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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES AND EXCHANGE COMMISSION v. HEALTHCARE SERVICES GROUP,
INC., DANIEL P. MCCARTNEY, THOMAS A. COOK AND MELVYN B. MASON,
Civil Action No. 96cv-6464 (E.D. Pa.).
Litigation Release No. 15068 / September 25, 1996.
Accounting and Auditing Enforcement
Release No. 823 / September 25, 1996.
The U.S. Securities and Exchange Commission announced today
that on September 24, 1996 it filed a lawsuit in federal district
court in Philadelphia, Pennsylvania, alleging violations of the
anti-fraud, reporting, internal controls and books and records
provisions of the federal securities laws by Healthcare Services
Group, Inc. ("HSG" or "the Company"), HSG chief executive officer
and chairman of the board, Daniel P. McCartney, HSG president and
former chief financial officer Thomas A. Cook, and former vice-
president Melvyn B. Mason. HSG, headquartered in Huntingdon
Valley, Pennsylvania, supplies housekeeping, laundry and linen
services to healthcare facilities. HSG's common stock is quoted
on the National Association of Securities Dealers' Automated
Quotation System.
In its complaint, the Commission alleged that HSG, McCartney
and Cook violated the anti-fraud provisions of the federal
securities laws by failing to disclose, in connection with a July
1990 $22 million public offering, that a substantial number of
HSG's customers presented a material risk of cancelling their
contracts with HSG. The complaint further alleges that HSG's
financial statements during calendar years 1990 and 1991, as
incorporated in Commission reports, were materially false and
misleading. The complaint also alleges that HSG and Mason
violated the anti-fraud provisions by failing to disclose that,
between 1988 and 1991, HSG made over $400,000 in payments to
certain third parties for no valid business purpose.
Simultaneously with the filing of the complaint, the
Commission filed with the Court proposed Orders, consented to by
all defendants, without admitting or denying the allegations in
the Commission's complaint, pursuant to which, upon entry by the
Court: (i) HSG will be permanently enjoined from future
violations of Section 17(a) of the Securities Act and Sections
10(b), 13(a), 13(b)(2) of the Exchange Act and Rules 10b-5, 12b-
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION v. HEALTHCARE SERVICES GROUP,
The U.S. Securities and Exchange Commission announced today that on September 24, 1996 it
ok, and former vicepresident Melvyn B. Mason.
HSG, headquartered in Huntingdon Valley, Pennsylvania, supplies housekeeping, laundry and
In its complaint, the Commission alleged that HSG, McCartney and Cook violated the anti-fraud
The complaint further alleges that HSG's financial statements during calendar years 1990 and
The complaint also alleges that HSG and Mason violated the anti-fraud provisions by failing
Simultaneously with the filing of the complaint, the Commission filed with the Court proposed
f $650,000; McCartney will be permanently enjoined from future violations of Sections 10and 13of
On July 25, 1990, HSG began a $22 million public offering of its common stock, pursuant to a
According to the Commission's complaint, the offering documents did not adequately disclose
the complaint charges that HSG violated Section 17of the Securities Act and HSG and McCartney
HSG Improperly Accounted for Cancellation Fees as
In the financial statements incorporated in its Form 10-Q for the second quarter of 1990, and
The Commission's complaint alleges that HSG was not permitted under Generally Accepted
The charges included $1,673,000 in income taxes payable on cancellation fee income, $700,000
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