According to the law firm press release, the complaint charges ALC and its former Chief Executive Officer with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants issued materially false and misleading statements, and omitted material information concerning ALC’s compliance with its obligations under a lease covering eight assisted living facilities operated by ALC. Under the terms of the lease, ALC was obligated to maintain specified occupancy rates and insure all regulatory licenses remained in good standing. In its quarterly and annual SEC filings, ALC confirmed its compliance with these obligations.
Undisclosed to investors, however, there is substantial evidence that during the Class Period, ALC failed to maintain the specified occupancy rates and concealed this fact by treating units leased to employees as bona fide rentals. Also undisclosed to investors until revealed in a lawsuit filed by the landlord, state regulators in Georgia and Alabama served notices in February and March 2012 of their intent to revoke licenses for three of the facilities, further violating the lease.
In early May 2012, the audit committee of ALC’s board of directors launched an investigation after receiving an internal whistleblower complaint concerning “possible irregularities in connection with” the lease, and on June 21, 2012, ALC settled with the landlord, causing ALC to incur a net loss of $19.5 million for the first six months of 2012 – an amount close to ALC’s entire net income in 2011.
On August 7, 2012, ALC announced that it was the subject of an SEC investigation concerning a number of topics, including “compliance with occupancy covenants” under the lease and the “leasing of units for employee use.”
Upon this news, ALC shares fell over 26 percent to close at $7.89 per share on August 7, 2012, representing a loss of shareholder value of over $51 million.
On November 14, 2012, an Order was issued by the Court appointing lead plaintiff and lead counsel in this case.
On February 15, 2013, an Amended Complaint for Violation of the Federal Securities Laws was filed by the Lead Plaintiffs against the Defendants.
On September 6, 2013, the parties filed a Stipulation of Settlement. This Settlement was preliminarily approved by the Court on September 25. On December 19, the Court granted final approval of the Settlement and dismissed this case with prejudice.