Securities Fraud: Ex-American Reality Capital Properties CFO is On Trial, Abu Dhabi Investor’s Lawsuit Against Citibank is Revived, and Drivers File Class Action Case Against Juno

Former REIT CFO’s Criminal Trial is Under Way
Brian Block, the ex-American Realty Capital Properties CFO, is on trial over his alleged involvement in accounting errors that led to the former Nicholas Schorsch-controlled real estate investment trust’s release of inaccurate financial statements during the first two quarters of 2014. As a result of the inaccuracies, ARCP overstated its adjusted funds from operations (AFFO) by about $12M for the end of that first quarter and by about $10.9M for the second quarter while understating its net losses.

This week, Lisa McAlister, a key witness and ARCP’s ex-chief accounting officer gave testimony. She suggested that Schorsch, the REIT’s CEO and chairman at the time, instructed Block on how to distort the number in the books. Block was McAlister’s boss at ARCP.

McAlister said that she was in the room when Schorsch advised Block on how to hide the fraudulent accounting. McAlister said that Schorsch, who has not been charged with wrongdoing in the accounting mistakes, was instructing Block on how to compensate for a 3-cent shortfall in ARCP’s targeted AFFO/share by fudging a certain line item.

McAlister has already pleaded guilty to fraud charges over ARCP’s accounting irregularities.

Investor Fraud Lawsuit Against Citibank Moves Forward
An Abu Dhabi appeals court is allowing an investor to continue pursuing claims against Citibank (C). An earlier ruling had dismissed the securities case citing technical flaws in the lawsuit. Now, however, the complaint has been deemed proper and the lower court will hear the case again.

The investor, Dr. Sami Abbas Hussein Ali Al Amri, claims that Citibank solicited investments in that country for years without obtaining the proper licensing from the Central Bank of UAE. Should he win, Citibank could be subject to penalties and sanctions. Other investors may also be able to seek compensation for losses they sustained from investment products that they bought from the bank in Abu Dhabi.

Dr. Al Amri, who released a press release about this latest court outcome, is also accusing Citi Private Bank Group, Citibank NA, and Citigroup Inc. of concealing certain losses from investors, some of whom ended up losing all of their investments.

Citibank promoted the CReAM Fund to investors in certain Middle Eastern countries, claiming it was a medium-risk venture expected to make 4% yearly revenues. The fund invested in 12 UK shopping centers. However, what investors did not know is that the CReAm fund’s management owned one of the shopping centers. In the end, investors lost millions of dollars after the shipping centers were liquidated.

Dr. El Amri said that he lost his entire investment, which was approximately $1.2M.

Drivers File Securities Fraud Case Against Juno
A class action securities case has been brought by Juno, a ride-hail service based in New York, by three drivers. They are also claiming false advertising and breach of contract.

The drivers contend that the company recruited high performing Lyft and Uber drivers to by promising them equity in Juno. However, when a competitor acquired Juno a couple of months ago, the equity program was eliminated. Instead, Juno said that drivers with shares in the company would be cashed out.

Recode reports that regardless of how many shares a driver had in Juno, all of them were generally receiving just $100. The plaintiffs described themselves as victims of a “bait and switch scam” in which they were promised equity and instead were paid with “pennies on the dollar” while other investors made much more.

In their securities fraud case, the drivers accused Juno of using the equity program to increase its number of drivers in New York City. They are claiming that Juno made false statements, promises, and representations.

The SSEK Partners Group is a securities fraud law firm. Contact one of our securities attorneys today.

Investor Wins Appellate Court Victory over Citibank; Lawsuit Could Expose Citibank to Penalties, Yahoo/PR Newswire, June 19, 2017

Brian Block Trial Witness Says Nicholas Schorsch Had Hand in Cooking the Books at ARCP, InvestmentNews, June 20, 2017

Copy of Securities Fraud Case Against June (PDF)

Citibank sued in Abu Dhabi for investor losses, Thomson Reuters, December 9, 2014