Skilled Healthcare Group, Inc. Under Investor Investigation
Company Name(s):
Skilled Healthcare Group
Affected Securities:
NYSE: SKH An Investigation on behalf of investors of Skilled Healthcare Group, Inc. (NYSE:SKH) over possible breaches of fiduciary duty and other violations of the law by certain officers and directors at Skilled Healthcare Group, Inc. was announced.
Skilled Healthcare Group, Inc, located in California, California, is a holding company, which owns subsidiaries, that operate skilled nursing facilities, assisted living facilities, hospices and a rehabilitation therapy business. Skilled Healthcare has a joint venture with APS Acquisition, LLC that operates a pharmacy in Austin, Texas.
Skilled Healthcare Groups revenue increased over the past four years from $531.66 million in 2006 to $759.75million in 2009. Nevertheless its Net Income went from a Net Income of $14.79million in 2006 to a Net Loss of $132.79million in 2009.
On July 06, 2010 a Humboldt County, California, Superior Court jury found Skilled Healthcare Group, Inc liable and ordered Skilled Healthcare Group to pay $677 million in statutory and restitutionary damages for not providing sufficient nursing care to patients. After the verdict was announced, Skilled Healthcare Group’s shares declined over 75% to $1.52 per share on July 07, 2010. In the following Humboldt County Superior Court Judge W. Bruce Watson denied a motion for a mistrial and said Skilled Healthcare failed to establish juror misconduct in the case. On August 30, 2010, Skilled Healthcare Group Inc. said it will appeal the court order. The investigation by a law firm concerns whether Skilled Healthcare Group’s directors and officers damaged Skilled Healthcare by causing or allowing it to violate California's health and safety code by not providing the minimum of 3.2 hours of direct nursing care per day to patients at various facilities.
Skilled Healthcare Groups faces already a lawsuit in the United States District Court for the Central District of California on behalf of all purchasers of Skilled Healthcare Group, Inc. (NYSE:SKH) common stock during the period from May 14, 2007 through June 9, 2009, alleging that Skilled Healthcare Group, Inc and certain of its officers and directors violated the federal securities laws Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, by misrepresenting its income in its IPO prospectus and in other SEC filings and public communications which had the effect of artificially inflating the market price. In an announcement dated June 9, 2009, Skilled Healthcare announced that the Company's prior financial statements for the annual and quarterly periods between January 1, 2006 and March 31, 2009 should no longer be relied upon and that the Company expected to restate those financial statements.
On June 9, 2009, Skilled Healthcare announced that the Company’s financial statements for the annual and quarterly periods between January 1, 2006 and March 31, 2009 were inaccurate and should no longer be relied upon, and that Company expected to restate those financial statements. According to the announcement, Skilled Healthcare discovered errors relating to its accounting for reserves on its accounts receivable. The Company estimated that the cumulative charges against after-tax earnings in the aggregate would be between $8 million and $9 million. As a result of the announcement that the Company misstated its earnings, its stock price has dropped, damaging investors, so the lawsuit.