Realty Capital Securities Facing Fraud Charges
The state of Massachusetts recently charged Realty Capital Securities with proxy vote fraud.
Realty Capital Securities, part of RCS Capital Corporation, is currently facing fraud charges. The state of Massachusetts has accused Realty with fraudulently using proxy votes in various real estate dealings. The Massachusetts Secretary of the Commonwealth filed an administrative complaint, which included allegations that Realty agents imitated shareholders in order to cast fraudulent votes for AR Capital-sponsored investment programs.
Realty Capital Securities is part of RCS Capital Corporation, specifically the branch of the company that deals in non-traded real estate investment trusts or “REITs,” as well as other alternative types of securities.
According to the administrative complaint, one instance of fraud occurred back in June at the annual meeting for the Business Development Corporation of America (BDCA). Another allegedly occurred at a BDCA meeting in September.
The complaint names Nicholas Schorsch as the sponsor of the real estate deals Realty allegedly used proxy votes to support. Schorsch is an owner of AR Capital, a principal shareholder in RCS Capital, and a former chairman and COO of the BDCA.
William Galvin, the Secretary of the Commonwealth, is attempting to revoke RCS’s registration status in the state of Massachusetts, as well as impose a cease-and-desist order and a fine.
“Any registered entity whose supervision and oversight is so lax as to allow fabricated proxy votes should not be doing business with the Commonwealth,” commented Galvin.
Galvin also added that RCS allegedly used bullying tactics to garner those victories by way of proxy votes. An example of this is an accusation, based on email findings, that RCS threatened to fire their employees if they didn’t prioritize soliciting proxies.
The complaint, filed on November 12, focused on two votes, but the office of the Massachusetts Secretary of the Commonwealth believes RCS fabricated many more.