SEC Settles Fraud Charges with Vereit
June 23, 2020
File No. 3-19831
June 23, 2020 - The Securities and Exchange Commission charged VEREIT, Inc., formerly known as American Realty Capital Properties, Inc., a publicly-traded real estate investment trust (REIT) with intentionally overstating a key performance metric. VEREIT has agreed to settle the charges and pay an $8 million penalty that will be distributed to harmed investors.
The SEC's order finds that former senior company executives falsely reported and manipulated the calculation of the company's adjusted funds from operations, or AFFO, a key non-GAAP performance measure, from at least May 2014 until the company's initial disclosure of the misconduct on October 29, 2014. The order finds that the company used AFFO when providing earnings guidance and that management, analysts and investors relied on AFFO to assess the company's financial performance.
VERIET's former senior executives, Brian S. Block and Lisa McAlister, previously settled SEC charges in connection with the fraud. They were also criminally charged by the U.S. Attorney's Office for the Southern District of New York. Block was convicted following trial, and McAlister pleaded guilty in the criminal case.
Without admitting or denying the findings, VEREIT consented to the SEC's order, which finds that VEREIT violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the reporting and books and records provisions of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder, imposes an $8 million penalty, and includes a cease-and-desist order. The order also creates a Fair Fund to distribute the penalty to harmed investors.
The SEC's investigation was conducted by Victor Suthammanont, Karen E. Willenken, Hane Kim, Nancy A. Brown, and Wendy B. Tepperman, with assistance from Scott B. York, and was supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, and the Public Company Accounting Oversight Board.