GPB Capital Holdings' investors have seen their fair share of problems this year -- and the troubling developments continue. GPB recently informed investors that it would not be able to provide critical tax documents by April 15, 2020.
The Schedule K-1 tax form is supposed to be issued annually to owners of limited partnerships. But, in a letter to 6,353 investors, GPB Capital said it would not be able to comply. The company added that it hopes to collect the accurate final documentation to issue the Schedule K1 forms by the end of July 2020, encouraging limited partners to seek tax professionals' guidance.
According to the Securities and Exchange Commission (SEC), GPB Automotive raised over $622.1 million and paid $52.2 million in commissions to brokers.
GPB Capital Holdings' Strategy Revolved Around Private Placements
The asset management firm's business strategy was to partner with independent broker-dealers to sell private partnerships to investors. The firm was to use that money to buy assets, including auto dealerships and waste management businesses, to generate high returns for investors. Such private placements usually pay steep commissions of 7% to 8% for brokers selling the products.
The Schedule K-1 tax form informs investors what they made (or lost) within a specific period. As a result, investors are obliged to file the form as part of their tax returns. If the Schedule K-1 is not delivered, shareholders can request an extension on their taxes. It remains unclear if GPB Capital is delaying sending tax forms to investors in its other private placements. But, the firm has a history of not providing investors with timely information.
GPB Capital Holdings Under FBI Investigation
The firm is being investigated by the Federal Bureau of Investigation (FBI) and SEC but has failed to present audited financial statements for its funds. Investors are unaware of the value of their investments in GPB funds.
CEO Charged with Obstruction of Justice
Last October, the Department of Justice charged the former chief compliance officer of GPB Capital Holdings with obstruction of justice.
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