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.