NEW YORK – July 21, 2021 – After convincing the United States Attorney for the Southern District of New York to voluntarily dismiss an indictment against the former chief financial officer of shopping center owner Brixmor Property Group, a defense team from Greenberg Traurig LLP persuaded the Securities and Exchange Commission to follow suit and drop all charges in a related civil enforcement action against its client.
The 2019 indictment and the SEC civil complaint alleged a scheme to manipulate Brixmor Property Group’s (NYSE-BRX) same-property net operating income—a non-GAAP metric— in an effort to “smooth” its growth and meet quarterly targets. The securities fraud charges were levelled against four former Brixmor executives who were forced to resign over the alleged scheme: Michael Carroll, former CEO; Greenberg Traurig client Michael Pappagallo, former president and CFO; Steven Splain, former chief accounting officer; and former accountant Michael Mortimer. Splain and Mortimer had pled guilty to securities fraud, agreed to the SEC’s entry of a consent judgment, and entered into cooperation agreements with the government. Brixmor entered a consent judgment with the SEC and paid a $7 million civil penalty.
Greenberg Traurig white-collar litigators, Gregory W. Kehoe and Daniel P. Filor, and securities litigator, Robert A. Horowitz, took the bold and unusual step of putting their defense cards on the table to convince the government that Pappagallo was innocent. Following the “innocence proffer,” the government re-interviewed the cooperating witnesses regarding the new information presented during the proffer. The statements from the cooperating witnesses substantially undermined the government’s charges against Pappagallo.
At the request of the U.S. Attorney’s Office, saying it “cannot prove beyond a reasonable doubt” that the major accounting adjustments were “part of a scheme to defraud,” Chief U.S. District Court Judge Colleen McMahon dismissed the indictment on April 1. Judge McMahon also ordered that the arrest records of Pappagallo and Carroll should be expunged.
After reviewing the evidence presented to the federal prosecutors, the SEC on July 19 asked U.S. District Court Judge Analisa Torres to voluntarily dismiss the civil enforcement action against Pappagallo and Carroll. Civil judgments against Splain and Mortimer were not dropped by the SEC.
“We want to thank the U.S. Attorney’s Office and SEC for entertaining our innocence proffer, following up on the information we provided, and taking the extraordinary step of voluntarily dismissing the indictment and the civil complaint,” said Greg Kehoe. “This train was set in motion based on incomplete information and flawed assumptions which the government has now acknowledged have no basis in fact. From the outset, Mr. Pappagallo denied any wrongdoing and is pleased that his stellar reputation has been restored.”
The Greenberg Traurig team also included associates Charlie Berk, Wendy J. Dickieson, Daniel Friedman, and Benjamin K. Shiffman and practice group attorney Daniel Kosove.
About Greenberg Traurig: Greenberg Traurig, LLP (GT) has approximately 2200 attorneys in 40 locations in the United States, Latin America, Europe, Asia, and the Middle East. GT has been recognized for its philanthropic giving, diversity, and innovation, and is consistently among the largest firms in the U.S. on the Law360 400 and among the Top 20 on the Am Law Global 100. The firm is net carbon neutral with respect to its office energy usage and Mansfield Rule 3.0 Certified. Web: www.gtlaw.com