UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 10793 / June 23, 2020

SECURITIES EXCHANGE ACT OF 1934

Release No. 89133 / June 23, 2020

ACCOUNTING AND AUDITING ENFORCEMENT

Release No. 4149 / June 23, 2020

ADMINISTRATIVE PROCEEDING

File No. 3-19831

In the Matter of

VEREIT, INC.,

Respondent.

ORDER INSTITUTING CEASE-ANDDESIST PROCEEDINGS 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

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate 

and in the public interest that cease-and-desist proceedings be, and hereby are, instituted 

pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) and Section 21C of 

the Securities Exchange Act of 1934 (“Exchange Act”) against VEREIT, Inc., formerly 

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

II.

In anticipation of the institution of these proceedings, Respondent has submitted 

an Offer of Settlement (the “Offer”) which the Commission has determined to accept.

Solely for the purpose of these proceedings and any other proceedings brought by or on 

behalf of the Commission, or to which the Commission is a party, and without admitting 

or denying the findings herein, except as to the Commission’s jurisdiction over it and the 

subject matter of these proceedings, which are admitted, Respondent consents to the entry 

of this Order Instituting Cease-and-Desist Proceedings 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 (“Order”), as set forth below.
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III.

On the basis of this Order and Respondent’s Offer, the Commission finds1that:

Summary

1. This proceeding arises from ARCP’s violations of the antifraud and books 

and records provisions of the federal securities laws. ARCP, now known as VEREIT, Inc.

(hereinafter, “ARCP” or the “Company”), is a real estate investment trust (“REIT”) 

primarily engaged in the business of acquiring, owning, and managing single-tenant 

commercial real estate properties that by February 2014 had grown to be the nation’s 

largest publicly-traded net lease REIT. ARCP, acting through its then Chief Financial 

Officer, Brian S. Block (the “CFO”), and its then Chief Accounting Officer, Lisa 

McAlister (the “CAO”), falsely reported 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 on October 29, 2014 of 

their misconduct (the “Relevant Period”).

2. On October 29, 2014, ARCP announced that its Audit Committee had 

concluded that the previously issued financial reports for its full fiscal year 2013, first 

quarter 2014 (“1Q14”), and second quarter 2014 (“2Q14”) should no longer be relied 

upon. The Audit Committee’s conclusion was based on the preliminary findings of an

internal investigation that ARCP had overstated AFFO in its 1Q14 financial reports and 

that this error was identified but intentionally not corrected, and other AFFO and 

financial statement errors were intentionally made resulting in an overstatement of AFFO 

in its 2Q14 financial reports. The Company also announced that the CFO and CAO had 

resigned at the request of the Audit Committee, and that the investigation was ongoing 

and had been expanded to encompass fiscal year 2013 in light of the fact that the CFO 

and 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. 

Respondent

3. ARCP is a Maryland corporation that during the Relevant Period was 

headquartered in New York, New York. ARCP’s common stock has been registered with 

the Commission under Exchange Act Section 12(b) since conducting its initial public 

offering and becoming a publicly-traded REIT in 2011. ARCP files periodic reports, 

including Forms 10-K and 10-Q, with the Commission pursuant to Section 13(a) of the 

Exchange Act and related rules thereunder. ARCP’s stock was traded on NASDAQ’s 

Global Select Market (ticker: ARCP) until July 2015 at which time it changed its name to 

 

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and 

are not binding on any other person or entity in this or any other proceeding.
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VEREIT, Inc. and moved its listing to the New York Stock Exchange (ticker: VER). As 

of June 30, 2014, ARCP reported total assets of approximately $21 billion.

Facts

A. AFFO and AFFO Per Share

4. For financial reporting purposes, publicly traded issuers in the United 

States must follow accounting standards that are commonly known as generally accepted 

accounting principles, or GAAP. Additionally, many REITs, including ARCP, report

supplemental non-GAAP financial measures utilized by Company management, 

investors, and analysts in understanding and assessing operating results. One such key 

measure typically reported by REITs, AFFO, is an “adjusted” version of a standardized 

metric of REIT operating performance, Funds From Operations (“FFO”), as defined by 

the National Association of Real Estate Investment Trusts (“Nariet”). Nariet defines FFO 

as: GAAP net income or loss “excluding gains or losses from sales of property, and 

adding back real estate depreciation.”

