SEC Accepts VEREIT Settlement Over Schorsch-Era Accounting Scandal
The Securities Exchange Commission has agreed to accept a settlement offer from Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), to settle charges stemming from the legacy company’s highly publicized 2014 accounting scandal.
The Securities Exchange Commission has agreed to accept a settlement offer from Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), to settle charges stemming from the legacy company’s highly publicized 2014 accounting scandal.
The agreement, which includes paying an $8 million civil penalty, was first announced last November, pending approval by the SEC’s Commissioners.
ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital), including Brian Block, William Kahane, Michael Weil, and Peter Budko.
Block and former chief accounting officer Lisa McAlister were previously convicted of fraudulently inflating ARCP’s second quarter 2014 financials by $13 million. Block was later convicted and sentenced to 18 months in federal prison for his role, while McAlister cooperated with the prosecution.
After the accounting misdeed was revealed, ARCP’s market value dropped by more than $3 billion and Schorsch eventually resigned as executive chairman. ARCP then replaced its board members and senior management team and rebranded as Vereit – a blend of veritas, the Latin word meaning truth, and REIT.
In determining to accept the offer, the SEC said that it considered ARCP’s self-reporting, public disclosures, cooperation, and remediation in the wake of the scandal. In October 2014, ARCP’s audit committee “promptly self-reported” to the SEC and disclosed to investors that the company had inflated its AFFO and left the erroneous numbers uncorrected.
The SEC also indicated that ARCP’s audit committee continued its investigation and provided timely updates to the SEC, voluntarily produced compilations of documents and other information at the SEC’s request, disclosed relevant factual information, and facilitated making its employees available for interviews.
In addition, the SEC claims that ARCP undertook a series of remedial measures, including reforming policies, procedures, and replacing its senior executives, board of directors, and numerous other employees.
Vereit shares closed at $6.72 on Thursday.
Vereit owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S., with total real estate investments of $14.8 billion including approximately 3,900 properties and 89.5 million square feet.
