The Ohio Attorney General’s Office announced yesterday that they are seeking to be the lead plaintiff in a lawsuit against an investment “trust” based out of New York City who misled investors and overstated earnings, resulting in a loss of over $7.5 million to Ohio’s public retirement funds.

American Realty Capital Properties, Inc., (ARCP) is alleged to have understated losses at the end of June.  When the accounting fraud was revealed in October, their stock suffered losses of over $3 billion dollars, causing the massive hit to OPERS and STRS.  These retirement funds are essentially the property of Ohio public employees and taxpayers.

According to their website, the business is established on “ethical values”:

Our company culture, which we consider to be the root of our success, is established on ethical values and a commitment to approaching every decision through the eyes of the investors we serve. We do this in the confidence that the more accountable we are to stockholders today, the better our business will be in the future.

This foundation guides all of our actions, policies and programs, including our corporate governance (led by an independent board of directors), fully transparent reporting, due diligence and regulatory compliance, and industry-leading best practice standards which are designed to protect the investor’s best interest at all times. These duties are important to us because we know that how we do things is just as important as what we do.

This is how we demonstrate to our stockholders daily that ARCP is a partner they can trust.

Thanks, Big Business.

Ohio’s AG, Mike Dewine, filed a motion in U.S. District Court to take over the case as the lead plaintiff against the company which disclosed that the cover-up and accounting fraud had “intentionally misstated company financials, and subsequently covered up the accounting irregularities”.

Let’s hope this ends better for Ohio’s public employees than was the case with the major losses suffered when John Kasich’s Lehman Brothers filed for bankruptcy and Ohio’s public pension systems lost between $220 million and $480 million on Lehman Brothers assets (according to calculations by the state treasurer’s office).  Those significant losses led to major changes to the systems directed by Ohio’s legislators (though to be fair, they held up the process for years while the retirement plan managers were ready to act).

Here’s the full press release:

Attorney General DeWine to Seek Lead Plaintiff Status for Ohio Pension Funds in Securities Lawsuit

(COLUMBUS, Ohio)—Following a recent review of securities and accounting fraud allegations, Ohio Attorney General Mike DeWine announced that he has filed a motion for two of Ohio’s pension funds to lead a class of investors in a lawsuit against American Realty Capital Properties (ARCP), Inc. The news comes after the company, a real estate investment trust based in New York City, disclosed that ARCP officials intentionally misstated company financials, and subsequently covered up the accounting irregularities, resulting in approximately $3 billion in losses for the company’s shareholders, including State Teachers Retirement System of Ohio (STRS) and the Ohio Public Employees Retirement System (OPERS).

“The information American Realty Capital Properties provided pension fund managers was false, misleading, and purposefully hid accounting fraud,” said Attorney General DeWine. “This fraud inflated the true value of the company, causing Ohio teachers and public employees to lose millions of hard-earned retirement dollars.”

The motion alleges that ARCP issued materially false and misleading financial statements by, among other things, overstating reported adjusted funds from operations, and then intentionally covering up their impropriety. In addition, it alleges that ARCP improperly accounted for various accruals and expenses that materially affected the company’s reported earnings per share. As a result of ARCP’s improper accounting and cover-up, key performance metrics were overstated and reported net losses for the reporting periods ending June 30, 2014 were understated. Revelation of this alleged accounting fraud by ARCP on October 28, 2014 resulted in losses in the company’s stock value of approximately $3 billion. STRS and OPERS lost in excess of $7.5 million as a result of the alleged fraud.

The motion asks the court to consolidate several lawsuits against ARCP and to name the Ohio pension funds STRS and OPERS lead plaintiffs.

“STRS Ohio looks forward to working once again with Attorney General DeWine and OPERS to protect the integrity of the financial markets,” said Michael Nehf, Executive Director for STRS Ohio.

“The OPERS Board of Trustees has been an active participant in securities litigation cases on behalf of our members and retirees,” said Karen Carraher, OPERS’ executive director. “This is a fiduciary responsibility that we take very seriously, and it is consistent with past actions we have taken to encourage corporate governance reform and to seek compensation for unlawful behavior. We intend to continue an aggressive posture to protect the integrity of the marketplace for all investors and citizens of Ohio.”

The motion was made in the United States District Court for the Southern District of New York.