U.S. prosecutors on Thursday announced criminal fraud charges against two former American Realty Capital Properties Inc executives stemming from a 2014 accounting scandal that wiped out roughly $4 billion of the real estate investment trust’s market value.
Former Chief Financial Officer Brian Block, 44, was charged with six criminal counts, including securities fraud, conspiracy and making false statements, according to U.S. Attorney Preet Bharara in Manhattan.
Lisa McAlister, 52, a former chief accounting officer, pleaded guilty on June 29 to four counts, including securities fraud and conspiracy, and is cooperating, Bharara said.
The U.S. Securities and Exchange Commission filed related civil charges against both defendants, seeking fines and officer and director bans.
Block was arrested on Thursday at his home in Hatfield, Pennsylvania. He was released on $1 million bond after appearing in the federal court in Philadelphia, prosecutors said.
The REIT, which has since changed its name to Vereit Inc. and is under new management, declined to comment. Vereit has said in past regulatory filings that it has been cooperating with investigators.
The accounting scandal that rocked American Realty Capital in 2014 represented a significant black eye for the nontraded real-estate investment trust business, which flourished during the years following the 2008 financial crash. Nontraded REITs, which purchased non-flashy commercial property, were popular with small investors because of the relatively high dividends they offered.
But they came under fire from regulators and others because of their high fees and weak disclosure. New regulations have gone into effect in recent years, but the industry’s fundraising efforts have been hurt by the negative publicity.