Scientology and David Miscavige are increasingly relying on extracting as much money as possible from Scientology’s wealthiest donors rather than increasing membership, as Tony Ortega has demonstrated with reports about “whales”. So we like to keep an eye on those wealthy church members, which has become increasingly interesting recently.
We’ve been looking in particular at a wealthy Scientologist named David Gentile (pronounced “gen-TILLY”). Gentile established GPB Capital Holdings, a New York-based investment firm, in 2013. According to the company’s website, its managing director is another Scientologist, Manuel Vianna, who we noticed working with fellow Scientologist Matthew Feshbach at Feshbach’s Okyanos Heart Institute in the Bahamas.
Our investigation into Okyanos revealed that Scientologist Ali Shawkat invested $14 million in Okyanos via the Panama Papers and press releases from the time. Mudhar Shawkat, Ali Shawkat’s father, was a member of the Iraqi Parliament for the last decade and was once considered to be Iraq’s next Prime Minister.
When the Shawkat father-son team immigrated to Canada, they sold a telecom company they owned in Iraq and moved $140 million out of the country. Shawkat was also highlighted in Scientology’s IAS Impact magazine as a $5 million donor to the IAS.
Rich Scientologists investing in each other’s businesses is not surprising, but we like to keep an eye on it.
Okyanos was sold by Feshbach for an undisclosed sum in 2017. According to Tony Ortega’s Underground Bunker, Feshbach owes the IRS $3.8 million in unpaid taxes; in 2018, his request to have this debt discharged through bankruptcy was turned down. Additionally, Matt Feshbach has reentered the stem cell industry in Plano, Texas under the name Ambrose Cell Therapy, as we recently reported on the Scientology Money Project.
Returning to Gentile and his New York investment firm, GPB, the company is “focused on acquiring income-producing private companies,” according to the website. A group of at least 63 broker-dealers known as GPB Capital raise money from individual investors.
Then, this money is pooled and invested in businesses that might not have access to conventional sources of funding — businesses that banks might be hesitant to lend money to because they are start-ups, have significant debts, or are under bankruptcy protection and require capital to restructure.
GPB has concentrated on buying auto dealerships, waste management companies, healthcare, biotech, and debt. According to the GPB website, it raised $1.5 billion in private funding and used that sum to make investments in the 160 companies that make up its portfolio.
On the private capital that is raised for GPB, Gentile’s broker-dealers earn a commission of 7.9 percent. Other parties involved in the transaction, such as those who refer investors to GPB’s brokers, also profit. About 12% of the money invested in GPB received commissions overall.
As a result, an initial private investment of $100,000 in GBP is reduced to $88,000. These exorbitant fees are a defining feature of the private placement capital market. In addition, GPB pays itself the fees associated with managing and advising the businesses it either buys or takes an equity stake in.
GPB raises capital from private investors in accordance with Securities and Exchange Commission Regulation D (also known as “Reg D” informally) (SEC). Investments under Regulation D are regarded as high-risk. Investopedia quotes:
Private placement exemptions are governed by Securities and Exchange Commission (SEC) regulation D. Smaller businesses can raise capital through the sale of debt or equity securities thanks to Regulation D, which exempts them from registering their securities with the SEC.
Any private business or entrepreneur can benefit from Reg D offerings because they make it possible to raise money more quickly and without incurring the expenses related to a public offering. Directives in the regulation may permit offerings to be openly solicited to potential investors in their network depending on how the rules are applied.”
Reg D investments, also referred to as “private placements” because funds are transferred between private investors and private businesses like GPB Capital, are more bluntly described by the SEC as follows:
“Generally speaking, certain laws and regulations aimed at safeguarding investors, such as the thorough disclosure requirements that are applicable to registered offerings, do not apply to private placements. Private placements are used by both private and public companies to raise money from investors. Private placements are also done by hedge funds and other private funds.
You might be given the chance to invest in an unregistered offering as a private investor. You might be informed that this is a unique opportunity. The opportunity might come from a broker, a friend, an acquaintance, or a family member. It’s possible that you saw an advertisement for the opportunity.
A membership interest in a limited liability company, common or preferred stock, limited partnership interests, or an investment product like a note or bond are just a few examples of the securities that may be at stake. Remember that private placements can be very risky and that selling any investment may be challenging, if not downright impossible.”
GPB’s issues with US regulators started last year when the company missed the SEC’s April 30 filing deadline. The company claimed it needed more time to restate its financials for these funds for 2015 and 2016:
Portfolio for GPB Automotive: $622.1 million
$645.8 million for GPB Holdings II
Restated financials from prior years are a warning sign for a company. A company that has effective internal accounting and compliance controls can deliver accurate financial statements by the SEC’s deadlines. Despite the missed SEC deadline, Gentile didn’t seem concerned.
