UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 97854 / July 7, 2023

ADMINISTRATIVE PROCEEDING 

File No. 3-19831

In the Matter of 

VEREIT, INC., 

Respondent.

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ORDER APPROVING PLAN 

OF DISTRIBUTION AND 

AUTHORIZING TRANSFER 

OF FAIR FUND

On June 23, 2020, the United States Securities and Exchange Commission (the 

“Commission”) issued an Order Instituting Cease-and-Desist Proceeding Pursuant to Section 8A 

of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making 

Findings, and Imposing a Cease-and-Desist Order (the “Order”)1against VEREIT, Inc. formerly 

known as American Realty Capital Properties, Inc. (“ARCP” or “Respondent”), a real estate 

investment trust (“REIT”), primarily engaged in the business of acquiring, owning, and 

managing single-tenant commercial real estate properties. By February 2014 ARCP had grown 

to be the nation’s largest publicly-traded net lease REIT. This proceeding arose from ARCP’s 

violations of the antifraud and books and records provisions of the federal securities laws. 

ARCP —acting through its then Chief Financial Officer, Brian S. Block ( “Block”), and its then 

Chief Accounting Officer, Lisa McAlister (the “CAO”) —falsified its reported results and 

manipulated the Company’s “Adjusted Funds from Operations” or “AFFO,” a key non-GAAP 

performance metric relied on by ARCP management, investors, and analysts to assess ARCP’s 

financial performance from at least May 2014 until the Company’s initial disclosure of their 

misconduct on October 29, 2014. In addition to announcing the preliminary results of its internal 

investigation which found intentional misconduct, ARCP also announced the resignations of 

Block and the CAO at the request of the audit committee, and that the Company investigation 

was ongoing and had been expanded to include fiscal year 2013 because Block and the CAO had 

key roles in the preparation of such filings. The closing price of ARCP’s stock on the day of this 

announcement, declined by approximately 19 percent from the prior day’s close. 

The Commission ordered the Respondent to pay an $8,000,000 civil money penalty to the 

Commission. The Commission also created a Fair Fund pursuant to Section 308(a) of the 

Sarbanes-Oxley Act of 2002, so the penalty paid can be distributed to investors harmed by the 

Respondent’s conduct described in the Order (the “Vereit Fair Fund”). Respondent ARCP has 

1 Securities Act Rel. No. 10793 (June 23, 2020).
2

paid in full. The Fair Fund, comprised of the $8,000,000 paid by the Respondent, has been 

deposited in a Commission-designed account at the U.S. Department of the Treasury.

Previously, on July 16, 2019, the Commission filed a complaint (the “Complaint”) 

against AR Capital, LLC (“AR Capital”), Nicholas S. Schorsch (“Schorsch”), and Block 

(collectively, the “Civil Action Defendants”). As alleged in the Complaint, AR Capital 

sponsored and externally managed REITs, including ARCP and two publicly held, non-traded 

REITs: American Realty Capital Trust III, Inc. (“T3”) and American Realty Capital Trust IV, 

Inc. (“T4”). ARCP completed a merger with T3 in February 2013 and with T4 in January 2014. 

The Complaint further alleged that contrary to shareholder disclosures, AR Capital, acting 

through Block and Schorsch, inflated several aspects of incentive fees “that enriched the 

Defendants at the expense of the REITs and their shareholders, and that Defendants made 

additional related misstatements in subsequent ARCP public filings with the Commission, 

including in quarterly and annual reports on Forms 10-K and 10-Q. The Complaint also alleged 

that Civil Action Defendants’ misleading presentation of agreements—purportedly for 

purchasing furniture, fixtures, and equipment necessary for the respective T3 or T4-related postmerger operations and reimbursing AR Capital for certain “unreimbursed expenses”— in public 

filings with the Commission, resulted in the Civil Action Defendants wrongfully obtaining at 

least $7.27 million in unsupported compensation. The Complaint alleged the Civil Action 

Defendants’ actions relating to these agreements also resulted in recording false entries on 

ARCP’s books and records. 

