Vereit pays Vanguard $90M over 2014 accounting scandal

REIT announces settlement deal

Jun.June 11, 2018 12:50 PM

Amercan Realty Capital CEO Nick Schorsch and Vereit CEO Glenn Rufrano (Credit: Wikipedia)

When American Realty Capital Properties changed its name to Vereit in 2015, the company hoped to leave its questionable past behind. But a lawsuit by Vanguard Group funds brought the skeletons out of the closet.

On Monday, Vereit announced that it agreed to pay $90 million to settle the suit over the real estate investment trust’s 2014 accounting scandal.

Vanguard Specialized Funds, along with other Vanguard funds, claimed investors lost billions after the scandal, which sent ARCP’s stock down more than 35 percent.

In October 2014, the REIT announced that its quarterly reports had overstated earnings and understated losses, and that these errors were intentionally covered up.  Two months later the firm’s founder Nicholas Schorsch and its CEO David Kay resigned from their positions.

Last year, ARCP’s former chief accounting officer testified that Schorsch was involved in talks over an inflated earnings report.

In its lawsuit, Vanguard claimed that Schorsch tried to “rob from shareholders and to give to himself and his friends,” according to Courthouse News.

Vanguard declined to comment on the settlement. In a filing with the Securities and Exchange Commission, Vereit said it “retains the right to pursue any and all claims against the other defendants in the Action and/or third parties, including claims for contribution for amounts paid in the settlement.” Schorsch was also named as a defendant in the lawsuit.

Vereit’s shares traded at $7.25 Monday morning, down from a peak of $17.81 in May 2013.

Related Articles

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Commercial loans expected to suffer because of the pandemic (Credit: iStock)

March saw fewer CMBS delinquencies. That is likely to change: Fitch

(Credit: iStock)

Thousands of CRE borrowers call on banks for debt relief

Banks, funds, mortgage REITs, and agencies like Fannie Mae and Freddie Mac have all begun adjusting their lending approach in face of the economic downturn (Credit: iStock)

These are the sectors where real estate lending is still happening: report

Angel Oak Cos. CEO Michael Fierman and Flagstar Bancorp Inc. CEO Alessandro DiNello (Credit: Angel Oak, Flagstar, iStock)

Mortgage market dries up for unconventional home loans

A WeWork office (Credit: Alex Tai/SOPA Images/LightRocket via Getty Images)

WeWork offers rent discounts as incentive to secure long-term leases

Gary Barnett, Central Park Tower, and the Tel Aviv Stock Exchange Bull (Credit: Wikipedia, iStock)

Extell’s Israeli bonds put on downgrade watch