In fact, readers of Business Observer were informed in a July 2018 article that GPB Capital would finance a 53-story condo development in Tampa. The project, known as Riverwalk, is the property of Feldman Equities, a company that Larry Feldman has long been a member of. Feldman is quoted in the Business Observer article as describing GPB’s significant investment in the Riverwalk project:
“According to Feldman, based on conventional commercial real estate lending standards, GPB Capital could provide all of the equity required to launch the project, which would total between $70 million and $105 million. Along with Feldman, Two Roads, Tower Realty Partners, and others, it’s possible that they’ll invest in Riverwalk Place.”
The computer renderings of the Riverwalk are on par with those of the Scientology Ideal Org. This comes as no surprise given that Riverwalk was also created by Gensler, the Ideal Orgs’ preferred architect for Scientology.
Following Feldman’s declaration that GPB was making a sizable investment in Riverwalk in July 2018, Gentile declared in August 2018 that GPB Capital would temporarily stop raising capital. According to Bruce Kelly of Investment News:
“GPB Capital Holdings, a leading seller of high-risk, high-commission private placements, with $1.8 billion in investor money, will forgo new capital raising to concentrate on reorganising the accounting and financial statements of its two significant funds.”
Kelly then quoted from a letter that Gentile had written to GPB investors:
“The letter, which was signed by GPB Capital CEO David Gentile, stated that while growth had produced many successes, it had also brought with it difficulties. To achieve our performance goals, a lot of work needs to be done integrating the numerous recent acquisitions into their respective platforms.”
In a recent update to this story, Business Observer stated that Mosaic Real Estate Credit LLC had provided $24.5 million in construction financing to Larry Feldman and his partners in the Riverwalk Place condo tower in downtown Tampa. Feldman was cited as saying that GPB was appropriate for $70-$105 million in Riverwalk Place, so it is important to take note of this. It doesn’t seem like this is the case.
The 63 Massachusetts broker-dealers connected to GPB Capital Holdings are the subject of an investigation launched by the Massachusetts Securities Division in September 2018. Boston is a major US financial hub, so the investigation caused significant concern. Spokesman for GPB said:
“GPB Capital Holdings, LLC is aware that the Commonwealth of Massachusetts has sent requests for information to a number of broker-dealers. GPB Capital is unable to comment on that subject. GPB Capital is currently not accepting new capital from investors until the audits of the financial statements for certain of its funds are finished, as we have previously disclosed to investors, according to a spokesperson for the company.
How long can GPB Capital Holdings take to complete financial statements? Gentile is a certified public accountant. Gana Weinstein, a law firm, raised this point in September 2018 when it began reaching out to GBP investors who may have suffered losses online. Gana Weinstein’s comments also address the brokers under investigation:
“Investors should be concerned at this point because funds of this size rarely stop raising funds unless there are serious concerns. Furthermore, the need to release new reports on financial statements made three years ago, as well as delays in reporting financials, is extremely concerning. This suggests that there could have been years of false information or that the size and nature are currently unknown.
Due to the high fees paid by the company to brokerage firms, brokerage firms have been all too willing to expose their clients to the risks of investing in GBP. When GPB Capital’s automotive portfolio raised $369.2 million from over 3,800 investors, it paid out $43.4 million in commissions, or 11.75 percent.
Seven percent of that amount goes directly into the pocket of the recommending broker. These funds were sold by as many as 60 brokerage firms, including Royal Alliance Associates Inc., Sagepoint Financial Inc., FSC Securities Corp., and Woodbury Financial Services Inc.”
Despite the sharks’ attention, the financial statements were still withheld. Then, in November 2018, the big news: GPB’s outside auditing firm resigned. According to Investor Lawyers, another law firm that is reaching out to GBP investors online:
“GPB Capital Holdings, LLC (“GPB”) notified certain broker-dealers who had been selling investments in its various funds on November 9, 2018, that GPB’s auditor, Crowe LLP, had elected to resign. According to reports, GPB CEO David Gentile stated that the resignation was prompted by “perceived risks that Crowe determined fell outside of their internal risk tolerance parameters.” GPB has since hired EisnerAmper LLP to provide audit services in the future.”
Bruce Kelly of Investment News reported in December that FINRA and the SEC had opened new investigations:
“In response to a state investigation into GPB Capital Holdings’ broker-dealers selling private placements, the Financial Industry Regulatory Authority Inc. (FINRA) and the Securities and Exchange Commission have launched their own investigations, according to sources.
We’ll keep an eye on GPB as its apparent problems develop.
GPB, on the other hand, appears to have 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 or say in how their money is spent. GPB Capital Holdings, unlike Scientology, cannot use religious status as a defence against government investigations.
