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Portfolio > Alternative Investments > Real Estate

Schorsch Accused of Manipulating ARCP’s Books

By Emily Zulz

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A complaint filed Thursday in New York state court alleges that former American Realty Capital Properties Inc. (ARCP) Chairman Nicholas Schorsch directed two executives to manipulate quarterly financial results in July.

Former ARCP’s Chief Accounting Officer Lisa McAlister, who filed the complaint in New York State Supreme Court in Manhattan, alleges that during the first quarter she informed Schorsch and former Chief Executive David Kay, then the company’s president, of questionable accounting practices but was ignored.

McAlister’s complaint, which was first reported in The Wall Street Journal on Thursday, is part of a defamation suit against the real-estate investment trust, Schorsch and Kay. The complaint focuses on the alleged role Schorsch played in the accounting errors that were intentionally concealed. McAlister’s suit seeks at least $50 million in damages.

Earlier this week, Schorsch and two other executives resigned from the U.S. real estate investment trust.

According to a statement on Monday, Schorsch, Chief Executive Officer David Kay, Lisa Beeson, president and chief operating officer, all resigned – effective immediately. William Stanley will act as CEO and chairman until permanent replacements are named.

ARCP stock fell 27% through last week after reporting on Oct. 29 that it found accounting errors that were intentionally concealed, leading to the resignations of its chief financial officer and chief accounting officer.

A Dec. 15 news release from AR Capital, another company tied to Schorsch, states “although the ARCP Audit Committee investigation is continuing…we understand that to date there has not been any conclusion of unlawful conduct by Schorsch.

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