Koch v. Healthcare Services Group, Inc. et al 2:19-cv-01227-ER — On March 22, 2019, investors sued Healthcare Services Group, Inc. (“Healthcare Services” or the “Company”) in United States District Court for the Eastern District of Pennsylvania. Plaintiffs in the HCSG class action allege that they acquired Healthcare Services stock at artificially inflated prices between April 11, 2017 and March 4, 2019 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. For more information on the HCSG lawsuit, please contact us today!

Summary of the Allegations

Company Background

Since its inception in 1976, the Company (NASDAQ: HCSG) has provided housekeeping/laundry and dining/nutrition services to the healthcare industry.

Healthcare Services says it employs more than 45,000 people and conducts business in 48 states. Its clients/customers include U.S. nursing homes, retirement communities, rehabilitation centers and hospitals.

Headquartered in Bensalem, Pennsylvania, the Company went public in 1983. As of March 13, 2019, it reportedly had more than 73 million shares of common stock “issued and outstanding.”

Summary of Facts

Healthcare Services and its CEO (collectively the “Defendants”) are now accused of deceiving investors by lying and withholding critical information about the Company’s business practices, operations and prospects during the Class Period.

Specifically, they are accused of omitting truthful information about certain accounting practices from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused Healthcare Services stock to trade at artificially inflated prices during the time in question.

The truth came out in a form the Company filed with the SEC on March 4, 2019. In it, Healthcare Services acknowledged that it had received a letter from the SEC in November 2017 “regarding an inquiry that the SEC was conducting into EPS calculation practices and requesting that the Company voluntarily provide certain information and documents relating to its EPS rounding and reporting practices.”

On the same form, the Company also revealed that it authorized its outside counsel “to conduct an internal investigation, under the direction of the Company’s Audit Committee, into matters related to the SEC subpoena” during the fourth quarter of 2018.

Finally, on that same day, Monocle published an article about the matter in which it stated in pertinent part: “Healthcare Service Group’s decade of apparent earnings manipulation through the ‘strategic rounding’ of its quarterly EPS has finally bitten the company and its investors.”

A closer look…

As alleged in the March 22 complaint, Defendants repeatedly made false and misleading public statements during the Class Period.

For example, during an earnings call on April 12, 2017, the Company’s CEO answered questions about prior allegations of EPS rounding, saying in pertinent part: “Well, I can tell you, without knowing exactly what article, or more specifically what iteration of articles you are referring to, I can tell you we believe our best efforts are spend actually running the company and delivering outcomes for our customers, our employees and all of our shareholders, not the latest and greatest investor sentiment or third-party articles and blogs.”

On the same form, the CEO also stated in pertinent part: “We’ve tripled the size of the company, customers, employees, revenues, profits. We’ve paid out more than $400 million in dividends during that time frame. And most importantly, we’ve positioned the company today to surpass that performance and deliver for all of our stakeholders over the next decade. So again, I think our track record of performance over the past 10 years really stands on its own.”

Impact of the Alleged Fraud on Healthcare Services’ Stock Price and Market Capitalization

The following chart illustrates the stock price during the class period:

Actions You May Take

If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.

NOTE: The deadline to file for lead plaintiff in this class action is May 21, 2019. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.

In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in Healthcare Services common stock using court approved loss calculation methods.

Recently Filed Cases

Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action.  Please contact us if you would like an LK report for any of these cases:

About Us

Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse.  With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.

Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients.  Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.

For additional information about this case or our institutional services, please contact us.