Investors sue American Realty Capital over accounting errors

More trouble: SEC is looking into filings that inflated earnings
October 31, 2014 11:05AM

Just days after Nicholas Schorsch’s American Realty Capital Properties admitted to possible accounting fraud, investors in the company filed a class-action lawsuit.

The complaint, filed by attorney Jeffrey Block of Boston-based Block & Leviton, is expected to seek millions of dollars in compensation.

At least one other lawsuit has been filed against American Realty Capital, and the Securities and Exchange Commission is looking to investigate matters.

“We think there were clear violations of SEC laws, and we think shareholders should be compensated for the very substantial losses they have suffered as a result,” Jeffrey Block told Crain’s. “We think this is fraud.”

Brian Block, chief financial officer who is not related to Jeffrey, and Lisa McAlister, chief accounting officer, left the REIT Wednesday and were replaced, as previously reported. The stock fell as much as 30 percent that day.

An audit committee’s probe found that Block intentionally did not fix the mistakes. The errors resulted in an overstatement of the year’s adjusted funds from operations and understatement of net losses through late June. [Crain’s]Mark Maurer