Nicholas Schorsch's bad week just got worse.
The executive chairman of independent broker-dealer giant RCS Capital, who resigned earlier this week as chairman of American Realty Capital Properties -- walking away from a compensation package valued at about $100 million in the process -- has reportedly been hit with a $50 million lawsuit accusing him of directing two ARCP executives to manipulate quarterly financial results, according to The Wall Street Journal.
The complaint that Schorsch instructed ARCP executives to shift numbers in the companys second-quarter results to cover up errors from the first quarter was part of a defamation suit against ARCP, Schorsch and former ARCP Chief Executive David Kay filed in New York State Supreme Court by former ARCP Chief Accounting Officer Lisa McAlister, the Journal reported. A court clerk told Financial Planning that the lawsuit could not be reviewed because it had not yet been entered into the courts computer systems.
The ARCP accounting scandal revealed a $23 million accounting error over the first six months of this year that was intentionally uncorrected, resulting in the dismissal of McAlister and Brian Block, the companys chief financial officer.
In the complaint, McAllister alleges that during the first quarter she informed Schorsch and Kay, then ARCPs president, of questionable accounting practices but was ignored, according to the Journal.
McAlister also alleges, the Journal said, that she repeatedly expressed concerns about Schorschs instruction to falsify financial results to executives and others, including in an e-mail to a manager at Grant Thornton, the REITs outside auditor. Asked for comment, a spokesman for Grant Thornton said, "It is firm protocol to not discuss client matters."
McAlister, ARCP and RCS did not reply to requests for comment.
- 'Steady Flow of Negative News' Takes Toll on Schorsch
- Lowlights of 2014: From Schorsch Drama to LPL's Regulatory Woes
- Schorsch Plays Defense at Schwab Amid Turmoil in His Empire