Securities Suit V. America Service Group Stays Alive

Securities Suit V. America Service Group Stays Alive - 4/2/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Securities Suit V. America Service Group Stays Alive
Christine Caulfield

Securities Law 360. April 2, 2009
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EXCERPT: A judge has refused to grant a motion by America Service Group Inc. to dismiss a securities suit alleging the health care company manipulated its projected costs and profits. Judge William J. Haynes Jr. of the U.S. District Court for the Middle District of Tennessee, rejected ASG's request to throw out the suit, finding shareholders had alleged enough facts to make their case. The plaintiffs claim that from September 2003 to June 2006, ASG and certain executives artificially inflated the price of the company's stock by fiddling with the reported costs and revenues of its subsidiaries, Secure Pharmacy Plus LLC and Prison Health Services. Named as co-defendants in the suit are ASG CEO Michael Catalano, chief financial officer Michael Taylor, former executives Enoch Hartman III and Grant Bryson, and SPP. ASG is a publicly traded holding company that was created in 1978 to provide medical care to inmates at government facilities through SPP, which provides medical supplies to prisons, and PHS, which runs and staffs the medical clinics at these facilities, according to court documents. The alleged scheme involved disseminating false and misleading statements about ASG's ability to control its subsidiaries' costs and to earn profits on the units' government contracts to provide drugs and medical services to inmates at federal and state prisons. The amended complaint also alleges that the defendants engaged in fraud on the market and that Catalano and Taylor traded on insider knowledge after its manipulative accounting boosted ASG's share price. ASG moved to dismiss the complaint on the grounds that the plaintiffs had failed to sufficiently establish the necessary intent on the part of the defendants to defraud investors.

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