GPB Capital Holdings is suing Signature Bank over roughly $2.2m the private equity firm claims the lender improperly took from its account over an alleged default involving two loans, including one the firm obtained under the federal Paycheck Protection Program last year.
The New York firm claims Signature’s action will result in a more than $1m windfall for the bank in connection with the Paycheck Protection loan, which GPB said “was made with the expectation that it would be forgiven,” in a court filing 25 February.
Signature Bank claimed the government-sponsored loan couldn’t be forgiven because GPB is in default, according to the private equity firm’s complaint filed in New York County’s supreme court. The bank took the step on 9 February, five days after the Securities and Exchange Commission sued the firm in federal court alleging fraud, saying the actions by regulators may affect the firm’s ability to repay, GPB claims.
GPB has denied legal and administrative claims by the SEC and at least eight states involving similar allegations. The regulators assert the firm defrauded more than 17,000 investors in what New York Attorney General Letitia James described as a $1.7bn Ponzi-like scheme in which earlier investors were promised 8% dividends from capital obtained from more recent investors. New York is seeking more than $700m in restitution.
In asking for a temporary restraining order, GPB claims Signature Bank declared the default because of legal actions taken against the firm and its principal owner, David Gentile, which the bank claimed would impair the firm’s ability to repay its loans. In addition to the government-backed loan, GPB borrowed $2m from the bank in a three-year term loan issued in March 2018.
A bank spokeswoman declined to comment on the lawsuit. The bank hasn’t filed a legal response, according to the court’s website.
The company’s PPP loan for more than $1.3m is one of several received by GPB, which has invested through its private-equity funds in car-dealerships, trash haulers and cold-storage warehouses among the roughly 250 businesses it says it owns. GPB said the Signature loan was used to “pay employees and run the business” and that it intends to seek forgiveness for the amount.
Documents released by the Small Business Administration last year showed GPB also obtained loans of more than $1.6m and $861,000 from Wells Fargo & Co., and another for almost $1.1m from Toyota Financial Savings Bank in New York.
Earlier this month, a federal judge in US District Court in the Brooklyn borough of New York appointed an SEC-requested independent monitor to oversee GPB’s operations and determine whether the firm should seek bankruptcy court protection. GPB said in a 25 February court filing that installing the monitor, Joseph T. Gardemal III, a managing director with Alvarez & Marsal Holdings in Washington, coupled with the resignation of Gentile as chief executive, would improve the…