5. ARCP, like many REITs, defined AFFO as Nariet FFO with further 

adjustments to exclude certain non-cash income and expense items (e.g., unrealized gains 

and losses) and certain “special” or “non-routine” expenses (such as merger and 

acquisition-related expenses) that are expensed-as-incurred under GAAP. ARCP reported 

AFFO in its quarterly and annual reports filed with the Commission on Forms 10-Q and 

10-K and explained that “AFFO is a recognized measure of sustainable operating 

performance by the REIT industry” and that the ARCP adjustments to calculate its AFFO 

“provides information consistent with management’s analysis of the operating 

performance of the properties.” REIT investors and analysts typically consider AFFO a 

measure of “normalized” residual cash flow after eliminating non-cash and non-recurring 

expenses, and an indicator of a REIT’s ability to pay dividends.

6. Because FFO and AFFO are non-GAAP measures, ARCP was required by 

Commission regulations to provide a reconciliation of those metrics to the “most directly 

comparable GAAP financial measure.” See 17 C.F.R. §§ 228, 229, 244 and 249. The 

most directly comparable GAAP measure to FFO and AFFO is net income. And FFO per 

share or AFFO per share is most directly comparable to GAAP’s earnings per share 

(“EPS”) metric.

7. Both prior to and during the Relevant Period, ARCP’s senior management 

considered AFFO per share as an important performance metric. ARCP prominently 

featured its AFFO per share in its earnings releases, financial supplements, and 

presentations furnished with Forms 8-K that ARCP filed contemporaneously with each 

quarterly and annual report. ARCP also provided public earnings guidance in the form of 

projected full-year AFFO per share. Internally, ARCP personnel regularly prepared 

models for forecasting performance and evaluating potential transactions in terms of 

impact to AFFO per share. Externally, analysts also watched ARCP’s reported AFFO per 

share closely, and many included in their reports their predictions of ARCP’s quarterly 

and annual AFFO per share.
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8. ARCP provided public projections of its full-year 2014 AFFO per share 

beginning in early 2013, in connection with announcements about quarterly earnings and 

announced transactions. On October 23, 2013, ARCP updated its 2014 AFFO per share 

projection to a range of $1.13 to $1.19. That projection remained unchanged until an 

update in connection with a transaction announced on October 1, 2014, and the $1.13 to 

$1.19 AFFO per share earnings guidance was reaffirmed on numerous occasions during 

that period, including in ARCP’s earnings releases for both 1Q14 and 2Q14. Throughout 

the reporting periods for 1Q14 and 2Q14, ARCP’s senior management tracked analysts’ 

estimates of ARCP’s quarterly AFFO per share and sought to meet or exceed those 

estimates, as well as to maintain reported AFFO within the previously announced 2014 

guidance range of $1.13 to $1.19 per share.

B. The Operating Partnership and Non-Controlling Interests

9. ARCP, like many REITs, conducts substantially all of its business 

activities through an operating partnership (the “OP”). From 2013 through 2014, ARCP 

was the sole general partner of the OP and owned in excess of 95% of its equity interests

(the “OP units”). The remainder OP units (i.e., those not owned by ARCP) were held by 

certain affiliated and unaffiliated investors and could be redeemed for a corresponding 

number of ARCP shares (or cash, at ARCP’s election) after a one-year holding period.

10. Under GAAP, these remainder OP units are deemed non-controlling 

interests (“NCI”). GAAP requires the consolidated income statement of ARCP to present 

net income or loss on a consolidated basis, as well as to identify separately the net 

income or loss attributable to ARCP stockholders and to the NCI. As such, ARCP 

reported both forms of its net loss: one that included the total operations of ARCP and the 

OP, without eliminating the portion of the consolidated net loss that was attributable to 

the NCI interests (identified simply as “net loss”), and one that eliminated from the net 

loss the portion of the consolidated net loss that was attributable to the NCI interests 

(identified as “net loss attributable to common stockholders”).

