The New York City Retirement Systems and TIAA-CREF have joined other institutional investors in suing American Realty Capital Properties (ARCP). They contend that the real estate investment trust violated federal securities laws when it allegedly made misleading and false statements that misrepresented the company’s business, as well as took part in a scam to fool the market and artificially inflate American Realty securities prices.
The claims are related to a $23 million accounting error that REIT made during last year’s first stated quarters, misstating the company’s adjusted operation funds. While ARCP eventually disclosed the mistakes, the plaintiffs claim that the company’s senior executives did not at first correct the error when it was discovered. The institutional investors believe that this was because executives wanted to get class members to buy American Realty securities at inflated prices.
TIAA-CREF and the $158.7 billion pension fund are seeking lead plaintiff class action securities status for their institutional investor fraud lawsuit.
Also suing ARCP with their securities fraud case are lead plaintiffs Ohio State Teachers’ Retirement System and Ohio State Teachers’ Retirement System. They claim that they lost $7.5 million because of the same alleged fraud.
Credit rating agency Standard & Poor’s recently said its ratings of ARCP—a BB+ issue level rating and a BB corporate credit rating—are still on CreditWatch and that there are negative implications. Board investigations and an external auditor review of the REITs financial statements are pending.
In December, Moody’s Investors Service (MCO) gave ARCP a Ba1 junk status, again in the wake of the accounting debacle and the forced executive turnover. That a number of financial firms including LPL Financial (LPLA), Charles Schwab (SCHW), Fidelity, AIG Advisor Group, Securities America, National Planning Group, and even ARCP founder and chairman Nicholas Schorsch’s Cetera Financial Group suspended trading in nontraded real estate investment trusts affiliated with Schorsch did not help.
The accounting error was a huge blow to ARCP, forcing many of its top executives, including Schorsch to step down. Also gone are ARCP CEO David Kay and COO Lisa Beeson.
Contact our REIT fraud lawyers today.
American Realty Capital Properties hit by lawsuit from institutional investors, Investment News, January 26, 2015
S&P Affirms American Realty Capital Properties (ARCP) Ratings Following Recent Bondholder Actions, Street Insider, January 22, 2015
More Blog Posts:
Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014
National Planning Holding Temporarily Stops Selling American Reality Capital Properties’ Nontraded REIT sales After Disclosure of $23M Accounting Error, Institutional Investor Securities Blog, October 31, 2014
Net Asset Value of Tony Thompson’s Former Nontraded REIT Strategic Realty Trust Plunges, Stockbroker Fraud Blog, July 22, 2014