Former ARCP CFO Pleads Not Guilty to Criminal Securities Fraud Charges

Brian S. Block, the ex-CFO of American Realty Capital Properties Inc., now called Vereit, has pleaded not guilty to criminal charges that accuse him making false filings with the SEC, making false certifications, securities fraud, and conspiracy to commit securities fraud. His criminal trial is scheduled for May 2017.
 
The U.S. Department of Justice had filed the charges against Block earlier this month. He was arrested at his home in September.
 
 According to a statement issued by Manhattan U.S. Attorney Preet Bharara, Block is accused of knowingly misleading the public and doing so through material misrepresentations about a key metric for evaluating the real estate investment trust’s 2014 financial performance. The government claims that Block overstated, by approximately $13M, the “adjusted funds from operations” for that year. As a result, the public thought that ARCP was performing better than how it was actually doing.  
 
In a parallel civil case, the SEC accused Block and Lisa McAlister’s, ARCP’s ex-chief accounting officer, with masterminding a scam to manipulate how $20B of ARCP’s AFFO was calculated. AFFO stands for adjusted funds from operations. This is the non-GAAP measure employed by ARCP for providing guidance about earnings.
Although internal accounting staff had cautioned that the wrong method was used to calculated AFFO for the REIT’s first quarter financial results in 2014, Block went on to allegedly falsify ARCP’s AFFO presentation before submitting its results for the second quarter. McAlister was with him at the time of this submission. The second-quarter filings purportedly hid that the AFFO had been overstated in the first quarter. This manipulation made it seem as if ARCP had fulfilled second-quarter estimates when it had not. FBI Assistant Director-In-Charge William Sweeney Jr. said that this put investors at a “disadvantage.”
McAlister has already pleaded guilty to the charges against her for her involvement, including conspiracy and securities fraud.
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