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Uh-oh. Someone trusted a whole bunch of money to a wealthy Scientologist.

[David Gentile, Founder and CEO of GPB Capital Holdings]

Jeffrey Augustine has an intriguing report about a Scientologist who appears to be heading for a big fall…

Increasingly, as Tony has shown with reports about its ‘whales,’ Scientology and David Miscavige are relying not on growing membership but extracting as much money as possible from Scientology’s wealthiest donors. So, we like to keep an eye on those rich church members, which has been getting more and more interesting lately.

In particular, we’ve been looking at a wealthy Scientologist named David Gentile (pronounced “gen-TILLY”). In 2013, Gentile founded GPB Capital Holdings, an investment company headquartered in New York. The company’s website shows that its managing director is another Scientologist, Manuel Vianna, someone we’d noticed was working with fellow Scientologist Matthew Feshbach at Feshbach’s Okyanos Heart Institute in the Bahamas.

Our research into Okyanos in the Panama Papers and press releases of the period revealed that Scientologist Ali Shawkat invested $14 million in Okyanos. Ali Shawkat’s father is Mudhar Shawkat who was a member of the Iraqi Parliament in the last decade and was, at one time, considered to become the next Prime Minister of Iraq. The Shawkat father-son team sold a telecom they owned in Iraq and moved $140 million out of the country when they immigrated to Canada. Shawkat also came to our attention when he appeared in Scientology’s IAS Impact magazine as a $5 million donor to the IAS.

It’s not surprising that rich Scientologists are investing in each other’s companies, but it’s something we like to keep an eye on.

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Feshbach sold Okyanos in 2017 for an undisclosed sum. As reported here at the Bunker, Feshbach owes the IRS $3.8 million in back taxes; his appeal to discharge this debt in bankruptcy was denied in 2018. And as we recently reported on the Scientology Money Project, Matt Feshbach has re-entered the stem cell business in Plano, Texas under the name of Ambrose Cell Therapy.

But getting back to Gentile and his New York investment company, GPB’s website says that the firm is “focusing on acquiring income-producing private companies.” GPB Capital has a collection of at least 63 broker-dealers who raise money from private investors. This money is then pooled and invested in companies that may not have access to mainstream sources of capital — companies that banks may be reluctant to loan money to because they’re start ups, or they have heavy debts, or they’re in bankruptcy protection and need capital to restructure. GPB’s acquisitions have focused on car dealerships, waste management firms, healthcare, biotech, and the purchase of debt. GPB’s website claims to have raised $1.5 billion in private capital and used that money to invest in the 160 companies in its portfolio.

Gentile’s broker-dealers make a commission of 7.9 percent on private capital raised for GPB. Others in the loop, for example those who refer investors to GPB’s brokers, make a percentage as well. The total commissions on money invested in GPB is about 12 percent. Thus, a private investment of $100,000 in GPB is reduced at the outset to $88,000. The world of private placement money is characterized by these high fees. Additionally, GPB pays itself fees incurred in advising and managing the companies it either purchases or takes an equity position in.

GPB raises money from private investors under what is called Regulation D (informally called “Reg D”) of the Securities and Exchange Commission (SEC). Reg D investments are considered high risk. From Investopedia:

Regulation D is a Securities and Exchange Commission (SEC) regulation governing private placement exemptions. Reg D allows usually smaller companies to raise capital through the sale of equity or debt securities without having to register their securities with the SEC. Reg D offerings are advantageous to any private company or entrepreneur because they allow an entity to obtain funding faster and to avoid the costs associated with a public offering. Within the regulation are directives that, based on which rules are applied, may allow offerings to be openly solicited to prospective investors in their network.

The SEC is more blunt in its characterization of Reg D investments, which are also known as “private placements” as the money moves between private investors and private companies such as GPB Capital:

Generally speaking, private placements are not subject to some of the laws and regulations that are designed to protect investors, such as the comprehensive disclosure requirements that apply to registered offerings. Private and public companies engage in private placements to raise funds from investors. Hedge funds and other private funds also engage in private placements.

