Brian Block, former chief financial officer of American Realty Capital Properties, was denied a new trial after being convicted of intentionally reporting false numbers in the company’s 2014 quarterly filings with the U.S. Securities and Exchange Commission.
Block’s June 2017 jury trial found him guilty on all counts, including one count of securities fraud, two counts of filing false reports to the SEC, two counts of filing false certifications and one count of conspiracy.
In November 2017, Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York sentenced Block to 18 months in prison, followed by three years’ supervised release, and imposed a $100,000 fine and a $600 mandatory special assessment. Block is attempting to appeal the verdict in the Second Circuit Court of Appeals.
Block’s motion for a new trial centered on claims that the Justice Department failed to disclose certain impeachment information relating to one of their key witnesses Ryan Steel that it became aware of during the trial. Steel, the former director of financial reporting at ARCP, was granted immunity by federal prosecutors in exchange for his cooperation.
The undisclosed evidence pertained to a conversation Steel had in 2015 with ARCP executive, William Gribbin, who blew the whistle on ARCP to the SEC and also testified at Block’s trial.
During a deposition in a civil case in May 2018, nearly a year after Block’s trial, Steel was asked if Gribbin ever offered to share a portion of the financial award that he might receive for his SEC whistleblower program submission.
While “having a couple drinks at a bar,” Steel claims that Gribbin “referenced how bad he felt for me, that he couldn’t believe this happened to me, and that he would take care of me. He didn’t necessarily ever specify what that meant or bring it up again. So, there was maybe a discussion of that, but there has never been a true offer or follow-up.”
Block had not been made aware of this conversation between Steel and Gribbin previously, and the government represented that it had learned about the conversation from Steel on June 20, 2017―during the trial but after Steel had testified.
At a November 2018 evidentiary hearing, Gribbin testified that his offer to Steel was one of financial assistance; “I told him since he’s out of work, if I came into money I could help him out.” Steel declined the offer.
Block’s attorneys claim that the DOJ’s failure to disclose what it knew about the Steel-Gribbin conversation during the trial violated the prosecution’s duties and deprived Block of a fair trial. With that information, Block argues that his counsel could have impeached Steel with a potential financial incentive to incriminate him.
Judge Oetken concluded that although the information was impeachable, he claimed that “there is no reasonable probability that its disclosure would have made a difference in the verdict.”
Claiming that the impeachment effect of the testimony would have been relatively minor in the context of all the trial evidence, Judge Oetken said, “There are two overarching considerations that make it clear to the court that the verdict would have been the same if Steel had been impeached by evidence of his 2015 conversation with Gribbin. The first is that there was corroborating evidence of virtually every important element of Steel’s testimony. The second is that very little of that testimony was actually disputed by Block.”
Block was a founding partner of American Realty Capital, later known as AR Capital, along with chairman and CEO Nicholas Schorsch, Michael Weil, Peter Budko and William Kahane. Following the various scandals that commenced with the ARCP accounting cover-up for which Block was charged, the company formed AR Global – where Block, Schorsch, Weil, Budko and Kahane are all presumed to continue in their roles as partners.
Schorsch has not been named in any federal indictments regarding the ARCP affair or other AR Global-related scandals.
American Realty Capital Properties is a publicly traded real estate investment trust now known as Vereit (NYSE: VER), which has no ties to the legacy company.