NEW YORK CITY—Seeking to dispel the perception that his company's top financial personnel had sought to inflate quarterly earnings numbers, American Realty Capital Properties' CEO on Wednesday afternoon said the misstated earnings grew out of an accounting error that was then covered up. The mistake, which precipitated a plummeting of the net lease REIT's stock prices on Wednesday and prompted a number of analysts to issue downgrades, resulted in the resignations of CFO Brian Block and chief accounting officer Lisa McAlister earlier the same day.

“The best way I can describe what happened is that we don't have bad people, we had some bad judgment there, and we have two employees who have resigned as a result” of the decision to not disclose an error in calculating adjusted funds from operations for the first quarter, CEO David S. Kay said during a webcast Wednesday afternoon. He pointed out that none of the GAAP measurements, including NAV, NOI and property metrics, were affected by the ovestatement

ARCP's audit committee determined that in order to conceal the Q1 error, which resulted from a confusion of two different accounting methods to determine AFFO, an accrual that ought to have been included as an expense in Q2's numbers was instead moved up to Q3's ledger, Kay said. As a result, Q2's AFFO figure was inflated by about 5% to $205.3 million, None of the current ARCP executives have been implicated in the investigation, he added.