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.

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