As an individual investor, you may be offered an opportunity to invest in an unregistered offering. You may be told that you are being given an exclusive opportunity. The opportunity may come from a broker, acquaintance, friend or relative. You may have seen an advertisement regarding the opportunity. The securities involved may be, among other things, common or preferred stock, limited partnerships interests, a membership interest in a limited liability company, or an investment product such as a note or bond. Keep in mind that private placements can be very risky and any investment may be difficult, if not virtually impossible to sell.

GPB’s troubles with US regulators began last year when the firm missed an April 30 filing deadline with the SEC. The firm said it needed more time in order to restate its 2015 and 2016 financials for these funds:

GPB Automotive Portfolio: $622.1 million

GPB Holdings II: $645.8 million

A company that has to restate financials from previous years raises red flags. A firm with proper internal accounting and compliance controls is able to produce accurate financial statements to required SEC deadlines. However, Gentile seemed unfazed by this missed SEC deadline. Indeed, an article in Business Observer in July 2018 informed readers that GPB Capital would invest in a 53 story condo project in Tampa. Called Riverwalk, the project belongs to Feldman Equities, a firm owned by long-time Scientologist Larry Feldman. The Business Observer article quotes Feldman on GPB’s major commitment to the Riverwalk project:

Feldman says GPB Capital could provide all of the necessary equity to launch the project, which would amount to between $70 million and $105 million, based on traditional commercial real estate lending standards. It’s expected that Feldman, Two Roads, Tower Realty Partners and others may contribute equity to Riverwalk Place, as well.

The Riverwalk computer renderings are as good as Scientology Ideal Org renderings. This is no surprise as Gensler, Scientology’s go to designer for Ideal Orgs, is also the designer on Riverwalk:

 

 
On the heels of Feldman’s statement in July 2018 that GPB was making a huge investment in Riverwalk, Gentile announced in August 2018 that GPB Capital would temporarily stop raising money. As Bruce Kelly of Investment News reported:

A leading seller of high-risk, high-commission private placements, GPB Capital Holdings, with $1.8 billion in investor money, will take a break from raising new money to focus on straightening out the accounting and financial statements of its two large funds.

Kelly then cited a letter from Gentile to GPB investors:

“While growth has led to many successes, it has also come with challenges,” according to the letter, which was signed by GPB Capital CEO David Gentile. “There is much work to be done with respect to integrating the high volume of recent acquisitions into their respective platforms in order to execute on our performance objectives.”

In September 2018, The Massachusetts Securities Division began an investigation into GPB Capital Holdings’ network of 63 broker dealers in Massachusetts. Boston is a powerhouse financial center in the US and so the investigation raised serious concerns. GPB issued a statement through a spokesman:

“GPB Capital Holdings, LLC is aware that certain broker-dealers have received requests for information from the Commonwealth of Massachusetts. GPB Capital is not in a position to comment on that matter. As we have previously disclosed to investors, GPB Capital is in the process of completing the audits of the financial statements for certain of its funds and is currently not accepting new capital from investors until that process is complete,” said a spokesperson on behalf of GPB Capital.

How long can it take GPB Capital Holdings to do financial statements? Gentile is himself a CPA. The law firm of Gana Weinstein raised this point in September 2018 when it began reaching out online to GPB investors who may have suffered losses. Gana Weinstein’s comments also speak to the brokers being investigated:

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Investors should be concerned at this point as it is highly unusual for funds of this size to cease raising funds unless there are serious concerns. Moreover, delays in reporting financials and the need to release new reports concerning financial statements made three years ago are highly troubling. This suggests potentially multiple years of false information or a size and nature that is currently unknown.

Brokerage firms have been all too willing to subject their clients to the risks of investing in GPB due to the hefty fees the company pays to firms. When GPB Capital’s automotive portfolio raised a total of $369.2 million from more than 3,800 investors it paid out $43.4 million, or 11.75 percent, in commissions. Seven percent of that amount goes directly to the recommending broker’s pocket. There are as many as 60 brokerage firms that sold these funds and among the largest of those firms are Royal Alliance Associates Inc., Sagepoint Financial Inc., FSC Securities Corp. and Woodbury Financial Services Inc.

