REIT firm pays $8 million SEC fine over misleading accounting

REIT firm pays $8 million SEC fine over misleading accounting
Vereit Inc. agreement follows $1 billion litigation settlement in September
NOV 20, 2019
Vereit Inc., a real estate investment company, agreed to pay an $8 million fine to the Securities and Exchange Commission this week over accounting irregularities dating back five years. The settlement, announced by Vereit Monday, brings to a close the SEC's investigation of suspect accounting practices disclosed in an Oct. 29, 2014, SEC filing by American Realty Capital Properties Inc., which is the former name of Vereit. The company admitted to a $23 million accounting error. That revelation sparked a flurry of lawsuits as the company's stock plummeted. Investors argued that ARCP fudged its accounting numbers in order to inflate financial results and fuel acquisitions. In September, Vereit announced a $1 billion settlement of the class-action lawsuits, which resolved claims related to accounting disclosures ACRP made in October 2014 and March 2015 that restated earlier financial results. Vereit paid $738.5 million of the settlement. The balance was paid by other parties, including American Realty Capital, a former company executive and the company's auditor at the time of the accounting misstatements. [Recommended video: Michael Kitces: IBDs probably can't match zero commissions of Schwab, TD]​ ARCP was the flagship real estate investment trust managed by American Realty Capital, which was headed by its founder, Nicholas Schorsch. Last summer, Mr. Schorsch and American Realty Capital agreed to pay $60 million in penalties to settle SEC charges that he, the company and a partner wrongfully obtained millions of dollars in connection with REIT mergers managed by ARCP. This week's $8 million settlement over the agency's accounting investigation was made with the agency's staff and must be approved by the five SEC commissioners. "It's a significant sum," said Andrew Stoltmann, a Chicago securities attorney. "Any time the SEC fines someone $8 million, it's a head turner. That's a pretty clear indication that [the firm] did something wrong." A spokesman for Vereit declined to comment.

Latest News

Private capital's $1 trillion bet on the American retirement account
Private capital's $1 trillion bet on the American retirement account

From 401(k)s to retail funds, Deloitte sees private equity and credit crossing into mainstream investing on two fronts at once.

Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May
Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May

Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.

Why uncertainty is making behavioral coaching more valuable than ever
Why uncertainty is making behavioral coaching more valuable than ever

Markets have always been unpredictable. What has changed is the amount of information investors are trying to process and the growing role advisors play in helping clients avoid emotional decisions

Florida investor hits real estate syndicator with fraud suit over $750K
Florida investor hits real estate syndicator with fraud suit over $750K

Six apartment deals, one "big account," and $2.7M in undocumented insider loans. Now the lawsuit lands

Chicago’s 'Mr. Finance' posed as advisor in loan scheme, according to Illinois regulators
Chicago’s 'Mr. Finance' posed as advisor in loan scheme, according to Illinois regulators

The Illinois order refers to Brandon Ellington’s investment program as a “Ponzi-like scheme.”

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management