11. Similarly, because FFO and AFFO represent net income or loss with 

adjustments, they may be presented on either (i) a “gross” consolidated basis 

(stockholders plus NCI) or (ii) a “net” basis (stockholders only). The “gross” basis 

calculation begins with consolidated net income or loss and excludes the gross amount of 

the adjustment items. To properly calculate FFO and AFFO per share on a “gross” basis,

the share count divisor would include the shares into which the NCI holders’ OP units 

can be converted (“the NCI shares”). This “gross method” essentially includes both 100% 

of the consolidated results and 100% of the shares of the OP. The “net” basis calculation 

begins with net income or loss attributable to the stockholders and excludes only the 

Company’s portion of the adjustment items. To properly calculate FFO and AFFO per 

share on a “net” basis, the share count divisor would exclude the NCI shares. The “net 

method” essentially includes only the results and shares of the stockholders. Both 

methods are internally consistent and should produce virtually the same FFO or AFFO 

per share.
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C. ARCP’s 1Q14 AFFO Presentation

12. On April 10, 2014, ARCP announced plans to issue its 1Q14 financial 

results before market open on May 8, 2014. At the announced time, ARCP reported its 

financial results for 1Q14 in a Form 10-Q filed with the Commission, along with an 

earnings release, earnings supplement, and investor presentation furnished as exhibits to a 

Form 8-K. ARCP reported for 1Q14 consolidated net loss of approximately $321 million, 

net loss attributable to the Company of approximately $309 million, total FFO of 

negative $184 million, total AFFO of approximately $147 million (positive), and AFFO 

per share of $0.26. In its earnings release, ARCP highlighted that “[w]e had a record 

quarter with earnings coming exactly in line with our expectations of $0.26 AFFO per 

share, consistent with our previously stated guidance for the year” and reaffirmed its 

2014 AFFO guidance of $1.13 to $1.19 per share.

13. In these 1Q14 reports and its quarterly reports in 2013, ARCP’s

presentations of its FFO and AFFO indicated that it was on a “net” basis. Specifically, 

ARCP’s Form 10-Q for 1Q14 presented a reconciliation of FFO and AFFO to “net loss 

attributable to stockholders” and stated that the “[a]mounts are presented net of any noncontrolling interest effect where applicable.” However, ARCP’s presentation of FFO and 

AFFO was not in fact “net” of NCI effects and instead used an improper hybrid method 

that overstated its results. 

14. Specifically, while ARCP began the calculation with the net loss 

attributable to the stockholders, (in this case, a loss that was smaller than the consolidated 

net loss), ARCP’s adjustment items to calculate FFO and AFFO (most of which were 

positive) used for the most part the gross amounts of the applicable items (i.e., both the 

stockholders’ portion and the NCI holders’ portion of these items, rather than only the 

stockholders’ portion, resulting in an increase in the total dollar amount of those 

adjustments and, in turn, an increase in positive AFFO), and divided by a share count that 

excluded the NCI shares (i.e., a lower share count, resulting in greater AFFO per share).

This improper hybrid method misleadingly inflated ARCP’s reported AFFO and AFFO 

per share.

15. ARCP’s AFFO calculated on an actual “net” basis would have been 

approximately $129.8 million in total and $0.23 per share for 1Q14. ARCP’s reported 

1Q14 AFFO was thus overstated by approximately $17 million in total and $0.03 per 

share.

16. Shortly before the 1Q14 financial results were scheduled to be announced,

ARCP personnel, including a senior member of the accounting staff responsible for 

financial reporting (the “Accountant”), raised concerns about ARCP’s method of 

calculating AFFO and AFFO per share—specifically that those metrics may be 

overstated because it was calculated using an improper hybrid method. These concerns 

were raised to ARCP’s CFO, CAO, and others. Despite those concerns, and without 

having a substantive explanation or completing an analysis, the CFO instructed that they 

file the 1Q14 Form 10-Q and related releases as-is by the previously announced date of 

May 8, 2014. 
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D. ARCP Personnel Quantified the 1Q14 AFFO Misstatement

17. Following the 1Q14 filings, the Accountant continued to analyze ARCP’s 

1Q14 AFFO presentation. The Accountant repeatedly advised the CFO, CAO and others 

that the Accountant believed ARCP had made a mistake in its 1Q14 AFFO calculation, 

and thus, had reported incorrect results by a significant amount.

