SEC fines Healthcare Services Group for concealing legal settlements, inflating earnings (updated)

Healthcare Services

24/08/2021 15:25

(Adds settlement details, company statement, CFO change)
    By Jonathan Stempel
    Aug 24 (Reuters) - Healthcare Services Group Inc  HCSG.O 
will pay a $6 million fine to settle U.S. Securities and
Exchange Commission civil charges that its failure to account
for legal settlements with its employees enabled it to inflate
quarterly results, the regulator said on Tuesday.
    The SEC said the Bensalem, Pennsylvania-based provider of
housekeeping and dining services to healthcare facilities did
not set aside enough money in 2014 and 2015 for expected
settlements of class-action litigation claiming it violated
federal and state wage-and-hour laws.
    Had the company properly recorded its settlement costs, it
would have missed Wall Street earnings forecasts at least four
times and been unable to report multiple quarters of increased
earnings per share, thereby misleading investors, the SEC said.
    The SEC called the settlement the third in its EPS
Imitative, which uses risk-based data analysis to uncover
potential accounting and disclosure violations resulting from
so-called "earnings management," among other things.
    John Shea, Healthcare Services' chief financial officer
since 2012, will pay a related $50,000 civil fine and accepted a
two-year suspension from appearing before the SEC as an
accountant.
    The company said he will become chief administrative officer
on Sept. 1. It did not immediately respond to a request for
additional comment.
    Derya Warner, the company's controller, agreed to a $10,000
SEC fine, the regulator said.
    None of the defendants admitted or denied wrongdoing.
    In a statement, Healthcare Services Chief Executive Ted Wahl
said the company cooperated with the SEC, and was committed to
strong internal controls, compliance practices and corporate
governance.
    

 (Reporting by Jonathan Stempel in New York, Editing by Mark
Porter)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))