Prime Automotive reportedly wants to sell all dealerships in Maine
The Prime Automotive Group plans to sell its 31 dealerships, including the seven it owns in Maine, reports Automotive News.
The Massachusetts-based company has been causing controversy for years, which was capped in February when the head of its parent company, GPB Capital Holdings, was arrested and charged with fraud.
Automotive News said another Northeast dealer made an offer for some of the dealerships two months ago but was turned down, saying Prime Automotive was only interested in selling all of its dealerships in a single transaction.
A Prime Automotive Group spokeswoman declined to comment on the report on Friday but did not refute the results. 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 one of the 20 top-selling dealer groups in the United States and sold more than 31,500 new cars in the past year, according to Automotive News.
In addition to fraud allegations and investor lawsuits, Prime Automotive is being sued by David Rosenberg, whose late father Ira Rosenberg built a number of Maine dealerships and then sold them to GPB Capital in 2017.
David Rosenberg, originally appointed by the new owner to run the dealership, was fired after reporting concerns about the financial operations of GPB Capital and Prime Automotive. Rosenberg’s lawsuit alleges that GPB Capital did not buy back its stake in Prime Automotive as described in its employment contract.
Prime Automotive or GPB Capital affiliates are also facing lawsuits from a Texas law firm alleging the company defrauded investors out of $ 1.8 billion; and the Commonwealth of Massachusetts, which said 180 investors in the state lost $ 14 million.
These lawsuits mirror many of Rosenberg’s allegations. He said the parent company promised to pay investors out of the profits but instead used money from new investors to pay those who had previously invested money. That way, he said, it worked like an illegal Ponzi scheme.
Both Toyota and Volkswagen have threatened to revoke their franchise agreements with their affiliated Prime Automotive dealers in Saco over alleged breaches of contract due to the dismissal of David Rosenberg. The automakers demanded the sale of the dealerships or the reinstatement of Rosenberg as CEO.
Automotive News cited sources believed to be familiar with Prime’s plans, who said the auto company plans to close the sale of its dealerships by the end of the year.
The industry magazine said the company didn’t report financial problems until June but is in a position to renegotiate a loan agreement that should allow it to meet its financial obligations by mid-2022, according to a regulatory filing with Securities and Exchange Commission.
The fraud allegations pending in federal court concern nearly $ 700 million raised by investors for Prime Automotive to buy from dealers. Investors were promised 8 percent annual returns, but those payments were suspended in 2018.
The US Securities and Exchange Commission has also filed a lawsuit over similar allegations against GPB Capital for operating “a Ponzi-like system” with investors’ money. Some states and investor groups have also filed lawsuits against GPB Capital.
The SEC said it had advised investors that their annual distributions would come from corporate earnings, but instead, as of 2015, at least some came from funds added by new investors to the company. A Ponzi scheme pays older investors with funds from newer investors rather than legitimate corporate profits.
The three executives arrested in February were David Gentile, the founder, owner and director of GPB Capital Holdings; Jeffry Schneider, Owner and CEO of Ascendant Capital; and Jeffrey Lash, a former managing partner of GPB Capital. All three have been tried in federal court in New York for wire transfer and securities fraud.
GPB Capital and the three arrested executives have denied the allegations.
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