On June 30, 2017, the former CFO of American Capital Properties Inc. (“ARCP”), Brian Block, was found guilty of securities fraud and related crimes in connection with reporting false numbers in quarterly filings with the Securities and Exchange Commission (“SEC”). The verdict was handed down following a nearly three-week trial held in the U.S. District Court for the Southern District of New York. A jury returned the verdict less than a day after closing arguments. Mr. Block was convicted of one count of securities fraud, two counts of filing false reports with the SEC, two counts of filing false certifications, and one count of conspiracy.
In 2014, ARCP was set to file its financial statement for the second quarter, when an employee informed Block and Chief Accounting Officer Lisa McAlister that there was a methodological error in some of the firm’s calculations and that its average funds from operations (or AFFO, a key financial metric for real estate investment trusts) was overstated by roughly $0.03 per share. Despite this guidance, no corrective action was taken to address the issue of overstated AFFO. On October 29, 2014, ARCP shares plunged as much as 37% — effectively wiping out roughly $4 billion in market value — after the company publicly stated that certain of its employees had concealed accounting errors.
Following the $23 million accounting scandal, ARCP, a non-traded REIT sponsor, changed its name to VEREIT (from the Latin word “veritas” for truth).