Healthcare Services Group has agreed to fork out $6 million to settle expenses that its CFO failed to file loss contingencies from legal liabilities to inflate its earnings.
In accordance to the U.S. Securities and Exchange Commission, the accounting violations resulted in HCSG’s earnings becoming misstated for six quarters amongst the to start with quarter of 2014 and the fourth quarter of 2015.
Had CFO John Shea “properly recorded the economic impression of the loss contingencies at the time they were probable and fairly estimable, the company would have claimed decreased EPS and missed investigation analysts’ consensus EPS estimates in a lot of of the applicable quarters,” the SEC stated in an administrative get.
To settle the expenses, HCSG and Shea agreed to fork out civil penalties of $6 million and $fifty,000, respectively. Shea also agreed to be suspended from showing up and working towards prior to the SEC as an accountant, which means he are unable to take part in the economic reporting or audits of community firms.
The company announced Tuesday it experienced appointed Shea chief administrative officer, efficient Sept. one. He experienced served as CFO considering the fact that 2012.
“HCSG repeatedly failed to file loss contingencies associated to litigation settlements inspite of mounting proof that this kind of liability was probable and fairly estimable, even though misleading investors by reporting inflated internet revenue and regular EPS advancement,” Anita Bandy, affiliate director of the SEC’s Division of Enforcement, stated in a news launch.
Bensalem, Pa.-centered HCSG supplies housekeeping, laundry, eating, and meals companies to the health care industry. In 2014 and 2015, it settled a number of class- and collective-action lawsuits in which staff alleged wage-and-hour violations.
The SEC stated Shea to start with violated accounting requirements when he failed to adequately file a loss contingency in the to start with two quarters of 2014 from a settlement of amongst $two.five million and $three million.
Shea decided that no amount of money for the loss contingency was probable or fairly estimable in portion for the reason that the settlement experienced not gained final courtroom approval at the time. But in accordance to the SEC, the contingency was “both probable and fairly estimable by Q2 2014, or previously, regardless of no matter if the courtroom experienced granted any approval of the settlement.”