18 Sep Prime Auto CEO Rosenberg abruptly exits amid lawsuit
GPB – David Rosenberg | Boston Business Journal | Hilary Burns | Sep 18, 2019, 5:17am EDT
David Rosenberg, longtime CEO of Prime Automotive Group, left the company abruptly on Monday, two months after accusing the investment firm that owns his company of financial misconduct.
GPB Capital Holdings in New York named a new interim CEO on Monday to succeed Rosenberg, according to a statement issued yesterday. The release said only that has Rosenberg “has been relieved of his duties” and that he will be replaced on an interim basis by Kevin Westfall, chairman of GPB Capital’s automotive strategy. It gave no details about Rosenberg’s departure.
Rosenberg’s attorney, Jack Pirozzolo of Sidney Austin LLP in Boston, said in a statement to the Business Journal that GPB’s announcement“represents further retaliatory action taken against David Rosenberg for reporting evidence of financial misconduct at GPB.”
“Company leadership not only ignored Mr. Rosenberg’s initial call for corrective steps within GPB’s legacy auto dealership operations, they attempted to silence him and other members of the Prime Automotive Group team when misconduct was discovered,” Pirozzolo said in the statement. “Now they have wrongfully terminated Mr. Rosenberg for acting responsibly and ethically and in the best interests of the dealerships and GPB investors, and for asserting his rights to certain payments that GPB was contractually obligated to make to him by July 1 — but which Mr. Rosenberg has not received to date.”
GPB Capital attorney Tab Rosenfeld declined to say why the company fired Rosenberg.
“We categorically deny that Mr. Rosenberg was retaliated against or terminated for anything other than proper grounds,” Rosenfeld told the Business Journal. “We also reject the false narrative that his attorney is trying to portray through the media. The parties are involved in litigation and the matter will get resolved as it should through the system. We have proper grounds for his termination and all that will become apparent over the course of time.”
This month, the Boston Business Journal honored Rosenberg for his charitable contributions at its annual Corporate Citizenship Awards ceremony where Rosenberg received the 2019 Lewis Family Foundation CEO Social Leadership Award.
Rosenberg sold a majority stake in Prime Motors to GPB Capital for $235 million in 2017. But in late July, he sued GPB Capital Holdings, alleging the firm engaged in “massive securities fraud” and “serious financial misconduct,” dating back to 2014, according to the lawsuit. The alleged misconduct, according to the lawsuit, included fabrication of revenue through fake contracts and misappropriation of investor funds for personal purposes, among other misdeeds. The lawsuit also said that Rosenberg learned of the financial misconduct after GPB asked him to lead their entire automotive portfolio, which included dealerships that the holding company had acquired before bringing Rosenberg on board.
“Rosenberg also learned that GPB Capital, its executives and principals and its outside attorneys were engaged in extensive efforts to cover-up the misconduct in order to lull the investors in GPB funds into thinking that their investments were safe,” the lawsuit said.
The suit contends that GPB Capital retaliated against Rosenberg for trying to shed light on the financial misconduct by breaching his contract and refusing to pay him $5.9 million on July 1.
GPB said on its website that it has raised $1.5 billion of capital and currently keeps 160 portfolio companies.
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