18. For example, by no later than May 23, 2014, the Accountant had informed 

the CAO that a correct calculation under either the “net method” or the “gross method” 

yielded 1Q14 AFFO results of only $0.23 per share, rather than the $0.26 per share 

ARCP reported.

19. Notwithstanding the understanding of the significance of this error, ARCP 

conducted an offering of common stock on May 23, 2014, pursuant to a Prospectus 

Supplement filed with the Commission pursuant to Rule 424(b)(5) on the same date. The 

Prospectus Supplement incorporated by reference ARCP’s 1Q14 Form 10-Q that 

included the false and misleading AFFO results. The offering raised $1.66 billion, of 

which the net proceeds to ARCP after underwriting discounts, commissions, and 

offering-related expenses were $1.59 billion.

E. ARCP’s CFO and CAO Take Additional Manipulative Steps to Conceal 

the Inflated 1Q14 AFFO Results and to Further Inflate 2Q14 AFFO

20. ARCP was scheduled to file its 2Q14 Form 10-Q and publish its related 

earnings releases, before market-open on the morning of July 29, 2014. 

21. Based on the Accountant’s analysis of the AFFO issue, the Accountant 

determined to prepare the 3-month 2Q14 AFFO results using the correct “net method” 

and provided numerous AFFO schedules reflecting that calculation throughout July to the 

CAO and CFO. However, the 2Q14 financial reports would need to report not only the 3-

month 2Q14 results, but also the results for the first half of the year (“FH14”). The FH14 

AFFO result adds the first and second quarter amounts for each line in the calculation.

Therefore, adding the original, as-reported 1Q14 AFFO would overstate the FH14 results

even if the correct method was used to calculate the 3-month 2Q14 AFFO result.

22. Instead of correcting the reported 1Q14 AFFO amount, the CFO and CAO 

ultimately chose to conceal the misstated 1Q14 AFFO amount and make further 

intentional errors in the 2Q14 AFFO result in order to meet analysts’ consensus 

expectations for ARCP’s AFFO results. 

23. Specifically, late in the evening of July 28, 2014, the night before the 

2Q14 filings would be made, the CFO, the CAO, and the Accountant met in the CFO’s 

office about ARCP’s AFFO calculations. The CFO began preparing a spreadsheet in 

which he recalculated AFFO and AFFO per share for 1Q14, 2Q14 and FH14 using the 

“gross method.” Using this method properly, however, would have revealed the 1Q14 

AFFO per share overstatement of $0.03 per share. Moreover, the correct “gross method” 

calculation for 2Q14 AFFO would have shown that ARCP only achieved $0.23 per share 
7

(versus analysts’ consensus expectations of $0.24) and $0.46 per share for FH14 (out of 

the Company’s annual guidance projections for AFFO of $1.13 to $1.19 per share).

24. The CFO then manipulated several line items of the AFFO calculation to 

inflate the figures in order to conceal the 1Q14 overstatement, meet the analysts’ 

consensus expectations for the 3-month 2Q14 period, and report FH14 results that would 

not require ARCP to lower its annual guidance projection for AFFO of $1.13 to $1.19 per 

share. First, the CFO added a total of approximately $13.1 million in unsupported 

plugged amounts to a certain line item in both the 1Q14 and 2Q14 AFFO calculations, 

which served to mask the overstatement of ARCP’s reported 1Q14 AFFO as well as to 

meet analysts’ consensus estimates for 2Q14 AFFO per share of $0.24. Second, the CFO

also improperly deducted millions of shares from the weighted shares outstanding for 

FH14 for the AFFO calculation, thereby improperly inflating the FH14 AFFO per share 

in his spreadsheet from $0.46 to $0.49.

