WageWorks provides tax-advantaged programs for consumer-directed health, commuter, and other employee spending account benefits in the United States. The company operates spending account management programs such as health and dependent care Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), and transit programs.
According to the law firm press release, on March 1, 2018, WageWorks announced that it would delay filing its annual report on Form 10-K. On the news, shares of WAGE closed at $42.70 per share, down $9.75 per share, or 18.6%, on more than 10-times the stock’s average daily trading volume.
The next day, on March 2, 2018, the company said that the delay in reporting its financials was due to a material weakness in internal control over financial reporting as of December 31, 2017, and that its audit committee was conducting an investigation into the company’s revenue recognition practices during fiscal 2016. The investigation is also looking at whether there was an open flow of information and appropriate “tone at the top” for an effective control environment at the company. WageWorks said that the investigation is ongoing and may result in the identification of other accounting issues, further material weaknesses, and/or require the restatement of the company’s financial statements for previously reported periods.
The Complaint alleges that throughout the Class Period, WageWorks and the Individual Defendants issued, or
caused to be issued, a series of false and/or misleading financial statements, failing to disclose that:
(i) there were material weaknesses in WageWorks’ systems of internal controls and that its practices and controls were ineffective; (ii) WageWorks failed to adequately manage and assess risk relating to certain complex transactions, including certain government contracts; (iii) WageWorks improperly recognized revenue thereby inflating its earnings and related financial metrics, and that, (iv) as a result of the foregoing, WageWorks’ financial statements were materially false and misleading at all relevant times.
On August 7, 2018, the Court issued an Order appointing Lead Plaintiff and Counsel. Lead Plaintiff filed a consolidated amended Complaint on May 16, 2019. On September 10, Lead Plaintiff voluntarily dismissed the Underwriter Defendants.