The U.S. Securities and Exchange Commission imposed a $7 million fine on commercial retail property owner Brixmor and four of its former executives for improperly adjusting the REIT’s same-property net operating income to inflate its quarterly growth for a two-year period.
According to the complaint, from the third quarter 2013 to the third quarter 2015, the executives selectively recognized income from a miscellaneous account, incorporated income that the company had represented was excluded, and improperly lowered the prior year's same-property net operating income.
The former executives charged for manipulating the measures, which are not audited under GAAP but are subject to SEC enforcement, are CEO Michael Carroll, CFO Michael Pappagallo, CAO Steven Splain and Senior VP of Accounting Michael Mortimer.
"We allege that these senior executives intentionally manipulated a key metric to mislead investors about Brixmor's ability to hit its targets," says Marc Berger, director of the SEC's New York Regional Office. "A company that chooses to publicly present non-GAAP financial measures must do so truthfully."
Without admitting or denying the allegations, the company agreed to pay the $7 million penalty and retain an independent consultant to review and assess controls relating to the calculation and presentation of non-GAAP measures.