VEREIT to Pay $8 Million to Settle SEC Investigation of Schorsch-Era Accounting Scandal

VEREIT, Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), has reached an agreement with the Securities Exchange Commission to settle charges stemming from the legacy company’s highly publicized 2014 accounting scandal. The agreement includes paying an $8 million civil penalty, which must be approved 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 in a scandal that shook the industry. Block was sentenced to 18 months in federal prison for his role and is attempting to appeal his conviction, 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.

Last month, the United States District Court for the Southern District of New York granted preliminary approval to settle two lawsuits involving the company, including Witchko v. Schorsch and a $1 billion class action. The court scheduled a hearing on January 21, 2020 to consider final approval of both settlements.

To settle the class action, Vereit has agreed to pay a total of $738.5 million, while AR Global and its principals, ex-chief financial officer Brian Block, and former auditor Grant Thornton are responsible for an additional $286.5 million.

Vereit has previously settled claims totaling $254.4 million, brought by entities that hold approximately 35.3 percent of its stock, including Vanguard Specialized Funds, BlackRock ACS US Equity Tracker Fund, Clearline Capital Partners, among others.

Vereit shares closed at $9.66 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 nearly $15 billion including approximately 3,900 properties and 90.7 million square feet.

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Court Grants Preliminary Approval to Settle $1 Billion Vereit/ARCP Class Action

Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), disclosed that during a hearing on Thursday, the United States District Court for the Southern District of New York granted preliminary approval to settle two lawsuits involving the company, including Witchko v. Schorsch and the $1 billion class action stemming from the legacy company’s highly publicized 2014 accounting scandal. The court scheduled a hearing on January 21, 2020 to consider final approval of both settlements.

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 convicted of fraudulently inflating ARCP’s second quarter 2014 financials by $13 million. Block was sentenced to 18 months in federal prison for his role in the scandal and is attempting to appeal his conviction, while McAlister cooperated with the prosecution.

Vereit has agreed to pay a total of $738.5 million, while AR Global and its principals, ex-chief financial officer Brian Block, and former auditor Grant Thornton are responsible for an addition $286.5 million to settle the class action.

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.

If the court grants final approval, the $1.025 billion class action settlement will resolve the claims by plaintiffs relating to the accounting disclosure made by ARCP in October 2014 and in March 2015 regarding the restatement of certain previously issued financials.

Vereit will pay $738.5 million, while former external manager AR Global and its principals will pay $225 million, former CFO Block is responsible for $12.5 million, and the firm’s auditor at the time of the scandal, Grant Thornton, is on the hook for $49 million.

Three additional derivative actions remain pending in courts other than the Southern District of New York. The company expects to seek dismissal of these actions based on the settlement of the derivative action Witchko v. Schorsch, which received preliminary approval by the SDNY court.

Vereit shares closed at $9.97 on Thursday.

Vereit has previously settled claims totaling $254.4 million, brought by entities that hold approximately 35.3 percent of its stock, including Vanguard Specialized Funds, BlackRock ACS US Equity Tracker Fund, Clearline Capital Partners, Eton Park Fund, HG Vora Special Opportunities Master Fund, Pentwater Equity Opportunities Master Fund, PIMCO Diversified Income Fund, Reliance Standard Life Insurance Co, and Twin Securities, Archer Capital Master Fund, Atlas Master Fund, Fir Tree Capital Opportunity Master Fund, and Cohen & Steers Institutional Realty Shares.

VEREIT owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S., with total real estate investments of $15 billion including approximately 4,000 properties and 90.6 million square feet.

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Vereit Settles Additional ARCP-Related Lawsuits

Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), has entered into additional settlement agreements with shareholders stemming from the legacy company’s highly publicized 2014 accounting scandal where executives inflated the company’s quarterly financials by $13 million. ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital).

The shareholders have decided not to participate as class members in the class action pending in the United States District Court for the Southern District of New York after the shareholders’ counsel approached the company seeking a resolution of their potential claims.

The shareholders have agreed to release claims against Vereit related to the purchase or sale of the company’s securities during the period at issue in the lawsuit in exchange for $12.2 million. The settlement agreements do not contain any admission of liability, wrongdoing or responsibility by any of the parties.

