(Reuters) – Federal prosecutors drop accounting fraud against the former CEO and one-time chief financial officer of Brixmor Property Group Inc., who was accused of manipulating key financial statistics for the large mall's owners and operator.
Federal prosecutors in Manhattan in a court filed that they concluded from new information that they could not prove their case against former CEO Michael Carroll and ex-CFO Michael Pappagallo, which led a judge to dismiss the case on Thursday.
That information concerned "special accounting adjustments that form a significant part of the alleged inaccurate statistics that were prosecuted in the indictment," prosecutors said.
Prosecutors also dropped charges against two former confessors, Steven Splain and Michael Mortimer. [1
Gregory Kehoe, Pappagallo's lawyer at Greenberg Traurig, said he appreciated the decision by the American lawyer Audrey Strauss' office to take the "extraordinary" and "rare" step to dismiss the case.
The US Securities and Exchange Commission said it was evaluating the dismissal of a related civil case.
A spokesman for Strauss declined to comment.
Brixmor, a New York-based real estate investment firm (REIT) with approximately 421 malls, agreed in 2019 to pay a $ 7 million fine for settling SEC fees, without acknowledging errors.
Investigators began investigating Brixmor in February 2016 after REIT said it had revealed "equalization" of the same property net operating profit (SP-NOI), a measure for investors of a REIT's financial result.
Prosecutors said that Carroll and Pappagallo incorrectly proclaimed the consistency of Brixmor's SP-NOI growth rate, with Mr Carroll describing it at an industry conference as REIT's "secret sauce", when in fact the speed fluctuated significantly.