Labaton Keller Sucharow LLP Announces Expanded Securities Class Action Lawsuit Filed Against PACS Group, Inc. and Related Parties

By: Labaton Keller Sucharow LLP via Business Wire

November 21, 2024 at 12:58 PM EST

Labaton Keller Sucharow LLP (“Labaton”) announces that, on November 21, 2024, it filed a securities class action lawsuit (the “Complaint”) on behalf of its client New Orleans Employees’ Retirement System (“New Orleans”) against PACS Group, Inc. (“PACS” or the “Company”) (NYSE: PACS) and related parties (collectively, “Defendants”). The action, which is captioned New Orleans Employees’ Retirement System v. PACS Group, Inc., No. 24-cv-08882 (S.D.N.Y) asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and U.S. Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder, on behalf of all persons or entities who purchased or otherwise acquired PACS securities between April 11, 2024, and November 5, 2024, inclusive (the “Class Period”). The action also asserts claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) on behalf of all persons and entities that purchased or otherwise acquired PACS common stock pursuant, or traceable, or both, to materials issued in connection with the Company’s secondary public offering completed on or about September 6, 2024 (the “SPO”).

The Complaint expands upon a related action against PACS captioned Manchin v. PACS Group, Inc., No. 1:24-cv-08636 (S.D.N.Y) (the “Manchin Complaint”) by adding the claims in connection with the SPO outlined above. The Complaint also expands upon the Manchin Complaint by adding three additional defendants who participated in the SPO. These additional defendants are Michelle Lewis (PACS’ Chief Accounting Officer), Evelyn Dislaver (a director on PACS’ board), and UBS Securities LLC (an SPO underwriter).

Pursuant to the notice published on November 13, 2024, in connection with the filing of the Manchin Complaint, as required by the Private Securities Litigation Reform Act of 1995, investors wishing to serve as Lead Plaintiff in these related actions pending against PACS are required to file a motion for appointment as Lead Plaintiff by no later than January 13, 2025.

PACS is one of the largest operators of skilled nursing facilities and post-acute care facilities in the United States. Headquartered in Farmington, Utah, PACS serves over 27,000 patients daily across its national portfolio of approximately 280 facilities in 16 states.

The Complaint alleges that the documents filed by Defendants in connection with the SPO (the “SPO Materials”) were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading and were not prepared in accordance with the rules and regulations governing their preparation. Additionally, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and prospects. Specifically, the SPO Materials and Class Period statements made false and/or misleading statements and/or failed to disclose: (a) that PACS inflated its Medicare revenues by misclassifying lower-acuity patients as high-acuity patients that required skilled care in violation of a Covid-era waiver, thereby securing higher reimbursement rates; (b) that after the expiration of the COVID-era waiver, PACS inflated its revenues by fraudulently billing for unnecessary treatments and for services never provided to patients; (c) that PACS’ historical revenues, competitive advantages, and growing market share were the result of systemic, improper, unethical, and/or illegal practices, and, thus, unsustainable; (d) that PACS’ risk disclosures were materially false and misleading because they characterized adverse facts that had already materialized as mere possibilities; and (e) as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and/or misleading or lacked a reasonable basis.

The truth began to emerge on November 4, 2024, when Hindenburg Research published a report detailing several allegations against the Company, including evidence of PACS’ misuse of COVID waivers to inflate Medicare reimbursements as well as other unsustainable revenue practices which misrepresented the Company’s financial health. On this news, PACS’ share price dropped $11.93 per share, or 27.8 percent, to close at $31.01 per share on November 4, 2024.

Then on November 6, 2024, the Company announced that it would delay the release of its third-quarter 2024 financial results. PACS stated that the postponement was due to the Company’s Audit Committee investigating recent third-party allegations concerning its reimbursement and referral practices. PACS also disclosed that it had received civil investigative demands from the federal government regarding these practices, which it stated may or may not have been related to the recent third-party report. On this news, PACS’ share price dropped $11.45 per share, or 38.8 percent, to close at $18.09 per share on November 6, 2024.

If you purchased or acquired PACS securities during the Class Period or purchased PACS securities pursuant and/or traceable to the SPO Materials, you are a member of the “Class” and may be able to seek appointment as Lead Plaintiff. Lead Plaintiff motion papers must be filed no later than January 13, 2025. The Lead Plaintiff is a court-appointed representative for absent members of the Class. You do not need to seek appointment as Lead Plaintiff to share in any Class recovery in this action. If you are a Class member and there is a recovery for the Class, you can share in that recovery as an absent Class member. You may retain counsel of your choice to represent you in this action.

If you would like to consider serving as Lead Plaintiff or have any questions about this lawsuit, you may contact Francis P. McConville, Esq., of Labaton at (212) 907-0650 or via email at fmcconville@labaton.com. You can view a copy of the Complaint online here.

New Orleans is represented by Labaton Keller Sucharow, which represents many of the largest pension funds in the United States and internationally with combined assets under management of more than $4 trillion. Labaton Keller Sucharow’s litigation reputation is built on its more than 60 years of securities litigation experience, more than 90 full-time attorneys, and in-house team of investigators, financial analysts, and forensic accountants. Labaton Keller Sucharow has been recognized for its excellence by the courts and peers, and it is consistently ranked in leading industry publications. Offices are located in New York, Delaware, London, and Washington, D.C. More information about Labaton Keller Sucharow is available at labaton.com.