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The SEC, FINRA, the state of Massachusetts, the FBI and the New Jersey Bureau of Securities are all investigating GPB Capital Holdings. That is not all; it is also being investigated by the New York City Business Integrity Commission, which is responsible for monitoring the private trash industry.

According to the company, it raises money through the help of financial advisors who sell private placements to investors, and from the money it makes, it purchases “income-producing private companies.” Private placements are used to raise funds by selling securities to investors privately. Private placements are not available to the public and as such, bear the significant risk and are not liquid. Many investors stay away from them because they mostly do not align with their goals.

GPB Capital Holdings generated more than $1.8 billion from selling these high-commission, risky private placements through independent brokers. In August 2018, every new fundraising was suspended by the company.

GPB Capital: The Trouble with Trash Hauling

Most of the investments affiliated with GPB Capital are in trash hauling companies and auto dealerships. GPB acquired a trash hauling company named Five Star Carting in 2017. And an article from ProPublica in March about Five Star and the investigations that were launched into the activities of GPB raised alarms.

According to the ProPublica article, Five Star Carting is the third-biggest trash hauler in New York City. The company which is now known as GPB Waste NY, has also had to deal with issues regarding its safety and labor record. During government inspections, some unsafe trucks that had bad brakes and steering wheels were found. The company paid $400,000 in settlements for a wage-related class-action lawsuit.

The director of waste strategy at GPB Capital, Rod Proto, who was once the president and Chief Operating Officer of Waste Management, was fired in 1999. And later, the SEC brought up charges of insider trading against him.

FBI RAIDED GPB CAPITAL

On the 28th of February 2019, the FBI raided GPB’s offices, but we cannot ascertain if the raid was in any way connected to the investigations about its investment disclosures or other reasons because the authorities did not publicly state the reason for the raid.

Jason Haselkorn, an investment fraud lawyer, has talked to many concerned GPB Capital investors.  Haselkorn has questioned the due diligence of the investment firms selling GPB Capital and worried many financial advisors were motivated by the high commissions.  The question, however, is, were the firms and due diligence committees aware of where the money was being invested?