U.S. prosecutors drop accounting fraud charges against the former CEO and former CFO of Brixmor Property Group Inc, who was accused of manipulating a key financial measure for the owner and operator of the large mall.
REUTERS: US prosecutors drop accounting fraud charges against former CEO and former CFO of Brixmor Property Group Inc., accused of manipulating a key financial measure for the owner and operator of the large mall .
Manhattan federal prosecutors in a court case said they concluded on the basis of new information that they could not prove their case against former CEO Michael Carroll and former CFO Michael Pappagallo, which has prompted a judge to dismiss the case on Thursday.
The information related to “particular accounting adjustments that are a significant part of the allegedly inaccurate metric loaded into the indictment,” prosecutors said.
Prosecutors also dropped charges against two former executives who had pleaded guilty, Steven Splain and Michael Mortimer.
“We are happy that the government now agrees with what we have said from the start: this lawsuit should never have been brought,” said Victor Hou, Carroll’s lawyer at Cleary Gottlieb Steen & Hamilton.
Gregory Kehoe, Pappagallo’s attorney at Greenberg Traurig, said he appreciated the decision of US Attorney General Audrey Strauss’s office to take the “extraordinary” and “rare” step to close the case.
The United States Securities and Exchange Commission has said it is assessing the dismissal of a related civil case.
A spokesperson for Strauss declined to comment.
Brixmor, a New York-based real estate investment trust (REIT) with approximately 421 shopping centers, agreed in 2019 to pay a fine of US $ 7 million to resolve the SEC’s charges, without admitting to wrongdoing.
Investigators began examining Brixmor in February 2016 after the REIT said it discovered a “smoothing” in same property’s net operating income (SP-NOI), a measure for investors of the financial performance of an REIT.
Prosecutors said Carroll and Pappagallo falsely touted the consistency of Brixmor’s SP-NOI growth rate, with Carroll describing it at an industry conference as the REIT’s “secret sauce” when in fact the rate has fluctuated significantly.
(Reporting by Nate Raymond in Boston; editing by Grant McCool)