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Here’s the thing about some of the metrics that companies make up to paint more flattering pictures of themselves: Insofar as they do not meet generally accepted accounting principles, they are made up, and as long as they are emblazoned with the scarlet letters “non-GAAP,” this is perfectly OK. And here’s the thing about manipulating such a number to make it even more favorable: If the people looking at it understand precisely how you are “manipulating” it, then it’s not manipulation, at least in a legal sense.

These are the things that prosecutors wish they had considered more fully back when they charged the CEO and CFO of a REIT with manipulating something they called “same-property net operating income” back in 2019.

The government’s claims were undercut by the fact that securities analysts and company auditors understood how Brixmor calculated its earnings metrics, said Peter Neiman, a partner at Wilmer Cutler Pickering Hale & Dorr LLP, which represented [Brixmore Property Group CEO Michael] Carroll along with Cleary Gottlieb Steen & Hamilton LLP.

“The government’s charges were contrary to the conclusions of both Big Four accounting firms that reviewed the relevant financial statements, and related to tiny alleged errors in a metric with no fixed definition under GAAP that Brixmor warned was not a substitute for its reported GAAP earnings,” Mr. Neiman said.

Prosecutors Drop Accounting Fraud Case Against Former Brixmor Executives [WSJ]

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