Ex-ARCP Accountant Files Whistleblower Suit

NEW YORK CITY—American Realty Capital Properties‘ former chief accounting officer on Thursday brought a defamation suit against the embattled net lease REIT, as well as former chairman Nicholas Schorsch and former CEO David S. Kay. The suit from Lisa McAlister, filed in New York State Supreme Court in Manhattan, alleges that then-CEO Schorsch ordered her and then-CFO Brian Block to cover up accounting errors, and that she was then terminated for bringing the financial improprieties to light. AR Capital, which sponsors ARCP and several other traded and non-traded companies, says the lawsuit is “without merit.”

McAlister says in her lawsuit that beginning in the fourth quarter of 2013, ARCP stopped pro-rating certain non-recurring transaction and deferred financing costs, therefore increasng its adjusted funds from operations. The suit alleges that although McAlister raised a red flag on the practice, it continued until late July 28, when Schorsch directed Block and McAlister to to reallocate the funds used to calculate the AFFO and shift the numbers on the REIT’s Q2 2014 10Q report. The company also changed the starting point for its AFFO calculations from “net loss attributable to stockholders (in accordance with US GAAP)” to “net loss (in accordance with US GAAP).”