Prime Automotive Group is looking to sell its 31 dealerships, including the seven it owns in Maine, trade publication Automotive News is reporting.
The Massachusetts-based company has been swirling in controversy for years, capped in February when the head of its parent firm, GPB Capital Holdings, was arrested and charged with fraud.
Automotive News said another dealer in the Northeast submitted a bid for some of the dealerships two months ago, but was rebuffed and told that Prime Automotive was only interested in selling all of its dealerships in a single transaction.
A spokeswoman for Prime Automotive Group declined to comment on the report Friday but did not refute its findings. The company’s Maine holdings 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 top-selling dealership groups in the United States and sold more than 31,500 new cars last year, Automotive News said.
In addition to the fraud charges and lawsuits filed by investors, Prime Automotive is also being sued by David Rosenberg, whose late father Ira Rosenberg built a string of dealerships in Maine and then sold them to GPB Capital in 2017.
David Rosenberg, who was originally named head of the dealerships by the new owner, was fired after he reported concerns over the financial dealings of GPB Capital and Prime Automotive. Rosenberg’s suit alleges that GPB Capital has not bought back his ownership stake in Prime Automotive as was outlined in his employment contract.
Prime Automotive or entities connected with GPB Capital also face lawsuits filed by a Texas law firm, which alleges the company defrauded investors of $1.8 billion, and the Commonwealth of Massachusetts, which said 180 investors in the state have lost $14 million.
Those suits echo many of Rosenberg’s allegations. He said the parent firm promised to pay investors from profits, but instead used money from new investors to pay those who had put in money before. In that way, he said, it operated like an illegal Ponzi scheme.
Both Toyota and Volkswagen have threatened to revoke their franchise agreements with their affiliated Prime Automotive dealerships in Saco as a result of alleged breaches of contract stemming from the ouster of David Rosenberg. The automakers demanded that the dealerships be sold or Rosenberg be reinstated as CEO.
Automotive News quoted sources who were said to be familiar with Prime’s plans as saying that the automotive group would like to complete the sale of its dealerships by the end of the year.
The industry journal said that the company reported financial troubles as recently as June, but was able to renegotiate a credit deal that should allow it to meet its financial obligations until mid-2022, according to a regulatory filing with the Securities and Exchange Commission.
The fraud charges, which are still pending in federal court, concern nearly $700 million that was raised from investors for Prime Automotive to buy dealerships. The investors were promised 8 percent annual returns, but those payments stopped in 2018.
The U.S. Securities and Exchange Commission has also filed a civil suit on similar allegations against GPB Capital, which it said was operating “a Ponzi-like scheme” with investors’ money. Some states and groups of investors have also filed lawsuits against GPB Capital.
The SEC said that investors were told their annual distributions would come from company profits, but instead starting in 2015, at least some came from funds that new investors were depositing in the company. In a Ponzi scheme, older investors are paid with funds from newer investors, rather than from legitimate company earnings.
The three executives who were arrested in February were David Gentile, the founder, owner and chief executive of GPB Capital Holdings; Jeffry Schneider, the owner and CEO of Ascendant Capital; and Jeffrey Lash, a former managing partner of GPB Capital. All three were charged with wire and securities fraud in federal court in New York.
GPB Capital and the three executives who were arrested have denied the charges.