The Division of Enforcement (the “Division”) has concluded that the allegations in the 

Civil Action’s Complaint and in this Administrative Proceeding both involve an underlying, 

overarching fraudulent scheme by ARCP acting through Block. Importantly, the initial 

disclosure of the AFFO fraud (the subject of the Administrative Proceeding settlement) is the 

same date, October 29, 2014, used in the distribution plan approved by the Court in the Civil 

Action (the “AR Capital Plan”). This disclosure related to a variety of matters impacted by 

ARCP’s fraud. Given this confluence of violative conduct, it was not possible to disaggregate 

the amount of inflation in ARCP’s market price based on each of the impacted matters. Thus, it 

could not be determined with certainty or specificity what harm each investor incurred. As a 

result of this uncertainty, the AR Capital Plan seeks to compensate all holders of ARCP 

securities at the time of the disclosure who purchased or acquired shares at the time of the T3 

merger or later, which would include those investors who purchased during the time of the 

AFFO fraud. Because of this same uncertainty, it is fair and reasonable for the funds collected in 

the Administrative Proceeding to be distributed through the Civil Action for distribution in 

accordance with the Court’s approved AR Capital Plan.2 Further, a single distribution process is 

a more efficient use of resources and allows the harmed investors to recover a greater portion of 

their losses, than would two separate distribution processes.

2 This distribution should not be understood to compensate “holders” of securities, which the Commission has 

traditionally not done. While this plan will result in distributions to investors who purchased ARCP securities 

before the beginning of the AFFO fraud, it is the Commission staff’s belief that there was one overarching scheme 

that encompassed both the AR Capital fraud and the AFFO fraud and these funds will be used to compensate victims 

of that overall scheme, just as the Civil Action funds are currently being used. 
3

On May 31, 2023, the Commission published a Notice of Proposed Plan of Distribution

and Opportunity for Comment (the “Notice”)3pursuant to Rule 1103 of the Commission’s Rules 

on Fair Fund and Disgorgement Plan (the “Commission’s Rules”).4 The Notice advised 

interested persons that they could obtain a copy of the proposed plan of distribution (“Proposed 

Plan”) from the Commission’s public website at http://www.sec.gov/litigation/fairfundlist.htm or 

by submitting a written request to Nancy Chase Burton, United States Securities and Exchange 

Commission, 100 F. St. NE, Washington, D.C. 20549-5876. 

The Notice also advised that all persons desiring to comment on the Proposed Plan could 

submit their comments, in writing, no later than thirty (30) days from the date of the Notice (1) to 

the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street 

NE, Washington, D.C. 20549-1090; (2) by using the Commission’s Internet comment form 

(https://www.sec.gov/litigation/admin.htm); or by sending an email to rule-comments@sec.gov. 

The Commission received no negative comments on the Proposed Plan during the comment 

period.

The Proposed Plan provides for the transfer of the Vereit Fair Fund, plus any accrued 

interest, less any taxes and fees, to the Civil Action for distribution to harmed investors in 

accordance with the AR Capital Plan approved by the Court.

The Division, therefore, now requests that the Commission approve the Proposed Plan as 

published and authorize the transfer of the Vereit Fair Fund, less any taxes and expenses, to the

Civil Action for distribution to harmed investors in accordance with the AR Capital Plan 

approved by the Court.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Rule 1104 of the Commission’s Rules, 17 C.F.R. § 201.1104, the 

Proposed Plan is approved, and the approved Plan of Distribution shall be posted 

simultaneously with this order on the Commission’s website at www.sec.gov; and

B. In accordance with Rule 1102(a) of the Commission’s Rules, 17 C.F.R. 

§ 201.1102(a), the Commission staff shall transfer the Vereit Fair Fund, plus any 

accrued interest, less any taxes and fees, to the Civil Action for distribution to 

harmed investors in accordance with the AR Capital Plan approved by Court.

By the Commission.

Vanessa A. Countryman

Secretary

3 Exchange Act Rel. No. 97625 (May 31, 2023).

4 17 C.F.R. § 201.1103.