Michael Carroll, Michael Pappagallo Charged with Securities Fraud, New York 2024

Former CEO and CFO Charged with Securities Fraud in Manhattan Federal Court

Michael Carroll and Michael Pappagallo, the former chief executive officer and chief financial officer of publicly traded real estate investment trust Brixmor Property Group, have been charged with securities fraud in connection with a scheme to fraudulently ‘smooth’ a key metric reported in the company’s public filings.

According to the indictment unsealed today in Manhattan federal court, Carroll and Pappagallo allegedly participated in a years-long scheme to cook the books and deceive the investing public. The case is assigned to U.S. District Judge Colleen McMahon.

The indictment alleges that Carroll and Pappagallo engaged in a scheme to fraudulently manipulate Brixmor’s Same Store Net Operating Income (SS-NOI) metric, which measures the amount of income derived from a set group of properties. They allegedly inflated the metric by using a non-GAAP metric related to financial performance.

As the respective CEO and CFO of the company, Carroll and Pappagallo were required to sign reports and file certifications entitled ‘Certification of Periodic Report Under Section 302 of the Sarbanes-Oxley Act of 2002’ that attested to the veracity of Brixmor’s SEC filings. They allegedly lied about the company’s performance and harmed the integrity of the market.

Deputy U.S. Attorney Audrey Strauss said, ‘When executives allegedly lie to the investing public about their company’s performance and thereby harm the integrity of the market, they must be held accountable.’

USPIS Inspector-in-Charge Philip R. Bartlett added, ‘By devising schemes to make Brixmor more appealing to the investing public, Carroll and Pappagallo not only committed criminal acts, their actions led them down a path of distrust from shareholders.’

Carroll and Pappagallo are expected to be presented later today before Judge McMahon in Manhattan federal court.

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