GPB Capital’s court-appointed Monitor Joseph Gardemal sent his report for the period ending July 2024 to Judge Margo Brodie. Scroll down to read the full PDF. A shocking piece of small print information shows why private equity investments are so incredibly risky:
The yellow-highlighted section reads:
Legal and other indemnified fees have totaled $17.9M in 2021, $26.1 in 2022, $35.0M in 2023, and $29.8M in the first two quarters of 2024. Legal fees advanced to date total $108.8m.
Gentile and Schneider’s outrageous $108.8 million in legal fees were paid for by investors.
This happened due to a clause in the contracts GPB Capital investors signed that indemnified David Gentile and Jeffry Schneider. In other words, the investors were legally obligated to pay all of their legal bills in the event of lawsuits and even criminal charges. It is an outrage.
From our article of December 19, 2022:
Gentile and Schneider sued GPB’s Monitor to force the company to pay their criminal defense bills. David Gentile is also seeking to force GPB Capital to give him $5.1 million he claims he is owed to pay his 2021 income taxes.
GPB Automotive’s SEC Form 10-K informs us that the Chancery Court in Delaware ruled Schneider was entitled to advancement of his legal fees:
In November 2021, Plaintiff, a former affiliate of GPB Capital Holdings, LLC, filed a Complaint in Chancery Court in Delaware against GPB Capital Holdings, LLC and each of the funds it manages, including the Partnership, seeking a ruling that he is contractually entitled to mandatory advancement of legal fees by GPB Capital with respect to several lawsuits in which Plaintiff is named. On March 24, 2022, the Chancery Court issued a bench ruling, finding that Plaintiff was entitled to advancement of his legal fees from GPB Capital. GPB does not anticipate any of the legal fees relating to the matter to be charged to the Partnership.
In the Kafkaesque world of private equity, owners and partners can be criminally charged and yet the shareholders are legally obligated to pay the legal bills. This is due to the many self-serving clauses deeply embedded within the fine print in the investment documents signed by often unsophisticated investors.
David Gentile filed the same action as Schneider for advancement of his legal fees in the Chancery Court in Delaware:
David Gentile v. GPB Capital Holdings, LLC et al., Case No. 2021-1102-SG (Court of Chancery, DE)
On or about December 20, 2021, Plaintiff David Gentile, founder and former Chief Executive Officer of GPB Capital Holdings, LLC, filed a Complaint in Chancery Court in Delaware against GPB Capital Holdings, LLC and each of the funds it manages, including the Partnership, seeking a ruling that he is contractually entitled to mandatory advancement of legal fees by GPB Capital with respect to several lawsuits in which Plaintiff is named. GPB does not anticipate any of the legal fees relating to the matter to be charged to the Partnership.
Our video with commentary and interaction with our viewers on the legal fees and other matters.
There are more legal bills coming from Schneider and Gentile.
However, now that Gentile and Schneider have been criminally convicted many things will definitely change:
1. The Second Circuit Court is expected to shortly lift the stay on its order to convert GPB Capital from a Monitorship into a Receivership. Once this occurs, money will begin to flow to investors. As the Receiver, Gardemal will have to set aside a reasonable amount of legal fees for Gentile and Schneider. However, it will not be the flagrant investor-money-destroying blank check sums Gentile and Schneider have been spending.
2. As part of sentencing, Gentile and Schneider will likely be ordered to repay GPB Capital’s investors the $108 million in legal fees — not that they will have any money left over US Federal Forfeiture laws kick in and their assets are seized as the proceeds of crime. Gentile and Schneider applied a small print scorched earth policy on taking every possible dollar from their investors; now the bill comes due for their actions in the form of forfeiture.
3. The US DoJ will begin to clawback monies from those who benefitted from GPB Capital. This will include the Church of Scientology. This happened in the Reed Slatkin Ponzi scheme. Slatkin was a Scientologist who perpetrated a $625 million Ponzi scheme in the 1990’s. After Slatkin was criminally convicted, the Feds clawed back money from early investors who were paid distributions. The Feds also clawed back $3.5 million from Scientology and its front groups to which Slatkin had donated.
Joseph Gardemal’s July 2024 Report:
Categories: The Scientology Money Project
We in Global Capitalism HQ continue to be delighted by the financial digging you’ve done on this case, Jeff.
I’m gobsmacked that these idiots have managed to waste $108 million in legal fees in the course of three years, or $3 million per month. However, it’s not clear from the language of the filing that this is just for their criminal defense — it probably includes all the fees for lawyers, forensic accountants etc. to try to get the financial reporting into some sort of order, as well as legal fees for selling off the various businesses that they disposed of.
Scientology is in shock. Had David Miscavige cut a plea deal and went to prison five years ago, that $108.8 million could have been used to finance the R&D of the incredibly precise and fully-automated AI E-Meter which can audit people in any language including Marcabian and Klingon. No more meat body auditors full of HE&R will be needed when the Ultra Insanity Mark X is released!
Thanks for keeping us abreast of all the news on this case.