Schorsch, Block and AR Capital to Pay $60M to SEC for Fraud

This resulted in them getting nearly 3 million extra ARCP partnership units in their incentive-based compensation. Plus, the two "wrongfully obtained at least $7.27 million in unsupported charges from asset purchase and sale agreements" tied to the mergers.

"REIT managers and their professionals have an obligation to tell the truth when making disclosures to shareholders about their compensation," said Marc P. Berger, head of the SEC's New York Regional Office, in a statement. "As we allege in our complaint, AR Capital and its partners Schorsch and Block failed to do so and benefited themselves greatly at the expense of shareholders."

Without admitting or denying the allegations, Schorsch, Block and AR Capital consented to entry of the final judgment, about $39 million of which will go to investors. The deal includes civil penalties of $14 million against AR Capital, $7 million against Schorsch, and $750,000 against Block.

Before it went under, American Realty Capital also set up a separate distribution entity, RCS Capital — which bought Cetera Financial Group and several other broker-dealers in 2014 and 2015, and then went bankrupt in 2016. (Schorsch has no involvement in any of these businesses today).

— Related on ThinkAdvisor:

• Is Private Equity Bad for Broker-Dealers?
• Ex-CFO of American Realty Capital Found Guilty of Fraud
• Cetera Replaces CEO Roth With Moore as RCS Bankruptcy Woes Fade