Opinion ID: 4301416
Heading Depth: 2
Heading Rank: 2

Heading: Alleged Corrective Disclosures

Text: Since the initial restatement announcement in February 2015, Hanger has issued five updates. 3 It has also continued to announce material weaknesses, ultimately acknowledging eleven. Hanger eventually admitted to overstating its pre-tax income by $87 million. On November 12, 2015, Hanger announced that its Audit Committee would investigate the circumstances which led to the restatement. On February 26, 2016, Hanger disclosed preliminary findings of the investigation in a Form 8-K (“February 8-K”) filed with the SEC, stating that “certain former officers and employees . . . may have engaged in inappropriate activities,” although it did not identify those individuals. The February 8-K revealed that Hanger had overstated its accounts receivable and understated its reserves by approximately $40 million. In June 2016, Hanger released a summary of the final investigation results in another Form 8-K (“June 8-K”). Both Forms 8-K stated that a former employee had fabricated inventory records. The June 8-K also stated that (1) Kirk and McHenry had “set an inappropriate ‘tone at the top’” by emphasizing “achieving certain financial targets,” which “may have” contributed to inappropriate accounting decisions, and (2) McHenry and others had “engaged in inappropriate historical accounting practices” and that “particular adjustments . . . were undertaken for the purpose of enhancing [Hanger’s] reported financial results.” 3 The full financial restatements had not been issued as of the time the district court ruled. 4 Case: 17-50162 Document: 00514587918 Page: 5 Date Filed: 08/06/2018 No. 17-50162