WageWorks, Inc. (WAGE) Accused of Inflating its Earnings
According to the complaint, WageWorks, Inc. (WAGE) repeatedly issued encouraging financial results, assuring investors that the company’s disclosure controls and procedures were effective. Despite WageWorks’ positive representations, WageWorks failed to adequately manage and assess risk relating to certain complex transactions and improperly recognized revenue, thereby inflating its earnings. While WageWorks’ stock was artificially inflated, WageWorks’ Chief Executive Officer sold nearly all of his holdings in WageWorks common stock, including 495,148 shares for net proceeds of $31.3 million. Notably, his sales were not made pursuant to a 10b5-1 trading plan and they were dramatically out of line with past trading practices. On March 1, 2018, WageWorks revealed that it would delay filing its Form 10-K. On this news, WageWorks’ stock price plunged nearly 19% to close at $42.70 per share on March 1, 2018. On March 2, 2018, WageWorks revealed that it had a material weakness in the company’s internal controls and that its Audit Committee was investigating the company’s revenue recognition practices.
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