Vereit has now settled claims to the tune of $254.4 million, brought by entities that hold approximately 35.3 percent of its stock. The company reached settlement agreements with Vanguard for $90 million in June 2018, eight plaintiffs for $85 million in October 2018, and another four plaintiffs for $42.5 million in October 2018. Most recently in February 2019, Vereit settled with an undisclosed number of shareholders for $15.7 million.

ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital) including William Kahane, Brian Block, Michael Weil, and Peter Budko. Block and former chief accounting officer Lisa McAlister were convicted of fraudulently inflating ARCP’s second quarter 2014 financials by $13 million. Block was sentenced to 18 months in federal prison for his role in the scandal and is attempting to appeal his conviction, 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.

Multiple securities class action complaints were filed against the company and its officers in the United States District Court for the Southern District of New York.

Vereit previously settled with Vanguard Specialized Funds, BlackRock ACS US Equity Tracker Fund, Clearline Capital Partners, Eton Park Fund, HG Vora Special Opportunities Master Fund, Pentwater Equity Opportunities Master Fund, PIMCO Diversified Income Fund, Reliance Standard Life Insurance Co, and Twin Securities, Archer Capital Master Fund, Atlas Master Fund, Fir Tree Capital Opportunity Master Fund, and Cohen & Steers Institutional Realty Shares.

Vereit maintains the ability to pursue claims against third parties, including claims for contribution for amounts paid in the settlements.

Vereit shares opened at $8.28 and closed at $8.17 on Tuesday.

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The company has total real estate investments of $15.6 billion including approximately 4,000 properties and 95 million square feet.

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Vereit Reaches Settlement with Additional Shareholders

Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), has agreed to settle claims with additional shareholders stemming from the legacy company’s highly publicized 2014 accounting scandal. ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital).

The shareholders have decided not to participate as class members in the class action pending in the United States District Court for the Southern District of New York after the shareholders’ counsel approached the company seeking a resolution of their potential claims.

The shareholders have agreed to release claims against Vereit related to the purchase or sale of the company’s securities during the period at issue in the class action lawsuit in exchange for $15.7 million. The settlement agreements do not contain any admission of liability, wrongdoing or responsibility by any of the parties.

Vereit has now settled claims to the tune of $233.2 million, brought by entities that hold approximately 33.5 percent of its stock. The company reached settlement agreements with Vanguard for $90 million in June 2018, eight plaintiffs for $85 million in October 2018, and another four plaintiffs for $42.5 million in October 2018.

ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital) including William Kahane, Brian Block, Michael Weil, and Peter Budko. Block and former chief accounting officer Lisa McAlister were convicted of fraudulently inflating ARCP’s second quarter 2014 financials by $13 million. Block was sentenced to 18 months in federal prison for his role in the scandal and is attempting to appeal his conviction, 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.

Multiple securities class action complaints were filed against the company and its officers in the United States District Court for the Southern District of New York.

Vereit previously settled with Vanguard Specialized Funds, BlackRock ACS US Equity Tracker Fund, Clearline Capital Partners, Eton Park Fund, HG Vora Special Opportunities Master Fund, Pentwater Equity Opportunities Master Fund, PIMCO Diversified Income Fund, Reliance Standard Life Insurance Co, and Twin Securities, Archer Capital Master Fund, Atlas Master Fund, Fir Tree Capital Opportunity Master Fund, and Cohen & Steers Institutional Realty Shares.

Vereit maintains the ability to pursue claims against third parties, including claims for contribution for amounts paid in the settlements.

Vereit shares opened at $8.21 and closed at $8.33 on Monday.

Vereit is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The company has a total asset book value of $14.1 billion including approximately 4,000 properties and 93.9 million square feet.

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Vereit to Settle Four ARCP Lawsuits for $42.5 Million

Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties (ARCP), has agreed to settle another batch of lawsuits for $42.5 million which stem from the legacy company’s highly publicized 2014 accounting scandal.

The four plaintiffs in the settlement include Archer Capital Master Fund, Atlas Master Fund, Fir Tree Capital Opportunity Master Fund, and Cohen & Steers Institutional Realty Shares.

