NEW YORK CITY—Seeking to dispel the perception that hiscompany's top financial personnel had sought to inflate quarterlyearnings numbers, American Realty CapitalProperties' CEO on Wednesday afternoon said the misstatedearnings grew out of an accounting error that was then covered up.The mistake, which precipitated a plummeting of the net leaseREIT's stock prices on Wednesday and prompted anumber of analysts to issue downgrades, resulted in theresignations of CFO Brian Block and chiefaccounting officer Lisa McAlister earlier the sameday.

“The best way I can describe what happened is that we don't havebad people, we had some bad judgment there, and we have twoemployees who have resigned as a result” of the decision to notdisclose an error in calculating adjusted funds from operations forthe first quarter, CEO David S. Kay said during a webcast Wednesdayafternoon. He pointed out that none of the GAAP measurements,including NAV, NOI and property metrics, were affected by theovestatement

ARCP's audit committee determined that in order to conceal theQ1 error, which resulted from a confusion of two differentaccounting methods to determine AFFO, an accrual that ought to havebeen included as an expense in Q2's numbers was instead moved up toQ3's ledger, Kay said. As a result, Q2's AFFO figure was inflatedby about 5% to $205.3 million, None of the current ARCP executiveshave been implicated in the investigation, he added.