The Boston offices Realty Capital Securities (RCS) falsified shareholder proxy votes to ratify management proposals and facilitate its $378 million acquisition by Apollo Global Management, Secretary of State William Galvin said.
The administrative complaint cites examples in which RCS employees impersonated shareholders during conference calls to vote in favor of management proposals.
RCS employees also fabricated votes for the 2015 special meeting of stockholders on Sept. 29 by posing as investors during calls, Galvin alleged.
“Not only did RCS employees face intense pressure to obtain votes, RCS employees also faced thinly-veiled threats regarding continued employment at RCS,” the complaint states. “As pressure grew RCS employees were even told that their own personal well-being was at stake.”
The proposals restructured RCS’ Business Development Corp. of America (BCDA) investment fund advisory agreement that would put management in control of the fund. The proxy fraud extended to multiple funds, Galvin claims.
The proposals would have given New York investors Nicholas Schorsch and William Kahane greater control of the fund, in which they have a majority interest. Schorsch resigned as CEO of BCDA Adviser in October 2014. A class-action suit filed in April by investors claims executives falsified financial returns to generate over $900 billion in bonuses.
Approximately 42 percent of votes by 23,000 shareholders who participated in the 2015 annual meeting were solicited by telephone by RCS employees, according to Galvin’s office. The activity peaked on June 23 and 24 after previous attempts to hold the meeting were delayed by a lack of quorum.
An unidentified employee described the office culture as “indentured servitude” in which entry-level employees would be forced to work Saturdays and Sundays soliciting proxy votes.
“I don’t know if they all cracked or if they couldn’t get it done so they were told to just do it this way,” the complaint quotes the employee as testifying.
The alleged violations came to Galvin’s attention July 2 when a whistleblower employee met with the enforcement division of the Secretary of State’s office. Galvin has requested RCS be fined and have its broker-dealer registration revoked.
RCS Chairman Michael Weil did not immediately return a phone message. The company is reviewing the complaint, a spokesman told The New York Times.
