American Realty Capital Properties Inc. (NASDAQ: ARCP) has been under severe pressure since late October. The company announced at that time previously issued financial statements and other financial information should no longer be relied upon. Note that it was not just one financial statement, but as far back as December 2013. This is a situation that also has ties to RCS Capital Corp. (NYSE: RCAP), and this plot seems to be getting thicker rather than more clear.

Following the announcement in October, the company released a statement that Brian Block will be replaced by Michael Sodo as chief financial officer and that Lisa McAlister will be replaced by Gavin Brandon as chief accounting officer. These replacements were effective immediately.

Fast-forward to December 15, Nicholas Schorsch stepped down from his role as executive chairman of American Realty and from the board of non-traded real estate investment trusts (REITs) managed by Cole Capital. Additionally, David Kay stepped down as chief executive and from the board, and Lisa Beeson stepped down as president and chief operating officer.

ALSO READ: Gold and Silver Outlook for 2015

These executives stepped down in order to stabilize the company, according to a statement by William Stanley, the interim CEO and chairman of the board. However, this stabilization has not been received well by investors, especially following legal proceedings that reportedly have just come up. According to the Wall Street Journal, a defamation suit was filed in the New York State Supreme Court in Manhattan by Lisa McAlister against Nicholas Schorsch and David Kay for their alleged roles involved with the financial statements. In this reported suit, Lisa McAlister was said to have alleged that she brought the accounting irregularities for the first quarter to the attention of Nicholas Schorsch and David Kay but was ignored and that numbers were later shifted to cover errors.

The reality is that this news story has become more and more complicated. It also seems to be a case in which there are more unknown issues than there are known facts. Put simply, the American Realty Capital Properties — and the situation around RCS Capital — is becoming an ever harder situation to analyze from the outside.

Shares of American Realty were briefly halted at 1:44 p.m. Eastern Time for five minutes for a “volatility trading pause” following news of this lawsuit. Shortly after 3:00 p.m. Eastern the stock was down 4.5% at $8.03 in very heavy trading volume.

RCS Capital announced in early November that it would not pursue its plan to purchase Cole Capital from American Realty for $700 million. It is worth noting that Nicholas Schorsch is the executive chairman of this company. RCS Capital shares were down by 14% at $10.10 late on Thursday. Its 52-week range is $8.94 to $39.98.

ALSO READ: 9 Big Stocks That Doubled in 2014

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.