Nicholas Schorsch's former flagship REIT settles with investors for $1 billion

Mr. Schorsch's firm, American Realty Capital, will kick in $225 million as part of the settlement

Sep 9, 2019 @ 5:53 pm

By Bruce Kelly

The company formerly known as American Realty Capital Properties Inc., a real estate investment trust founded by Nicholas Schorsch and rocked by an accounting scandal five years ago, announced a $1 billion settlement Monday.

The company, now known as Vereit Inc., will pay $738.5 million of the class action settlement, according to a press release. American Realty Capital, led by Mr. Schorsch, will pay $225 million, with the company's former chief financial officer Brian Block, who was found guilty of securities fraud in 2017, paying $12.5 million. The auditor for the firm at the time of the scandal, Grant Thornton, will pay $49 million.

Vereit has been embroiled in litigation for almost five years. In October 2014, the company, known by its former ticker symbol ARCP, admitted to an accounting error of $23 million, setting off a selling frenzy of the company's stock.

Lawsuits then followed, with attorneys for investors claiming ARCP had misstated financial metrics in order to inflate financial results and fuel acquisitions.

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The 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 of its previously issued financials, Vereit said in a press release.

ARCP was the flagship real estate investment trust managed by American Realty Capital, a closely held real estate partnership that was controlled by Mr. Schorsch. ARCP at one time had $20 billion in real estate assets, and the firm at least twice bought REITs controlled by American Realty Capital.

"Vereit is pleased to enter into agreements that we expect will bring these litigations to a conclusion," said the company's CEO, Glenn J. Rufrano, in a statement.

"We are pleased to be able to conclude this matter so we can continue to focus on our core mission of serving the interests of and creating value for the shareholders of the REITs that we manage," said a spokesman for American Realty Capital.

"Grant Thornton is pleased to have this matter resolved," a spokesman for the firm said via email.

This summer, Mr. Schorsch and American Realty Capital agreed to pay $60 million in penalties to settle Securities and Exchange Commission charges that he, the firm and a partner wrongfully obtained millions of dollars in connection with REIT mergers managed by the firm.

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