US prosecutors drop accounting fraud case against former Brixmor executives By Reuters

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© Reuters. bFILE PHOTO: Carroll, CEO of Brixmor Property Group awaits the company’s IPO on the floor of the New York Stock Exchange

By Nate Raymond (Reuters) – US prosecutors are dropping accounting fraud charges against the former CEO and CFO of Brixmor Property (NYSE 🙂 Group Inc, who were accused of tampering with a key financial metric for the owner from the large shopping center and operator. Federal prosecutors in Manhattan in a court filing said that based on new information, they concluded that they could not prove their case against former CEO Michael Carroll and former CFO Michael Pappagallo, prompting a judge to dismiss the case on Thursday. That information referred to “particular accounting adjustments that form a significant part of the allegedly erroneous metric charged in the indictment,” prosecutors said. Prosecutors also dropped charges against two former executives who had pleaded guilty, Steven Splain and Michael Mortimer. “We are pleased that the government now agrees with what we have said from the beginning: this indictment should never have been started,” said Victor Hou, Carroll’s attorney at Cleary Gottlieb Steen & Hamilton. Gregory Kehoe, Pappagallo’s Greenberg Traurig attorney, said he appreciated the decision by US Attorney Audrey Strauss’s office to take the “extraordinary” and “rare” step of dismissing the case. The U.S. Securities and Exchange Commission said it is considering dismissing a related civil case. A spokesman for Strauss declined to comment. Brixmor, a New York-based real estate investment trust (REIT) with about 421 shopping malls, agreed in 2019 to pay a $ 7 million fine to settle the SEC charges, without admitting wrongdoing. Researchers began examining Brixmor in February 2016 after the REIT said it had discovered a “smoothing” in the net operating income of the same property (SP-NOI), a measure for investors of a REIT’s financial performance. Prosecutors said Carroll and Pappagallo falsely promoted the consistency of Brixmor’s SP-NOI growth rate, and Carroll described it at an industry conference as the “secret sauce” of the REIT, when in fact the rate fluctuated significantly.

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