Vereit has now settled claims to the tune of $217.5 million, brought by entities that hold approximately 31 percent of its stock. The company reached a settlement agreement with Vanguard for $90 million in June, and another earlier this month with eight plaintiffs for $85 million.

ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital) including William Kahane, Brian Block, Michael Weil, and Peter Budko. Block and former chief accounting officer Lisa McAlister were convicted of fraudulently inflating ARCP’s second quarter 2014 financials by $13 million. Block was sentenced to 18 months in federal prison for his role in the scandal and is attempting to appeal his conviction, 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.

Multiple securities class action complaints were filed against the company and its officers in the United States District Court for the Southern District of New York.

In the latest tranche of settlements, the four plaintiffs agreed to dismiss all claims against Vereit and the other defendants with prejudice in exchange for $42.5 million. The settlement agreements do not contain any admission of liability, wrongdoing or responsibility by any of the parties.

Vereit previously settled with Vanguard Specialized Funds, BlackRock ACS US Equity Tracker Fund, Clearline Capital Partners, Eton Park Fund, HG Vora Special Opportunities Master Fund, Pentwater Equity Opportunities Master Fund, PIMCO Diversified Income Fund, Reliance Standard Life Insurance Co, and Twin Securities.

Vereit’s shares closed at $7.37 on Monday.

Vereit is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The company has a total asset book value of $14.3 billion including approximately 4,000 properties and 94.6 million square feet.

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Vereit to Settle Eight ARCP Lawsuits for $85 Million

Publicly traded REIT Vereit Inc. (NYSE: VER) and its operating partnership have agreed to pay $85 million to settle previously disclosed litigations stemming from an accounting scandal that occurred during the American Realty Capital Properties (ARCP) era.

ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital) including William Kahane, Brian Block, Michael Weil, and Peter Budko.

Block and former chief accounting officer Lisa McAlister were convicted of fraudulently inflating ARCP’s second quarter 2014 financials by $13 million to make it appear that it had met certain targets, which it had not.

Block was sentenced to 18 months in federal prison for his role in the scandal and is attempting to appeal his conviction, while McAlister cooperated with the prosecution.

More than $3 billion of the company’s market value was lost after the accounting scandal was made public, and triggered a wave of C-suite resignations, including Schorsch himself. Following the scandal, the company replaced its board members and senior management team and rebranded as Vereit – a blend of veritas, the Latin word meaning truth, and REIT.

Multiple securities class action complaints were subsequently filed against the company and its officers in the United States District Court for the Southern District of New York. Plaintiffs include BlackRock ACS US Equity Tracker Fund, Clearline Capital Partners, Eton Park Fund, HG Vora Special Opportunities Master Fund, Pentwater Equity Opportunities Master Fund, PIMCO Diversified Income Fund, Reliance Standard Life Insurance Co, and Twin Securities.

The plaintiffs agreed to dismiss all claims against Vereit and the other defendants with prejudice, and Vereit will pay $85 million to settle the claims. The settlement agreements do not contain any admission of liability, wrongdoing or responsibility by any of the parties.

“Vereit is pleased to have brought the actions to a conclusion,” the company said in a statement. “Including the previously announced settlement with Vanguard Specialized Funds and other Vanguard funds, the company has now settled claims brought by approximately 24 percent of Vereit’s outstanding shares of common stock and swaps referencing common stock held at the end of the period covered by the various pending shareholder actions for a total of $175 million.”

Vereit’s shares closed at $7.20 on Tuesday.

Vereit, which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S., has a total asset book value of $14.3 billion including approximately 4,000 properties and 94.6 million square feet.

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Larry Roth Launches New Consulting Firm, Partners with Berkshire Global Advisors

Financial services industry veteran Larry Roth has launched RLR Strategic Partners, a growth consultancy focused on the retail wealth management and asset management spaces. In addition, RLR has partnered with investment bank Berkshire Global Advisors to provide mergers and acquisitions advisory solutions for its clients.

According to the company, RLR works in collaboration with the executive leadership teams, boards of directors, and advisory boards of wealth management businesses across the country in setting growth goals, and then developing and implementing strategies to reach those goals. As part of its strategy offerings, the company provides governance to publicly-traded and closely-held firms seeking to build out or enhance their boards of directors.