Despite the sharks beginning to circle, the financial statements still were not forthcoming. Then the big news came in November 2018: GPB’s outside auditing firm resigned. As reported by Investor Lawyers, another law firm that is also reaching out online to GPB investors:

On November 9, 2018, GPB Capital Holdings, LLC (“GPB”) notified certain broker-dealers who had been selling investments in its various funds that GPB’s auditor, Crowe LLP, elected to resign. As reported, GPB’s CEO, David Gentile, stated that the resignation purportedly came about “[d]ue to perceived risks that Crowe determined fell outside of their internal risk tolerance parameters.” GPB has since engaged EisnerAmper LLP to provide it with audit services moving forward.

In December, Bruce Kelly of Investment News reported that FINRA and the SEC had opened new investigations:

In the wake of a state investigation into broker-dealers selling private placements by GPB Capital Holdings, the Financial Industry Regulatory Authority Inc. (FINRA) and the Securities and Exchange Commission have launched their own investigations, according to sources.

As GPB’s apparent problems develop, we’ll continue to keep an eye on it.

At this point, however, GPB sure looks like it has a lot in common with Scientology itself: excessive secrecy, a lack of financial transparency, and one-sided contracts in which GPB has all the power and the investors have virtually no power and no say in how their money is spent. Unlike Scientology, however, GPB Capital Holdings cannot claim religious status as a defense against governmental investigations.

 
— Jeffrey Augustine

 
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Random question for the Bunker community

Does anyone happen to be driving west to east across great swathes of this country in the next few months? Asking for non-Scientological purposes. Drop the Proprietor a line if you’ll be motoring east.

 
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Start making your plans!

 
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Scientology’s celebrities, ‘Ideal Orgs,’ and more!

[Jenna Elfman, Giovanni Ribisi, and Greta Van Susteren]

We’ve been building landing pages about David Miscavige’s favorite playthings, including celebrities and ‘Ideal Orgs,’ and we’re hoping you’ll join in and help us gather as much information as we can about them. Head on over and help us with links and photos and comments.

Scientology’s celebrities, from A to Z! Find your favorite Hubbardite celeb at this index page — or suggest someone to add to the list!

Scientology’s ‘Ideal Orgs,’ from one end of the planet to the other! Help us build up pages about each these worldwide locations!

Scientology’s sneaky front groups, spreading the good news about L. Ron Hubbard while pretending to benefit society!

Scientology Lit: Books reviewed or excerpted in our weekly series. How many have you read?

 
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THE WHOLE TRACK

[ONE year ago] Xenu or Xemu? Here’s our take on one of Scientology’s galactic-wide mysteries
[TWO years ago] Tonight on ‘Leah Remini’: Once again, Scientology’s a horror show for the mentally ill
[THREE years ago] A business executive looks at Scientology as a (poorly run) business
[FOUR years ago] Jon Atack: Scientology’s ‘training routines’ and their relationship to meditation
[FIVE years ago] Black hearts and burning crosses: Scientology litigation is getting weird in Texas
[SIX years ago] Scientology True Crime: A First Look at Nancy Many’s Docudrama Airing January 16
[SEVEN years ago] Scientology and Oiliness: More Renderings from the Super Power Building

 
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Scientology disconnection, a reminder

