American Realty Capital Properties Inc. (ARCP), the U.S. real estate investment trust reeling from reports of an accounting cover-up, was sued by a former executive who said she was fired for blowing the whistle on financial improprieties.
Lisa P. McAlister, ARCP’s former chief accounting officer, alleged that her October termination was in retaliation for her statements that changes in accounting practices were an attempt to hide the company’s faltering financial performance, according to a complaint filed today in New York state court in Manhattan. She didn’t cite any evidence beyond the allegation.
McAlister said she voiced her concerns to then-Chairman Nicholas Schorsch and then-Chief Executive Officer David Kay before being fired.
Schorsch, 53, stepped down from the company, which he built into one of the biggest real estate investment trusts, on Dec. 12 after it disclosed accounting errors were intentionally concealed. Kay quit three days later, along with Chief Operating Officer Lisa Beeson, according to the company.
Schorsch, who controls an empire of real estate companies through his closely held firm AR Capital, co-founded ARCP and was its CEO until Kay took over under a planned succession in October.
AR Capital said in a statement that McAlister’s lawsuit was without merit. A lawyer for McAlister raised similar allegations in a letter received Nov. 14 by Schorsch, who “immediately arranged for the letter to be forwarded to the appropriate government authorities,” according to the statement, which said an internal probe is under way.
“We are confident that Mr. Schorsch has engaged in no unlawful conduct,” according to the statement. “Although the ARCP Audit Committee investigation is continuing, we understand that to date there has not been any conclusion of unlawful conduct by Mr. Schorsch.”
[ARCP fell 0.20 percent Friday to trade at $8.06 Friday in New York after declining 4 percent to trade at $8.07 Thursday.]
McAlister, who started working for the company in November 2013 and was named accounting chief in July 2014, said the company defamed her in a press release the day after her firing, blaming her for accounting and reporting irregularities.
McAlister said the statements in the press release have damaged her reputation and career, embarrassed and humiliated her and caused “emotional distress and mental anguish.”
“Because of these defamatory allegations, Ms. McAlister is unable to obtain employment, as any future employer understandably is concerned about her professionalism and integrity, thereby leaving her unable to care and without health insurance for her two special needs children, an autistic child and a child with cerebral palsy,” McAlister said in her complaint.
Schorsch is also chairman and largest shareholder of RCS Capital Corp. (RCAP), which sells REITs created by AR Capital [and owns the Cetera Financial Group of independent broker-dealers]. New York-based AR Capital is the largest sponsor of non-traded REITs, which are marketed mainly to individual investors.
RCS said in a statement that there have been no accounting irregularities at the company and the “unfounded allegations” against Schorsch shouldn’t have a material impact on its operating results.
Andy Merrill, a spokesman for ARCP, didn’t return a respond to a request for comment on the lawsuit.
The case is McAlister v. American Realty Capital Properties Inc., 162499/2014, New York State Supreme Court, New York County (Manhattan).
– To contact the reporters on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at [email protected]; Brian Louis in Chicago at [email protected] To contact the editors responsible for this story: Kara Wetzel at [email protected]; Michael Hytha at [email protected] Michael Hytha