AR Capital has had a rough few months, and things only appear to be getting worse for the investment management firm.
AR Capital announced last week that its co-founder Nicholas Schorsch will be stepping down from the board of directors of RCS Capital, New York REIT, and eleven non-traded real estate investment trusts (REITs) and direct investment programs sponsored by AR Capital. The move includes Schorsch’s departure from his role as chairman and chief executive officer of NYRT.
"Schorsch has made this decision in order to focus his attention on strategic initiatives and potential liquidity events of closed programs sponsored by AR Capital, and new strategies for the future suite of AR Capital investment programs," the company said.
"These actions should greatly minimize distractions and immediately eliminate any perceived or potential conflicts created as a result of Mr. Schorsch’s involvement on the boards of AR Capital-sponsored programs or on the board of RCS Capital, whose subsidiary, Realty Capital Securities, is the wholesale broker dealer that distributes those programs," the company added.
William Kahane will become executive chairman of the NYRT board of directors. Additionally, Kahane is stepping down from his role as a director of RCS Capital to “lead the further growth and development of AR Capital-sponsored real estate programs and listed companies.”
The shakeup follows a disclosure AR Capital made in October 2014, revealing accounting irregularities, resulting in the replacement of its chief financial officer and chief accounting officer. Additionally, David Kay stepped down as chief executive officer, and Lisa Beeson stepped down as chief operating officer.
To add to the firm's woes, Lisa McAlister, former chief accounting officer, filed a defamation suit last month in New York State Supreme Court against Schorsch and Kay over allegations that she brought potentially accounting irregularities to the attention of Schorsch and Kay but was ignored, and that numbers were later fudged to cover errors.
The company is contesting the allegations. "AR Capital's principals believe this defamation lawsuit is without merit," the company stated. "Mr. Schorsch denies the allegations and intends to defend against the claims vigorously. We are confident that Mr. Schorsch has engaged in no unlawful conduct."
Furthermore, AR Capital noted that McAlister's lawyer raised similar allegations in a letter sent to Schorsch in November 2014 that sought an opportunity to resolve them. "Although the ARCP audit committee investigation is continuing, we understand that to date there has not been any conclusion of unlawful conduct by Mr. Schorsch. Both AR Capital and Mr. Schorsch will have no further comment on the lawsuit at this time.”