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.
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.
