The Real Deal New York

VEREIT pays $85M to settle accounting scandal class-action suits

The plaintiffs are funds tied to firms such as BlackRock and Clearline Capital
By Christian Bautista | October 02, 2018 04:45PM

From left: Glenn Rufrano and Nicholas Schorsch (Credit: iStock)

VEREIT continues to settle accounts with its past.

The firm, which was embroiled in a 2014 accounting scandal under former chief Nicholas Schorsch, agreed to pay $85 million in settlements to resolve eight class-action lawsuits, according to a filing with the Securities and Exchange Commission on Tuesday. The plaintiffs in the cases are investment funds and insurance firms, including entities tied to BlackRock, Clearline Capital Partners and Reliance Standard Life Insurance Company.

VEREIT, then named American Realty Capital, filed a second quarter report in 2014 that understated its losses to meet Wall Street forecasts. This led to the resignation of Schorsch and chief executive David Kay, and an 18-month prison sentence for former Chief Financial Officer Brian Block.

Block, who was charged with six counts of fraud, eventually had his conviction reduced to a $160,000 fine and a lifetime ban on working for a company that deals in securities.

Before the inaccurate filings were exposed, VEREIT was on a tear with acquisitions. Between 2011 to mid-2014, its assets grew from $132 million to $21.3 billion, according to BlackRock’s suit. The biggest piece of that buying spree was rival Cole Real Estate Investment, which was acquired in an $11.2 billion transaction.

The agreements add to the firm’s legal payouts for the year. In June, the firm paid Vanguard $90 million to settle its case.

VEREIT has now has settled claims from entities that hold 24 percent of its common stock, according to SEC filings. The company did not admit to wrongdoing, and it retained the rights to pursue claims against other parties in the matter.

The company previously lodged a $35 million lawsuit against Block, though a federal judge denied that claim.

VEREIT has gotten more leniency from regulators than its own shareholders. In May, the company announced that the United States Attorney’s Office has declined to bring criminal charges relating to the accounting scandal. The company also said that it was negotiating with the SEC to resolve civil charges.

VEREIT declined to comment.