Schorsch Leaves Boards of RCS Capital, 12 Others

Schorsch is also the biggest shareholder of RCS, which raises money from investors for AR Capital’s nontraded REITs. The investment products are marketed to individual investors and depend heavily on the sponsor’s reputation. Since the accounting problems at ARCP were disclosed on Oct. 29, shares of RCS fell 43% through yesterday’s close and ARCP tumbled about 32%.

Michael Happel will become chief executive officer of New York REIT and William Kahane will become its executive chairman as well as chairman of ARC Realty Finance Trust Inc. Kahane will also resign from his role as a director of RCS Capital. Peter Budko will take the role as chairman of Business Development Corp. I and II.

“These actions should greatly minimize distractions and immediately eliminate any perceived or potential conflicts created as a result of Mr. Schorsch’s involvement on the boards of AR Capital-sponsored programs or on the board of RCS Capital whose subsidiary, Realty Capital Securities, is the wholesale broker-dealer that distributes those programs,” AR Capital said in the statement.

Schorsch helped create RCS Capital, an investment bank and brokerage with at least $1.3 billion of deals closed or pending for nine companies, primarily broker-dealers, in the past year.

ARCP is reviewing its financial statements going back to last year after finding that accounting errors were deliberately hidden. ARCP’s chief executive officer, chief operating officer and chief financial officer have resigned since the errors were disclosed.

— Check out Schorsch’s Issues Extensive but ‘Isolated,’ Says Nontraded REIT Expert on ThinkAdvisor.