District Court Dismisses Securities Fraud Suit Against Former Hanger CEO

Schulte represented the former CEO of Hanger Inc. in securing the dismissal of a securities fraud class action in which he was named as a defendant. The case arose out of numerous announcements by Hanger that its financial information spanning more than five years was no longer reliable and would be restated due to numerous accounting errors, which the plaintiffs alleged were caused by inappropriate actions taken by the former CEO and other Hanger officers. On Jan. 26, 2017, Judge Samuel Sparks of the U.S. District Court for the Western District of Texas dismissed the action against all defendants, with prejudice.

Schulte joined the suit after the plaintiffs filed their Third Amended Complaint, which alleged that Hanger’s pre-tax income for a five-and-half-year period was overstated by $95 million, and included more than a dozen pages of scienter allegations. The court dismissed the complaint for failure to adequately allege scienter. The plaintiffs have filed a Notice of Appeal, and Schulte will continue to represent the former CEO in seeking to affirm his dismissal from the action, if necessary.

This dismissal with prejudice is the second victory for our client. In December 2016, SEC’s Division of Enforcement closed an investigation into both Hanger and our client that arose out of the same circumstances as the securities fraud class action — despite the fact that Hanger’s restatement of five years’-worth of financial statements has not yet been completed.

The Schulte team who achieved this victory was led by litigation partners Charles Clark and Howard Schiffman, and included associate Jason Mitchell and former Schulte lawyer Bayard Brown.