Investigation of Healthcare Services Group, Inc.

Healthcare Services Group, Inc. (HCSG) Fails to Disclose SEC Investigation

In March 2017, Monocle Accounting Research issued a report that revealed Healthcare Services had manipulated its reported earnings per share (“EPS”) in the last forty-four consecutive quarters. In response to Monocle’s findings, in March 2018, the SEC launched a “Formal Order of Investigation” into Healthcare Services’ manipulation of its EPS and issued a subpoena to the Company. Despite Healthcare Services’ ongoing investigation, the Company failed to disclose the existence of the investigation in its December 2018 Form 8-K filing with the SEC and instead reported that “here are no actions, suits, proceedings or investigations pending” against the Company. Investors did not become aware of the investigation until two years later, when Healthcare Services finally revealed that the SEC had been investigating the Company’s EPS calculations and practices for 16 months.  On this news, Healthcare Services’ stock price fell a little over 13%, to close at $32.78 per share. The SEC investigation has already cost the Company millions of dollars in legal expenses and has exposed Healthcare Services to potential sanctions and penalties by the SEC. Additionally, a securities class action lawsuit has been filed against the Company and could result in hundreds of millions of dollars more in potential damages.

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