In a press release filed Tuesday, the Securities and Exchange Commission announced that it had settled with Health Care Services Group for $6 million, resolving its allegations that the company inflated its earnings per share (EPS) by failing to record losses resulting from litigation.
The company, which the SEC says provides support services like food and housekeeping to medical facilities, first came to the agency’s attention as a result of its EPS Initiative, a data-driven approach to detecting “potential accounting and disclosure violations caused by, among other things, earnings management practices.”
According to the agency, Health Care Services failed to record loss contingencies due to lawsuit settlements in 2014 and 2015, “despite mounting evidence that such liability was probable and reasonably estimable.” As a result, earnings per share were consistent and in line with analyst expectations; according to the press release this was misleading to investors and in violation of Generally Accepted Accounting Principles.
While the company will not admit or deny the agency’s findings, the company will pay civil penalties, as will the company’s former CFO, who will also be suspended from appearing before the SEC as an accountant.
