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Articles Tagged with AR Capital

Nicholas Schorsch’s former real estate investment trust (REIT) American Realty Capital Properties Inc. (ARCP) has arrived at a $1B settlement with investors who sued over the company’s accounting scandal that led to inflated financial results five years ago. Now called Vereit, the REIT will pay $738.5M of the class action securities fraud settlement, while Schorsch’s American Realty Capital (AR Capital) will pay $225M. American Realty Capital Property’s ex-CFO Brian Block will pay $12.5M of the settlement. Meantime, Grant Thornton, the firm’s auditor during the period of the scandal, will pay $49M.

American Realty Capital Properties admitted to a $23M accounting error in late 2014. After ARCP restated its financials, investors sold their shares, causing a $3B drop in the REIT’s value. At one point, ARCP held $20B in assets.

Investors sued, accusing the REIT of incorrectly stating financials so as to spur acquisitions and inflate financial results. Two years ago, Block pleaded guilty to securities fraud related to the accounting misstatements.

A $60M settlement has been reached between The US Securities and Exchange Commission (SEC) and AR Capital, the real estate investment trust (REIT) manager’s founder Nicholas Schorsch, and American Realty Capital Properties Inc. (ARCP) ex-CFO Brian Block. The three of them are accused of “wrongfully obtaining” millions of dollars related to two mergers involving REITS that AR Capital managed and sponsored.

According to the regulator’s complaint, between the latter part of 2012 and the beginning of 2014, AR Capital took steps so that ARCP, a publicly traded REIT, would merge with American Realty Capital Trust III and American Realty Capital Trust IV, two non-traded REITS that were publicly held. Schorsch was the principal owner and CEO of all three REITs during the time of the merger, while Block was the CFO and a minority shareholder.

The Commission contends that without their board’s permission, the REIT manager, Schorsch, and Block “inflated an incentive fee” during the mergers, which made it possible for them to get another $2.92M in ARCP operating partnership units as a portion of their “incentive-based” compensation.” The SEC is also accusing the three defendants of “wrongfully obtaining” at least $7.2M in charges that were not supported from the sale and asset purchase agreements that were related to the mergers.

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