“The work that we are doing at RLR is ultimately all geared towards helping the wealth management space create significant new value by serving the crucial role it is meant to play in our society,” said Roth. “At its best, the wealth management industry connects Main Street and Wall Street, supports the achievement of long-term financial goals for people across the net worth spectrum, and drives better life outcomes for both the well-to-do, as well as those with more modest means.”

Prior to establishing RLR Strategic Partners, Roth served as CEO of AIG Advisor Group, as well as CEO of Cetera Financial Group, two of the largest independent financial advice firms in the industry.

Roth was at the helm during the pre-planned bankruptcy of Cetera’s former parent company, RCS Capital Corp in 2016. Cetera later reemerged as an independent, privately held organization with no ties to RCAP’s founder and former chairman Nicholas Schorsch.

A CPA and licensed attorney, Roth received his juris doctor from the University of Detroit’s School of Law and a bachelor’s degree from Michigan State University. He also graduated from the owner/president management program at Harvard University’s Graduate School of Business Administration. He holds FINRA Series 7, 24, 63 and 79 registrations.

Roth was recently appointed to the board of New York-based investment boutique Oppenheimer & Co. Inc.

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Cetera Acquired by Private Equity Firm Genstar Capital

After months of speculation, Cetera Financial Group, the second largest independent broker-dealer in the nation, has agreed to sell a majority stake of its business to private equity firm Genstar Capital, with Cetera’s leadership team maintaining “a meaningful ownership position,” the company said. The transaction is subject to regulatory approval and is expected to close in the late third quarter of 2018. Terms of the deal were not disclosed.

Cetera network of six independent broker-dealer firms is comprised of Cetera Advisors, First Allied Securities, Brokerage Services, Cetera Advisor Networks, Cetera Financial Institutions, and Cetera Financial Specialists.

Going forward, Cetera will continue to operate under a multi-affiliation structure, through two channels – traditional and specialty – that will serve independent advisor businesses and financial institutions.

“Working alongside Genstar, our entire organization will continue to serve our advisor community by advancing our Advice-Centric Experience, which envisions a profession driven by high-caliber, planning-based advice for clients,” said Robert “RJ” Moore, CEO of Cetera. “This is a unique time in our profession, when the need and desire for financial advice is at its greatest. We believe there continues to be significant opportunities for Cetera to be a compelling leader in the delivery of that advice.”

In addition to Moore, the new board will include Genstar managing partner Tony Salewski and vice president Sid Ramakrishnan, as well as Ben Brigeman, former executive vice president for Charles Schwab & Co., and Hal Strong, former vice chairman of Russell Investments.

Earlier this year, Bloomberg and other industry publications reported that Cetera was exploring a potential sale that could command up to $1.5 billion and had tapped investment banks to explore its options.

In February, Cetera disclosed a capital structure review and confirmed the retention of Goldman Sachs & Co. LLC to support the review process. At the time, the company said that the objective of the review was to optimize its capital structure, lower costs, and maximize continued investments.

Cetera became an independent, privately held organization following the pre-planned bankruptcy of its former parent company, RCS Capital Corp in 2016. Moore took over as chief executive officer in September 2016 after the departure of Larry Roth, who saw Cetera through the bankruptcy process.

RCS Capital was hit hard after it was revealed in October 2014 that American Realty Capital Properties, another company controlled by RCAP founder Nicholas Schorsch, intentionally left a $23 million accounting error uncorrected. The bankruptcy terms included a recapitalization by RCS Capital’s first and second lien lenders.

Genstar Capital is based in San Francisco and has approximately $10 billion in assets under management and targets investments focused on targeted segments of the financial services, industrial technology, healthcare and software industries.

Cetera is the nation’s second-largest independent financial advisor network with nearly 8,000 advisors, as well as a retail service provider to the investment programs of banks and credit unions.

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Vereit Settles with Vanguard Over ARCP’s 2014 Accounting Scandal

Vereit Inc. (NYSE: VER), a publicly traded REIT formerly known as American Realty Capital Properties, has agreed to pay $90 million to Vanguard Specialized Funds to settle a lawsuit over the company’s highly publicized accounting scandal made public in October 2014.

