arrested in February were David Gentile, founder, owner and CEO of GPB Capital Holdings; Jeffry Schneider, owner and CEO of Ascendant Capital; and Jeffrey Lash, former managing partner of GPB Capital. All three were charged with wire fraud and securities fraud in federal court in New York.
GPB Capital and the three executives who were arrested denied the charges.
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