United States District Court, S.D. New York
OPINION AND ORDER
PAUL OETKEN United States District Judge
Brian Block is charged in a six-count indictment with
offenses relating to his allegedly fraudulent preparation of
financial statements for American Realty Capital Properties
(“ARCP”), a real estate investment trust
(“REIT”) for which he served as Chief Financial
Officer (“CFO”). (Dkt. No. 1
(“Indictment”).) Before the Court are two
pre-trial motions filed by Block, the first seeking to
dismiss the indictment in its entirety or in the alternative
to strike portions of it, and the second seeking a bill of
particulars. The Court heard oral argument on the motions on
April 19, 2017. For the reasons that follow, the motions are
served as CFO of ARCP, which is a publicly traded REIT with a
portfolio invested primarily in commercial real estate.
(Indictment ¶¶ 1-5.) ARCP, as is common among
REITs, did not own the real estate directly; rather, the real
estate was held by a subsidiary operating partnership (the
“OP”), and ARCP owned 97% of the OP's common
stock, while the remaining 3% was held by outside
shareholders with non-controlling interests. (Indictment
quarterly financial disclosures included-among other
information-two financial metrics, Funds From Operations
(“FFO”) and Adjusted Funds From Operations
(“AFFO”), neither of which is defined by GAAP but
both of which are common metrics in the real estate industry.
FFO is calculated based on net income, with adjustments for
gains or losses from sales of property, depreciation and
amortization, and unconsolidated partnerships and joint
ventures. (Dkt. No. 28 at 5.) AFFO further adjusts FFO to
account for one-time expenses, though its calculation
methodology is less consistently defined. (Id. at
served as CFO of ARCP in the first and second quarters of
2014. (Indictment ¶ 10.) The Indictment alleges that he
participated in a fraudulent scheme to falsely inflate AFFO
and AFFO per share in in ARCP's public filings for the
second quarter of 2014 (“Q2 2014”) and the first
half of 2014 (“YTD 2014”). (Id.) The
Indictment claims that Block inflated these figures so that
they would be consistent with ARCP's AFFO guidance and to
conceal errors made in the first quarter of 2014 (“Q1
2014”). (Id.) The impact of the misstatement
on YTD 2014 AFFO was approximately $13 million, and on YTD
2014 AFFO per share was approximately $0.03, or 5% of total
AFFO per share. (Id. ¶ 11.)
Indictment, which was unsealed on September 8, 2016, charges
Block with six counts. (Id. ¶¶ 26-40.)
Count One charges Block with conspiracy to commit securities
fraud to make false filings with the SEC and to falsify the
books and records of ARCP. Count Two charges Block with
securities fraud. Counts Three and Four charge Block with
making false statements in filings with the SEC. Count Five
charges Block with filing a false certification with the SEC.
And Count Six charges Block with filing a false certification
with the SEC.
moves to dismiss all counts against him or, in the
alternative, to strike portions of the Indictment. (Dkt. No.
27.) Block also moves for a bill of particulars. (Dkt. No.
Court first considers Block's motion to dismiss and
strike and next addresses his motion for a bill of
Motion to Dismiss and Strike
argues that the Indictment should be dismissed because it
violates due process and because it fails to adequately
allege that his misstatements were materially false or
misleading. In the alternative, he argues that portions of
the indictment should be stricken.
Motion to Dismiss
motion to dismiss under Federal Rule of Criminal Procedure
12(b), the Court accepts the allegations in the indictment as
true and may not consider the sufficiency of the evidence.
United States v. Alyenikov, 737 F.Supp.2d 173, 176
(S.D.N.Y. 2010) (citing United States v. Velastegui,
199 F.3d 590, 592 n. 2 (2d Cir.1999); United States v.
Perez, 575 F.3d 164, 166 (2d Cir. 2009)).
7(c) provides that the indictment “shall be a plain,
concise and definite written statement of the essential facts
constituting the offense charged.” Fed. R. Crim. P.
7(c). It is well established that “an indictment need
do little more than to track the language of the statute
charged and state the time and place (in approximate terms)
of the alleged crime.” United States v.
Yannotti, 541 F.3d 112, 127 (2d Cir. 2008) (quoting
United States v. Alfonso, 143 F.3d 772, 776 (2d Cir.
1998)). “An indictment is sufficient when it charges a
crime with sufficient precision to inform the defendant of
the charges he must meet and with enough detail ...