Shareholders of a Chattanooga-based shopping center developer lost nearly $150 million in market value Wednesday after a report that federal law enforcement officials are probing the company for alleged accounting fraud.
Shares of CBL & Associates Properties Inc. fell 8.38 percent to close at $9.40, which equaled its low for the year. For a time, shares were down more sharply after The Wall Street Journal reported that the FBI and Securities and Exchange Commission are investigating the business.
Also, several law firms have said they're investigating potential securities claims on behalf of CBL shareholders resulting from the allegations, which could result in lawsuits.
CBL denied any wrongdoing after the Journal's report, which said the agencies are focusing their examination on whether CBL officials falsified information on financial statements to banks when applying for financial arrangements.
Citing unnamed sources, the report said law enforcement officials have talked to former CBL employees who alleged the company inflated its rental income and properties' occupancy rates.
CBL said in a statement that it has not been contacted by the FBI or the SEC and its officials "strongly deny" the allegations in the newspaper report.
"As we told the (Wall Street Journal) reporter - who contacted our company for the first time on Tuesday regarding this matter - neither the company nor its executives have been contacted by the FBI, the SEC or any regulatory agency regarding our company's accounting or financial practices."
CBL CEO Stephen Lebovitz said allegations of improper accounting are "completely baseless" and "the company operates with the utmost integrity and holds itself to the highest ethical standards. We have stringent policies and procedures in place to ensure all of our accounting and financial processes and reporting comply with applicable laws, rules and regulations."
The Journal said authorities have separately asked questions about the relationship between the company and U.S. Sen. Bob Corker, R-Tenn. The newspaper had previously disclosed trades with CBL that proved valuable for the former Chattanooga mayor who is a friend of several top CBL officials.
Corker reported in Senate financial disclosures making numerous trades in CBL stock for himself and his children.
The Journal said authorities have found no evidence to suggest that Corker has committed wrongdoing.
"A politically motivated special interest group that refuses to disclose its donors continues to make baseless charges against Senator Corker, and we know that any effort to examine his actions will result in their smear campaign being discredited," said Micah Johnson, Corker's spokeswoman.
In November, the Campaign for Accountability, a nonprofit watchdog organization, called on the SEC to investigate Corker for his trades of CBL stock.
On Wednesday, both the SEC and FBI would not comment on the Journal's report.
"Per Department of Justice policy, I can neither confirm nor deny the existence of an investigation," said Andrew Ames of the FBI Washington field office in an email.
Dr. Bruce Hutchison, a UTC economics professor, said that the information a company such as CBL would provide banks would be technical in nature and there could be a difference of interpretation of it.
"My first impression is that in all likelihood, it's that type of technical interpretation," he said. "But who knows at this point."
Warren Barnett, president of the Barnett & Co. investment advisory firm in Chattanooga, said that the SEC has not issued a Wells Notice regarding CBL, which the agency sends to people or firms when it's planning to bring an enforcement action.
"That has not been sent out," he said. "Without a Wells Notice, it's difficult to say how serious [is the report.] It's too early to say."
The executive director of CFA, Anne Weisman, said in a statement Wednesday that "Corker's pattern of buying CBL stock low, selling high, and reaping a huge profit are highly suspicious."
"The inquiry into Sen. Corker's actions demonstrates that not even powerful senators are above the law," she said of the SEC probe.
In November, the Journal reported that Corker had failed to properly disclose several CBL trades on his personal financial statements filed with Congress. Corker later amended his financial disclosure, blaming "technical errors" in the original filing by his former accounting firm.
CBL owns or operates 145 retail properties across the country, including Hamilton Place and Northgate malls in Chattanooga.
Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.