Frequently Asked Questions
- Why did I receive a Distribution Plan Notice and Claim Form?
- What is this all about?
- What is the Fair Fund?
- Who should submit a claim?
- How are payment amounts determined?
- How do I file a claim?
- How do I get more information?
- Why did I receive a Distribution Plan Notice and Claim Form?
You received a Notice and Claim Form because you or someone at your household may have purchased or otherwise acquired American Realty Capital Properties, Inc. (“ARCP”) common stock on or after February 28, 2013, including in the American Realty Capital Trust III, Inc. (“T3”) merger, and held such shares at the close of trading on October 28, 2014, inclusive. Claimants who fit this criteria may be eligible for distribution from a Fair Fund that was established in Securities and Exchange Commission enforcement actions against American Realty Capital Properties, Inc. (“ARCP”) (now known as VEREIT, Inc.), Nicholas S. Schorsh, and Brian S. Block.
Top - What is this all about?
On July 16, 2019, the SEC filed a Complaint against AR Capital, LLC, (“AR Capital”), Nicholas S. Schorsch (“Schorsch”), and Brian S. Block (“Block” and collectively, with AR Capital and Schorsch, the “Defendants”) (the “SEC Complaint”). As alleged in the Complaint, AR Capital sponsored and externally managed REITs, including ARCP and two publicly held, non-traded REITs: American Realty Capital Trust III, Inc. (“T3”) and American Realty Capital Trust IV, Inc. (“T4”). ARCP completed a merger with T3 in February 2013 (the “T3 Merger”), and with T4 in January 2014 (the “T4 Merger”).
The Complaint further alleged that contrary to shareholder disclosures, Defendant AR Capital, acting through Block and Schorsch, inflated several aspects of an incentive fees “that enriched the Defendants at the expense of the REITs and their shareholders,” which resulted in Defendants’ collecting a total of 2,922,445 ARCP operating partnership units (“OP units”) to which they were not entitled and that Defendants made additional related misstatements in subsequent ARCP public filings with the Commission, including in quarterly and annual reports on Forms 10-K and 10-Q.
The SEC Complaint also alleged that Defendants’ misleading presentation of agreements—purportedly for purchasing furniture, fixtures, and equipment necessary for the respective T3 or T4-related post-merger operations and reimbursing AR Capital for certain “unreimbursed expenses”— in public filings with the SEC, resulted in the Defendants wrongfully obtaining at least $7.27 million in unsupported compensation. The SEC complaint alleged the Defendants’ actions relating to these agreements also resulted in recording false entries on VEREIT’s books and records.
Without admitting or denying the allegations in the SEC Complaint, the Defendants consented to the entry of final judgments against them. AR Capital was ordered liable for disgorgement, “representing profits gained as a result of conduct alleged in the Complaint,” of 2,922,445 OP units and $11,275,065 plus prejudgment interest thereon of $1,038,791. The Schorsch and Block final judgments ordered each liable on a joint-and-several basis with AR Capital for certain amounts of the disgorgement. The final judgments also ordered payment of civil penalties of $14,000,000 against AR Capital, $7,000,000 against Schorsch, and $750,000 against Block. (DE 8, 9, 11.) The Final Judgments required the Defendants to satisfy the disgorgement obligation with respect to the OP units by the surrender and return of such OP units to ARCP for cancellation and by the payment of cash disgorgement, prejudgment interest, and civil penalties to the SEC. In July 2019, Defendants paid the cash disgorgement, prejudgment interest, and penalties to the Commission and surrendered the OP units as required by the judgments.
The cash disgorgement, prejudgment interest, and penalties paid to the Commission is currently invested at the Bureau of the Fiscal Service (“BFS”) at the United States Department of the Treasury. Any investment fees of the BFS will be paid by the Fair Fund.
By Order dated October 22, 2019, the Court created a Fair Fund pursuant to Section 308(a) of Sarbanes-Oxley, as amended, and appointed Miller Kaplan Arase LLP (“MKA”) as Tax Administrator to execute all income tax reporting requirements, including the preparation and filing of tax returns for all funds under the Court’s jurisdiction in this case. By Order dated April 16, 2020, the Court appointed Kurtzman Carson Consultants, LLC (“KCC” or “Distribution Agent”) to serve as the Distribution Agent to oversee the administration and distribution of the Fair Fund, in coordination with the Commission staff, and in accordance with the terms of a distribution plan to be approved by the Court.
By Order dated May 18, 2021, the SEC approved a plan of distribution for the distribution of the Fair Fund to investors harmed by the conduct described in the SEC Orders. You can see review the approved plan through the Important Documents tab on this website.
Top - What is the Fair Fund?
The Fair Fund is comprised of the $34,175,862.42 paid by AR Capital, LLC pursuant to SEC Orders. These funds have been been deposited into an interest-bearing account at the US Treasury’s Bureau of the Fiscal Service. Interest and any additional funds received pursuant to Commission or Court order, agreement, or otherwise, will be added to the Fair Fund for disbursement to investors in accordance with the Plan.
Top - Who should submit a claim?
If you purchased or acquired acquired American Realty Capital Properties, Inc. (“ARCP”) common stock on or after February 28, 2013, including in the American Realty Capital Trust III, Inc. (“T3”) merger, and held such shares at the close of trading on October 28, 2014, inclusive, and you are not an Excluded Party, you should submit a claim because you may be eligible for a distribution from the Fair Fund.
Top - How are payment amounts determined?
The amount of compensation shall be determined in accordance with the Plan of Allocation included in Appendix 1 to the Plan. The amount of compensation will be based on the number of shares of ARCP common stock purchased or otherwise acquired by an Eligible Claimant on or after February 28, 2013, including in the T3 merger, and held at the close of trading on October 28, 2014. The Distribution Payment for Eligible Claimants will be calculated in a pro rata fashion: the Net Available Fair Fund multiplied by the ratio of the Eligible Claimant’s Eligible Shares to the sum of the Eligible Shares of all Eligible Claimants. No Eligible Claimant shall receive a distribution payment unless the preliminary calculation is equal to or greater than $10.00.
Top - How do I file a claim?
You may submit your completed and signed Proof of Claim Form online no later than 11:59 p.m. Eastern Time on November 15, 2021, closely following the directions on this website under the “File Claim” tab. You may also request a claim form be mailed to you by calling 1-866-727-6411. Alternatively, you may mail your completed and signed proof of claim form postmarked on or before November 15, 2021, addressed as follows:
AR Capital Fair Fund
c/o KCC Class Action Services
Distribution Agent
P.O. Box 301171
Los Angeles, CA 90030-1171
Top - How do I get more information?
You may obtain further information by viewing the resources under the “Case Documents” tab of this website. You may also obtain Claim Forms and seek additional information from the Fund Administrator at:
Email: info@ARCapitalFairFund.com
Phone: 1-866-727-6411
Physical Address:
AR Capital Fair Fund
c/o KCC Class Action Services
Distribution Agent
P.O. Box 301171
Los Angeles, CA 90030-1171
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