ARCP was founded by Nicholas Schorsch and his partners at AR Global (formerly AR Capital) including William Kahane, Brian Block, Michael Weil, and Peter Budko.

Block and former chief accounting officer Lisa McAlister were accused of fraudulently inflating ARCP’s second quarter 2014 adjusted funds from operations by $13 million hours before filing the results with the SEC to make it appear that it had met certain targets when, in fact, it had fallen short.

More than $3 billion of the company’s market value was destroyed following the fraud revelation, which triggered a wave of C-suite resignations, including that of Schorsch himself.

According to the Vanguard lawsuit, “the company’s stock price plummeted by over 36 percent…causing the plaintiffs and other investors to lose billions of dollars.” Vanguard’s holdings accounted for approximately 13 percent of Vereit’s outstanding shares of common stock.

Following the scandal, American Realty Capital Properties replaced its board members and senior management team and rebranded the company as Vereit – a blend of veritas, the Latin word meaning truth, and REIT.

Approximately one year after the accounting scandal was revealed, Vanguard filed its lawsuit against Vereit, and named a number of current and former AR Global-related entities and executives, including Schorsch, Block, McAlister, AR Capital, RCS Capital Corp. (NYSE: RCAP), former ARCP president David Kay, and former chief operating officer Lisa Beeson.

Vanguard has agreed to dismiss all claims against Vereit and the other defendants with prejudice in exchange for the $90 million sum. While the settlement agreement contains mutual releases by both companies, Vereit retains the right to pursue claims against the other defendants in the action, including claims for contribution for amounts paid in the settlement. The agreement does not contain any admission of liability, wrongdoing or responsibility by any of the parties.

“Vereit is pleased to have brought Vanguard’s lawsuit to a conclusion,” the company said in a statement. “In light of the fact that the Vanguard lawsuit was proceeding in a different federal district court than the other related cases pending against Vereit, [we believe] that if the Vanguard lawsuit continued, it could find itself facing successive trials on similar factual and legal issues that could have subjected Vereit to increased legal risk. Based on these factors and others, we believe that the settlement with Vanguard is in [our] best interest.”

Block is currently awaiting an 18-month federal prison sentence for his role in the accounting fraud, while McAlister cooperated with the prosecution and testified against her former boss. Neither Schorsch nor any other AR Global partner has been charged in the ARCP or other ARC-related scandals.

Vereit’s shares opened at $7.18 Monday morning and closed at $7.20, an increase of 0.28 percent.

Vereit is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The company has a total asset book value of $14.5 billion including approximately 4,100 properties and 94.7 million square feet.

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LPL and Advisor Group Parent Among Potential Cetera Buyers

LPL Financial and Advisor Group-owner Lightyear Capital are showing interest in buying Cetera Financial Group’s network of six independent broker-dealer firms, according to a report published yesterday by Investment News’ Bruce Kelly.

Citing anonymous sources close to the matter, Kelly reported that both firms signed confidential nondisclosure agreements to “access Cetera’s proprietary information in order to perform due diligence for a possible merger.”

Earlier this year, Bloomberg and other industry publications reported that Cetera was exploring a potential sale that could command up to $1.5 billion and had tapped investment banks to explore its options.

Shortly thereafter, Cetera disclosed a capital structure review and confirmed the retention of Goldman Sachs & Co. LLC to support the review process. At the time, the company said that the objective of the review was to optimize its capital structure, lower costs, and maximize continued investments.

Cetera’s broker-dealer network is comprised of Cetera Advisors, First Allied Securities, Brokerage Services, Cetera Advisor Networks, Cetera Financial Institutions, and Cetera Financial Specialists.

Cetera became an independent, privately held organization following the pre-planned bankruptcy of its former parent company, RCS Capital Corp in 2016. Robert Moore took over as chief executive officer in September 2016 after the departure of Larry Roth, who saw Cetera through the bankruptcy process.

RCS Capital was hit hard after it was revealed in October 2014 that American Realty Capital Properties, another company controlled by RCAP founder Nicholas Schorsch, intentionally left a $23 million accounting error uncorrected. The bankruptcy terms included a recapitalization by RCS Capital’s first and second lien lenders.

Cetera Financial Group is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.

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