NEW YORK (TheStreet) -- Who knew that a billionaire could have such a bad week? Real-estate big shot Nicholas S. Schorsch has been watching shares of his publicly held American Realty Capital Properties (ARCP) tank over the past week after the company announced that errant financial executives had "intentionally" made $23 million in accounting errors.
The company's Audit Committee investigated the accounting missteps and two senior financial executives resigned and were replaced. But with more investigations pending, according to Reuters and The Wall Street Journal, investors drew the reasonable conclusion they should bail not only from ARCP, the biggest owner of restaurant and other single-tenant properties, but also from other companies run by Schorsch.
That included stock in RCS Capital (RCAP) , a New York-based investment firm that had 9,200 financial advisors at mid-year and shares the same address and telephone number as ARCP. Around the time that books were being cooked at ARCP, Schorsch was exulting the fruits of an aggressive brokerage acquisition spree at RCS, where he serves as executive chairman.
Among those purchases was the June 12 acquisition of Atlanta-based J.P. Turner Associates -- "one of the finest independent retail broker-dealers in the nation," by Schorsch's account.
It's a curious commendation given J.P. Turner's sordid regulatory history. Maybe in RCS's rush to add to its broker ranks it didn't pay attention to things like serial account churning and supervisors who ignored red flags. Worse would be that management knew about the ugly details and decided to buy it anyway.
Spokespeople for RCS and Turner declined to comment.
In just over two years, three managers -- ranking as high as the firm's president -- have been suspended or barred by securities regulators. In September 2012, the Securities and Exchange Commission fined and suspended J.P. Turner's co-founder and president William Mello from acting as a supervisor for five months. In a related case, its former head of supervision, Michael Bresner, was permanently barred last December from working at any broker-dealer as a supervisor. An administrative law judge overseeing the case described Bresner's misconduct as "recurrent and egregious."
That same judge wrote that three former Turner brokers had "recklessly disregarded" their customers' conservative investment objectives. The brokers lost $2.7 million in customer money while generating $845,000 in fees and commissions, according to the SEC. The SEC's case against the three is on appeal.
The violations and sanctions go on and on. Turner supervisor Herman Mannings III was suspended from acting as a principal for two months earlier this year. In that case, Finra said one of Mannings' 60 charges, Leonard A. Goldberg, had done 335 unsuitable mutual fund switches in accounts of 54 customers. Although Mannings should have seen "multiple red flags" in the transactions, he approved them without adequate followup, Finra said.
Mannings did not admit or deny Finra's findings.
Mannings still works at J.P. Turner. Goldberg found a job at Newport Coast Securities in Palm Springs, Calif. When I reached Goldberg by telephone at his office, he said that all of the 300-plus switches "were made at the customers' request." Finra has been investigating him since Oct. 3, 2012, according to his BrokerCheck records.
Douglas J. Schulz, who provided an expert analysis in a recent Finra arbitration against Turner, said in a telephone interview that supervision at the firm "is some of the worst I've ever seen." And he's seen a few: the Web page of his Colorado firm, Invest Securities Consulting, says that he's testified in more than 600 investment and brokerage disputes.