Prebul Auto Group President Joe Prebul will head to New York to face 11 federal counts of wire fraud, accused of swindling a relative out of almost $7 million.
Mr. Prebul - owner of a number of car dealerships in Southeast Tennessee and North Georgia - was arrested Tuesday morning in Hamilton County and appeared in Magistrate Judge Bill Carter's courtroom in the afternoon to face allegations that he promised to invest money in a Chrysler account for a New York relative and instead spent it on personal and business expenses.
The relative, according to the complaint filed in the Southern District of New York by criminal investigator Scott Romonowski, owns several businesses in the music industry and gave Mr. Prebul about $6.8 million to invest.
From about 1995 to July 2008, the relative transferred millions of dollars by wire or mail to Mr. Prebul in Tennessee for the purposes of investing the money, the complaint states. More than $14 million was wired from New York to Chattanooga between Jan. 11, 2006, and May 2, 2008, according to the complaint.
Mr. Prebul did not comment when he left the federal courthouse here Tuesday.
Officials at two Chattanooga Prebul auto dealerships declined comment on Mr. Prebul's arrest. A sales official at Prebul Kia on Chapman Road, who declined to give her name, said all Prebul dealerships will continue to operate "business as usual."
WHERE THE MONEY WENT
The relative received confirmation e-mails and monthly statements acknowledging the money was received and was earning interest, and Mr. Prebul returned money to the relative whenever asked to do so, according to the complaint.
In a January, 2006, e-mail to potential investors, Mr. Prebul said his account was drawing more than 6 percent interest per month and all the money could be redeemed at any time, according to the complaint.
The money was used to offset loans Chrysler made to Prebul Auto Group, as well as for business expenses, real estate properties, credit card accounts, family vacations, golf lessons and tournaments, private chartered planes and five-star hotel accommodations, according to the complaint. From December, 2006, to December, 2008, Mr. Prebul and his wife totaled about $2 million in expenses on their credit cards, the complaint states.
In August, 2008, Mr. Prebul told the relative that the money was a loan, not an investment, according to the complaint. Mr. Prebul also told the relative that he owed the relative more than $7.6 million when promised interest was factored in, the complaint states.
Since 2005, Prebul Auto Group has lost a total of at least $1.6 million, according to the complaint. At one point, Mr. Prebul owned 11 dealerships. He closed his dealership in Dayton, Tenn., in December, 2008, and consolidated the stock with his Chattanooga dealership. He closed his Ringgold, Ga., dealership in January, records show.
Conditions of release
Mr. Prebul was released from custody Tuesday on a $2 million promise-to-appear bond, meaning that he will not pay any money unless he violates conditions of his bond or does not attend mandatory court appearances.
His attorneys, Wayne Peters and Charles Gearhiser, have until Feb. 24 to choose a date for a preliminary hearing in New York. Other conditions of the bond stipulate that Mr. Prebul "not encumber or liquidate any personal property," Judge Carter said.
Mr. Peters argued that Mr. Prebul would need to spend money to travel to New York and retain counsel there, since neither he nor Mr. Gearhiser is licensed to practice in New York.
U.S. Attorney Gary Humble said he had no problem with Mr. Prebul spending money from his accounts, but he didn't want Mr. Prebul selling personal property for profit.
"That would be restitution money that's really not his to be spending," Mr. Humble said, adding that Merrill Lynch had frozen Mr. Prebul's account.
Other terms of Mr. Prebul's release included not using a twin-engine plane leased by Carolex Air LLC or his personal powered glider.
Along with his dealerships, Mr. Prebul also is a director of CapitalMark Bank & Trust. Bank officials said they could not comment other than to say the allegations do not involve CapitalMark.
"CapitalMark Bank & Trust is financially sound, and the allegations against Mr. Prebul do not materially affect the bank in any way," Craig Holley, chairman, president and CEO of CapitalMark, said in an e-mailed statement.
Mr. Prebul owns Prebul Kia, Prebul Chrysler Jeep Dodge, Prebul Volvo and Prebul Infinity in Chattanooga. In Dalton, Ga., he owns Prebul Motors, which sells Buick, Cadillac, GMC, Kia, Mazda and Pontiac brands.
In December, Mr. Prebul closed his Dayton-based Prebul Chrysler Jeep Dodge.
Staff writers Dave Flessner, Amy Williams and Brian Lazenby contributed to this story.