25. Despite the Accountant’s objections, the CFO instructed the Accountant to 

use the numbers and calculations in the spreadsheet the CFO had just prepared in 

ARCP’s 2Q14 Form 10-Q and related earnings releases and emailed to the Accountant 

and CAO. The CAO informed the Accountant that she would handle communicating with 

the auditors. The Accountant followed the CFO’s and CAO’s instruction and prepared 

the filings accordingly. Prior to market open on July 29, 2014, the CFO and CAO 

authorized the filing of the Form 10-Q and related earnings releases.

26. ARCP’s 2Q14 Form 10-Q falsely reported total AFFO on a purportedly 

“gross method” basis for 2Q14 of $205.3 million and FH14 of $353 million. ARCP also 

filed a related Form 8-K furnishing a press release and supplemental financial 

presentation that falsely reported AFFO of $0.24 per share for 2Q14 and $0.49 per share 

for FH14. ARCP’s press release further highlighted these falsely inflated AFFO and 

AFFO per share figures and affirmed the prior 2014 annual guidance range of AFFO per 

share of $1.13 to $1.19.

27. On September 7, 2014, the Audit Committee of ARCP’s Board of 

Directors was informed by ARCP’s independent auditor of concerns raised by an 

employee regarding accounting practices and other matters, including ARCP’s 2Q14 

reporting of AFFO. On October 29, 2014, prior to market open, ARCP announced that, 

based on the preliminary results of an internal investigation, the Audit Committee of the 

Board of Directors believed that 1Q14, 2Q14, and FH14 AFFO and AFFO per share had 

been overstated, with the 2Q14 report “intentionally not correct[ing]” the 1Q14 error and 

making “other AFFO and financial statement errors ... intentionally.” The announcement 

also stated that at the request of the Audit Committee, the CFO and CAO had resigned. 

Following this disclosure, ARCP’s stock price dropped by approximately 19% (from a 

closing price of $12.38 on October 28 to $10.00 on October 29), resulting in a marketcapitalization loss of over $2 billion. When ARCP ultimately filed restatements on March 

2, 2015, its stock price closed at $9.90.

28. ARCP filed restatements of its Form 10-K for fiscal year 2013, 1Q14 

Form 10-Q, and 2Q14 Form 10-Q on March 2, 2015. Among other things, the 
8

restatements disclosed the Company’s conclusion that AFFO had been overstated for 

fiscal years 2011-2013 and for the first two quarters of 2014. The restatements also 

reported that the investigation found that senior management considered AFFO to be an 

important metric used by analysts and investors in evaluating the Company’s 

performance and, for the first two quarters of 2014, sought to maintain reported AFFO 

within the 2014 guidance range of $1.13 to $1.19 per share announced at the end of 2013. 

It further reported that some members of senior management were aware of AFFO errors 

prior to the 1Q14 Form 10-Q filing but allowed the report to be filed without completing 

an analysis of the errors and in the 2Q14 Form 10-Q report, as previously reported, errors 

were intentionally not corrected and other AFFO and financial statement errors were 

intentionally made. The restatements also identified other corrections and issues relating 

to multiple matters, including related party payments to affiliates of the former external 

manager and issues relating to equity awards made to its former CEO and CFO. 

29. ARCP’s control environment during the Relevant Period significantly

contributed to the fraudulent misrepresentations of AFFO described above. As 

acknowledged in ARCP’s restatements, including for 1Q14 and 2Q14, the Company had 

numerous material weaknesses in the design and implementation of controls to, among 

other things, ensure that AFFO was correctly calculated, ensure that the information 

contained in ARCP’s periodic reports and other SEC filings correctly reflected the 

information contained in the Company’s accounting records and other supporting 

information, prevent changes to the financial statements and supporting financial 

information by senior management without proper review, and ensure that accounting 

employees would not be subject to pressure to make inappropriate decisions affecting the 

financial statement components of the calculation of AFFO.

Violations

30. As a result of the conduct described above, ARCP violated Section 17(a) 

of the Securities Act, which prohibits fraudulent conduct in connection with the offer or 

sale of securities, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, 

which prohibit fraudulent conduct in connection with the purchase or sale of securities.

