Real estate losses: Schorsch sued in Delaware
"Enriched themselves by funneling revenue... to another co. they controlled"
"A group of investors has accused Nicholas Schorsch, the former nontraded REIT czar, and his partners of siphoning off revenue in RCS Capital, or RCAP, a company once controlled by Mr. Schorsch that went into bankruptcy," in a Delaware Chancery Court suit filed last week, writes Investment News here.
Schorsch, who once controlled a real estate empire worth over $30 billion, has left investors complaining they lost money tying up their cash in real estate securities they are unable to sell without deep discounts.
Schorsch, formerly based in the Jenkintown area, converted his family's former metal-recycling and processing companies in Philadelphia and South Jersey into a constellation of real estate companies based largely in New York over the past 15 years.
The Delaware suit claims Schorsch and his partners "enriched themselves by funneling revenue from RCAP to AR Capital, another company they controlled." Schorsch took RCAP public in 2013, then declared bankruptcy last year after it couldn't pay debt Schorsch used to buy a string of retail brokerages and other assets. The company is now known as Aretec, doing business as broker Cetera Financial Group.
The investors, through RCS Creditor Trust, say their investment was wiped out. They say Schorsch and fellow RCS officers, veteran investment bankers William Kahane, Peter Budko, Edward "Michael" Weil and Brian Block, "exploited their control of RCAP to 'enrich' their wholly owned, nontraded REIT business, AR Capital," according to Investment News.