Pontiac (Mich.) General Employees Retirement System filed a securities class-action lawsuit Wednesday on behalf of shareholders of Hanger Inc., an Austin, Texas-based orthotic products and services company.
The $490 million pension fund filed the lawsuit in U.S. District Court in Austin, Texas, on behalf of purchasers of Hanger shares between August 2013 and August 2014, alleging that company executives misrepresented or concealed adverse impacts of Medicare audits. An Aug. 7, 2014, earnings call revealed a 23% decline in earnings per share as a result of those audits, causing the shares to drop 25%. The earnings drop was “the direct result of audits that revealed the receivables and bad debt had been misstated,” said Avi Josefson, a partner at Bernstein Litowitz Berger & Grossmann, which filed the suit on behalf of the pension fund.
No class has been certified yet, but other institutional investors are expected to join, said Alexander Coxe, spokesman for the law firm. Calls to Hanger were not returned at press time. A third-quarter earnings call is scheduled for Nov. 17.
