Federal prosecutors took the unusual step of dismissing criminal charges against former executives of shopping-center owner Brixmor Property Group Inc. , telling a judge they couldn’t prove their claims of accounting fraud.
The move ends the case against Michael Carroll and Michael Pappagallo, Brixmor’s former chief executive officer and former chief financial officer, respectively. Messrs. Carroll and Pappagallo were indicted in July 2019 on claims they manipulated a key earnings metric, same-property net operating income, in order to meet quarterly targets.
But after doing more investigation, prosecutors decided a building block of their fraud theory might not hold water in court, according to a letter they sent Thursday to U.S. District Judge Colleen McMahon in Manhattan. Prosecutors also dismissed cases against two former Brixmor senior accounting officers, Steven Splain and Michael Mortimer, who had earlier agreed to plead guilty.
The outcome is rare and “mildly embarrassing” for the government, said John Coffee, a professor at Columbia Law School and expert in white-collar-crime enforcement. “Here they are saying, ‘we really don’t think we have the evidence, and as true professionals, we don’t think we can pursue the prosecution,’” Mr. Coffee said.
Brixmor is a real-estate investment trust, or REIT, that owns about 393 shopping centers with tenants such as TJX Cos., Kroger Co. and Dollar Tree Stores Inc. The company began an internal investigation in 2015 after an employee in its accounting department alleged executives used “cookie-jar” tactics to meet earnings guidance given to Wall Street, according to a 2019 Securities and Exchange Commission order resolving a separate civil-fraud case against Brixmor.
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