Bernie Headley has not seen his daughter Stephanie in 5,325 days.
Valerie Haney has not seen her mother Lynne in 1,456 days.
Katrina Reyes has not seen her mother Yelena in 1,958 days
Sylvia Wagner DeWall has not seen her brother Randy in 1,438 days.
Brian Sheen has not seen his grandson Leo in 501 days.
Geoff Levin has not seen his son Collin and daughter Savannah in 389 days.
Christie Collbran has not seen her mother Liz King in 3,696 days.
Clarissa Adams has not seen her parents Walter and Irmin Huber in 1,564 days.
Carol Nyburg has not seen her daughter Nancy in 2,338 days.
Jamie Sorrentini Lugli has not seen her father Irving in 3,112 days.
Quailynn McDaniel has not seen her brother Sean in 2,458 days.
Dylan Gill has not seen his father Russell in 11,024 days.
Melissa Paris has not seen her father Jean-Francois in 6,944 days.
Valeska Paris has not seen her brother Raphael in 3,111 days.
Mirriam Francis has not seen her brother Ben in 2,692 days.
Claudio and Renata Lugli have not seen their son Flavio in 2,952 days.
Sara Goldberg has not seen her daughter Ashley in 1,992 days.
Lori Hodgson has not seen her son Jeremy and daughter Jessica in 1,704 days.
Marie Bilheimer has not seen her mother June in 1,230 days.
Joe Reaiche has not seen his daughter Alanna Masterson in 5,319 days
Derek Bloch has not seen his father Darren in 2,459 days.
Cindy Plahuta has not seen her daughter Kara in 2,779 days.
Roger Weller has not seen his daughter Alyssa in 7,635 days.
Claire Headley has not seen her mother Gen in 2,754 days.
Ramana Dienes-Browning has not seen her mother Jancis in 1,110 days.
Mike Rinder has not seen his son Benjamin and daughter Taryn in 5,412 days.
Brian Sheen has not seen his daughter Spring in 1,518 days.
Skip Young has not seen his daughters Megan and Alexis in 1,921 days.
Mary Kahn has not seen her son Sammy in 1,792 days.
Lois Reisdorf has not seen her son Craig in 1,375 days.
Phil and Willie Jones have not seen their son Mike and daughter Emily in 1,870 days.
Mary Jane Sterne has not seen her daughter Samantha in 2,124 days.
Kate Bornstein has not seen her daughter Jessica in 13,233 days.

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Posted by Tony Ortega on January 10, 2019 at 07:00

E-mail tips to tonyo94 AT gmail DOT com or follow us on Twitter. We also post updates at our Facebook author page. After every new story we send out an alert to our e-mail list and our FB page.

Our new book with Paulette Cooper, Battlefield Scientology: Exposing L. Ron Hubbard’s dangerous ‘religion’ is now on sale at Amazon in paperback and Kindle formats. Our book about Paulette, The Unbreakable Miss Lovely: How the Church of Scientology tried to destroy Paulette Cooper, is on sale at Amazon in paperback, Kindle, and audiobook versions. We’ve posted photographs of Paulette and scenes from her life at a separate location. Reader Sookie put together a complete index. More information can also be found at the book’s dedicated page.

The Best of the Underground Bunker, 1995-2018 Just starting out here? We’ve picked out the most important stories we’ve covered here at the Underground Bunker (2012-2018), The Village Voice (2008-2012), New Times Los Angeles (1999-2002) and the Phoenix New Times (1995-1999)

Other links: BLOGGING DIANETICS: Reading Scientology’s founding text cover to cover | UP THE BRIDGE: Claire Headley and Bruce Hines train us as Scientologists | GETTING OUR ETHICS IN: Jefferson Hawkins explains Scientology’s system of justice | SCIENTOLOGY MYTHBUSTING: Historian Jon Atack discusses key Scientology concepts | Shelly Miscavige, ten years gone | The Lisa McPherson story told in real time | The Cathriona White stories | The Leah Remini ‘Knowledge Reports’ | Hear audio of a Scientology excommunication | Scientology’s little day care of horrors | Whatever happened to Steve Fishman? | Felony charges for Scientology’s drug rehab scam | Why Scientology digs bomb-proof vaults in the desert | PZ Myers reads L. Ron Hubbard’s “A History of Man” | Scientology’s Master Spies | The mystery of the richest Scientologist and his wayward sons | Scientology’s shocking mistreatment of the mentally ill | The Underground Bunker’s Official Theme Song | The Underground Bunker FAQ

Watch our short videos that explain Scientology’s controversies in three minutes or less…

Check your whale level at our dedicated page for status updates, or join us at the Underground Bunker’s Facebook discussion group for more frivolity.

Our non-Scientology stories: Robert Burnham Jr., the man who inscribed the universe | Notorious alt-right inspiration Kevin MacDonald and his theories about Jewish DNA | The selling of the “Phoenix Lights” | Astronomer Harlow Shapley‘s FBI file | Sex, spies, and local TV news

 

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