Two former Brixmor Property Group executives, former CEO Michael Carroll and former Chief Financial Officer Michael Pappagallo, have been indicted for crimes allegedly committed during their tenures.
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The two were charged with securities fraud for their participation in a scheme to “smooth” a key metric reported in Brixmor’s public filings. The indictment, which was unsealed in early August, alleges Carroll and Pappagallo reported false figures for every quarter from Q3 2013 to Q3 2015.
During that period, Brixmor, which owns grocery-anchored shopping centers, experienced considerable fluctuation in same-store net operating income across its portfolio of more than 500 properties. The executives allegedly rejiggered the numbers so the NOI appeared more consistent from quarter to quarter.
“As alleged, the most senior executives at Brixmor engaged in a years-long scheme to cook the books and deceive the investing public," Deputy U.S. Attorney Audrey Strauss said in a statement.
The two have pleaded not guilty to charges of conspiracy, fraud and making false statements to the Securities and Exchange Commission, and they were each released on $1M bonds secured by their homes, Bloomberg reports.
The securities fraud, false filings charges and false certification charges each carry a maximum prison term of 20 years. The charge of conspiracy carries a maximum term of five years.
The executives allegedly had help executing their scheme from Brixmore former Chief Accounting Officer Steven Splain and Michael Mortimer, who was senior vice president for management accounting. Splain and Mortimer each pleaded guilty in July in U.S. District Court to one count of conspiracy to commit securities fraud and to making false filings with the SEC, and one count of securities fraud.
The accounting irregularities came to light more than three years ago, uncovered by the New York-based company's audit committee. At that time, Carroll and Pappagallo both resigned their positions.
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