31. Also, as a result of the conduct described above, ARCP violated Section 

13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13, which require every 

issuer of a security registered pursuant to Section 12 of the Exchange Act to file with the 

Commission information, documents, and quarterly reports as the Commission may 

require, and mandate that periodic reports contain such further material information as 

may be necessary to make the required statements not misleading.

32. In addition, as a result of the conduct described above, ARCP violated

Section 13(b)(2)(A) of the Exchange Act, which requires all reporting companies to make 

and keep books, records, and accounts which, in reasonable detail, accurately and fairly 

reflect their transactions and dispositions of their assets.
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ARCP’s Self-Reporting, Remediation, and Cooperation

33. In determining to accept ARCP’s Offer, the Commission considered 

ARCP’s self-reporting, public disclosures, cooperation, and remediation, as described 

below.

34. ARCP promptly self-reported to the Commission, and in its Form 8-K 

filed on October 29, 2014 disclosed to investors the preliminary results of the Audit 

Committee investigation that the Company incorrectly calculated its 1Q14 AFFO and 

that “this error was identified but intentionally not corrected, and other AFFO and 

financial statement errors were intentionally made” for the three and six month periods 

covered by the 2Q14 reports, and that at the request of the Audit Committee the CFO and 

CAO had resigned. 

35. ARCP’s Audit Committee continued its investigation thereafter and 

provided timely updates to the Commission staff. ARCP voluntarily produced 

compilations of documents and other information at the staff’s request, made timely 

disclosure of relevant factual information, and facilitated making its employees available 

for interviews with the staff. After issuing restatements in March 2015, ARCP continued 

to cooperate with the Commission staff’s investigation, including providing certain 

information relevant to the Commission’s action entitled SEC v. AR Capital, LLC, et al., 

No. 19 Civ. 6603 (AT) (S.D.N.Y). 

36. ARCP also promptly undertook a series of remedial measures, including

reforming policies, procedures, and controls; instituting enhanced annual trainings; and

reporting the remediation as of December 31, 2015 of all material weaknesses identified 

in its restated financials. In addition, the Company replaced the CEO, Chief Operating 

Officer, General Counsel, CFO, and CAO—constituting an entirely new senior 

management team—as well as its entire board of directors (including a new independent 

Chairman) and numerous other employees. 

IV.

In view of the foregoing, the Commission deems it appropriate to impose the 

sanctions agreed to in Respondent ARCP’s Offer.

Accordingly, pursuant to Section 8A of the Securities Act and Section 21C of the 

Exchange Act, it is hereby ORDERED that:

A. Respondent ARCP cease and desist from committing or causing any 

violations and any future violations of Section 17(a) of the Securities Act and Sections 

10(b), 13(a), and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-11, and 

13a-13 thereunder.

B. Respondent ARCP shall, within 14 days of the entry of this Order, pay a 

civil money penalty in the amount of $8,000,000 to the Securities and Exchange 

Commission. If timely payment is not made, additional interest shall accrue pursuant to 31 

U.S.C. §3717.
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Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter 

identifying ARCP as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Sanjay 

Wadhwa, Division of Enforcement, Securities and Exchange Commission, 200 Vesey 

Street, Suite 400, New York, NY 10281.

C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, 

a Fair Fund is created for the civil penalties paid as referenced in paragraph B above.

Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 

as penalties paid to the government for all purposes, including all tax purposes. To preserve 

the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of 

any award of compensatory damages by the amount of any part of Respondent’s payment 

of a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor 

Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after 

entry of a final order granting the Penalty Offset, notify the Commission's counsel in this 

action and pay the amount of the Penalty Offset to the Securities and Exchange 

Commission. Such a payment shall not be deemed an additional civil penalty and shall not 

be deemed to change the amount of the civil penalty imposed in this proceeding. For 

purposes of this paragraph, a “Related Investor Action” means a private damages action 

brought against Respondent by or on behalf of one or more investors based on substantially 

the same facts as alleged in the Order instituted by the Commission in this proceeding.

By the Commission.

Vanessa A. Countryman

Secretary