Lisa McAlister, American Realty Capital Properties’ former chief accounting officer, filed a $50 million lawsuit in accusing former ARCP Chairman Nicholas Schorsch of ordering her to manipulate quarterly financial results. But in a statement released Thursday night, RCS Capital CEO Michael Weil said the allegations against Schorsch are “unfounded” and that the ordeal should have no “material impact on the long-term strength of our business model or our operating results.”
Schorsch resigned from his post as chairman of ARCP earlier this week, but he still serves as chairman of RCAP.
“Progress on our strategic initiatives has resulted in recent positive analyst recommendations and upgrades, citing a strong outlook for our retail advice business and stabilization in other areas of RCS Capital over the longer term,” Weil said. “The steady and continual reinstatement of our products by our selling group members, and the over 1,100 current active selling agreements, will help ensure that retail clients continue to have access to the diverse portfolio of alternative investments we offer.”
Weil said there have been no reporting irregularities at RCAP. On Oct. 31, the firm’s legal counsel, with the help of an outside forensic accounting firm, conducted a review of its financials, and they remain confident in RCAP’s reported financials.
At the end of October, RCAP’s sister company American Realty Capital Properties (ARCP) announced a $23 million accounting error. Upon learning of the discrepancies, Chief Financial Officer Brian Block and McAlister resigned from their positions. Of the 31 investment products that RCAP distributes through its wholesale broker/dealer, 14 of them are affiliated with American Realty.
After the error was announced, several broker/dealers and custody and clearing firms, including LPL Financial, AIG Advisor Group, Cambridge, Schwab and Fidelity, suspended sales of ARCP products. Some have reinstated.
Shares of RCAP fell 15 percent on Thursday when news of the allegations surfaced. Shares of ARCP were down 4 percent over the same period.