Ex-Brixmor Property CEO, CFO charged in accounting fraud

Brixmor Property Group Inc.’s former CEO and ex-CFO were charged with manipulating income at the New York-based shopping-center owner.

SEC building with official seal
The Securities and Exchange Commission stands in Washington, D.C., U.S., on Monday, May 10, 2010. The chief executive officers of the biggest U.S. stock markets were called to a meeting at the U.S.Securities and Exchange to discuss last week’s selloff in equities, according to four people familiar with the situation. Photographer: Joshua Roberts/Bloomberg

Michael Carroll, who was chief executive officer, and Michael Pappagallo resigned in February 2016 following a discovery by the audit committee that employees were “smoothing” income to make quarterly results more consistent and within guidance issued by the company.

Carroll, 51, and Pappagallo, 60, manipulated same-store net operating income “to fraudulently convey to the investing public that Brixmor was accomplishing predictable, consistent and stable growth quarter after quarter,” prosecutors said in an indictment unsealed Thursday.

Not guilty plea

The two men pleaded not guilty to charges of conspiracy, fraud and making false statements to the U.S. Securities and Exchange Commission. They were each ordered released on $1 million bond secured by their homes.

They’re charged with reporting false figures for every quarter from the third quarter of 2013 to the third quarter of 2015. Prosecutors said they were aided by two former accounting officials.

Steven Splain, the former chief accounting officer and Michael Mortimer, who was senior vice president for management accounting, pleaded guilty last month to conspiracy and securities fraud, Manhattan U.S. Attorney Geoffrey Berman said in a statement.

Carroll, Pappagallo, Splain and Mortimer were also sued by the SEC on Thursday.

Blackstone Group LP created Brixmor in 2011 through the roughly $9 billion purchase of more than 500 strip malls from Australia’s Centro Properties Group, and took the real estate investment trust public in October 2013 as commercial-property markets were rebounding from the 2008 financial crisis. Blackstone sold its remaining 14% stake three years ago.

The case is U.S. v. Carroll, 19-cr-00545, U.S. District Court, Southern District of New York (Manhattan).

MORE FROM ACCOUNTING TODAY