Almost two months after
filing a defamation suit accusing American Realty Capital Properties Inc. of firing her in retaliation for blowing the whistle on fraudulent accounting practices, Lisa McAlister, the company's former chief accounting officer, has withdrawn her suit.
In a stipulation filed late Thursday in New York State court, Ms. McAlister said she was discontinuing the suit “without prejudice," which means that she could refile the suit at a later date.
No further information was provided in the one-page document. The attorney who represented her, Stephen Meister, did not return a call requesting comment.
A source who asked not to be identified but who was familiar with the case, said no money changed hands between the plaintiff and defendants.
The decision to drop the suit provides a boost of confidence for both ARCP, the large, publicly traded real estate investment
trust, and RCS Capital Corp. (RCAP), the holding company that owns a wholesale broker-dealer that markets nontraded REITS and a retail broker-dealer, according to an analyst note from William Katz, who follows RCAP for
Citigroup Global Markets Inc.
Nicholas Schorsch, one of the executives whom Ms. McAlister accused of ordering ARCP's former accounting officers to cover up improper financial reporting, had been a chairman at both companies before resigning from his posts in December.
“While there are no current economic ties between ARCP and RCAP, the prior worries reflect investor concern around: 1) headline risks; 2) belief of wide ranging corporate governance issues given the chairman's dual roles; and, 3) potential legal issues [that] would climb up and over to RCAP,” Mr. Katz wrote. “It would seem the dismissal neutralizes much of these tail risks.”
Friday afternoon in New York, RCAP's stock was up about 6% at $10.86. ARCP was trading relatively flat around $9.30.
ARCP and RCAP still
face an investigation from the secretary of the Commonwealth of Massachusetts, William Galvin. The Securities and Exchange Commission and the FBI have also been investigating ARCP, according to news reports.
Ms. McAlister's suit, filed Dec. 18, had accused Mr. Schorsch and former chief executive officer David Kay of instructing her and former chief financial officer Brian Block to alter quarterly financial results at ARCP. She said that she was terminated and
made a scapegoat for the $23 million ARCP accounting error cover-up that was disclosed in October, according to the initial complaint.
Mr. Kay had
hired former head of enforcement at the SEC, Robert Khuzami, to defend him in the case. Mr. Khuzami did not return a call requesting comment, nor did Lorin Reisner, an attorney for Mr. Schorsch.
