Former American Realty Capital Properties CFO Sentenced for Accounting Fraud
November 9, 2017 | Luke Schmidt | Blue Vault
On November 8, 2017, Brian Block, former CFO of American Realty Capital Partners, received a sentence of 18 months in federal prison for overstating the company’s financial results. In addition to the prison sentence, Mr. Block was sentenced to three years of supervised release and a $100,000 fine.
Mr. Block was convicted of the following six counts of fraud: one count of conspiracy to commit securities fraud, one count of securities fraud, two counts of making false filings with the SEC, and two counts of submitting false certifications along with required filings with the SEC. Mr. Block was previously found guilty by a New York federal jury on June 30, 2017 following a three-week trial.
The attorney general’s office claims that prior to filing financial results for the second quarter of 2014, it was explained to Mr. Block that the method used by ARCP to calculate adjusted funds from operations in the first quarter of 2014, and certain other previous quarters, was incorrect and resulted in inflated numbers. Mr. Block took no steps to relay the information to the Audit Committee of ARCP’s Board of Directors or outside auditors, and continued using the same calculations in the second quarter.
Prosecutors had originally sought a sentence of seven years, after calculating that non-binding federal sentencing guidelines would call for 105 years. The guidelines were based on the drop in ARCP’s share price after the inaccurate financial information was revealed to the public on October 29, 2014, which caused the stock to drop 37%.
The judge mentioned mitigating factors in determining the sentencing, including Mr. Block’s clean criminal record prior to this offense and the lack of long-term fraudulent conduct over the prior several years. Additionally, he mentioned how unlikely it would be for Mr. Block to engage in additional criminal activity in the future.
ARCP is now known as VEREIT, Inc. and is based in Phoenix, Arizona. ARCP was part of a commercial real estate empire built by investor Nicholas Schorsch. Neither Schorsch nor VEREIT were accused of wrongdoing.
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