The Law Office of Jeffrey M. Haber Announces the Investigation of StoneMor Partners, L.P. and Certain of its Current and Former Officers and Directors
- Posted on: Jan 3 2017
Lead Plaintiff Motion Due No Later Than January 20, 2017
New York, N.Y. – January 3, 2017 – The Law Office of Jeffrey M. Haber (the “Firm”) is investigating StoneMor Partners, L.P. (“StoneMor” or the “Company”) (NYSE: STON) and certain of its current and former officers and directors (the “Individual Defendants” and, together with StoneMor, the “Defendants”) for violations of the federal securities laws. A class action lawsuit has been brought in the United States District Court for the Eastern District of Pennsylvania (Civil Action No. 16-cv-06275), on behalf of all persons who purchased StoneMor common units between January 19, 2012 and October 27, 2016, inclusive (the “Class Period”). The complaint charges StoneMor and the Individual Defendants with violations of the Securities Exchange Act of 1934.
StoneMor is the second largest owner and operator of cemeteries and funeral homes in the U.S. Since becoming a publicly traded company, StoneMor has never generated sufficient cash flow from operations to make the Company’s quarterly distributions. Nevertheless, through the issuance of false and misleading statements about the financial condition of the Company, StoneMor made quarterly distribution payments to its unitholders.
According to the complaint, Defendants created (non-GAAP) accounting metrics that undermined the Company’s audited financial statements in order to convey to unitholders and the public that StoneMor was a profitable business that was generating significant cashflow from which it could pay high-yield profit distributions to unitholders. In reality, Defendants played a financial shell game that involved raising fresh capital from investors just in time to distribute a portion of it back to investors and the operators (i.e., the Company’s senior officers and/or directors) of the scheme.
Essential to the scheme was Defendants’ ability to convince the market to measure the success of the Company on non-GAAP financial metrics; that is, financial metrics that were contrary to those found in the GAAP-based audited financial statements. These non-GAAP metrics were used by Defendants throughout the Class Period to issue new units and access the debt markets in order to raise capital for the making of quarterly distributions. As alleged, so long as Defendants could keep selling high-yield securities to new investors, StoneMor could continue to make distributions to old investors and the managers of the scheme, some of whom were also directors of the general partner.
Under the Company’s limited partnership agreement, the general partner was to receive additional distributions when the Company issued distributions above a predetermined threshold. In other words, by ensuring that the Company would issue quarterly distributions in excess of $0.51/unit, the General Partner could increase the amount it would receive.
The scheme came to an end when StoneMor could no longer raise new capital with which to pay distributions. On September 2, 2016, the Company announced that it was restating its financial statements to correct various errors. The Company took over two months to file the restatement.
On October 27, 2016, after the market closed, StoneMor announced that it was cutting its quarterly cash distribution for the third quarter of 2016 by 50%. The company falsely cited its new sales force as the reason for the cut, stating that it was working to increase its quality in size. Notwithstanding, the market understood something was up beyond the growing pains of a new sales force. On this news, StoneMor’s unit price fell $11.08, or 44.64%, to close at $13.74 per unit on October 28, 2016.
On November 9, 2016, the Company released disappointing operating and financial results, revealing that it was experiencing slower than expected progress in recruitment. StoneMor further noted that it had to record additional adjustments to its consolidated financial statements (because the SEC required the Company to rely only on GAAP measures in presenting its financial statements) and disclosed that there were material weaknesses in the Company’s internal control over financial reporting as of December 31, 2015. On this news, StoneMor’s unit price fell $0.46, or 5.09%, to close at $8.57 per unit on November 9, 2016.
Since the Company’s distribution cut in October, the price of StoneMor’s units declined sharply by 67%, closing at $7.83 per unit on December 15, 2016.
If you purchased or otherwise acquired StoneMor units during the Class Period, and would like to learn more about this lawsuit and your ability to participate as a lead plaintiff, without cost or obligation to you, contact Jeffrey M. Haber, Esq. at (212) 209-1005, or firstname.lastname@example.org. A lead plaintiff is a representative party who acts on behalf of other class members in directing the litigation. Your share of any recovery in the action will not be affected by your decision of whether to seek appointment as lead plaintiff.
If you want to move for appointment as lead plaintiff, you must do so by no later than January 20, 2017.
No class has been certified in the action. Until a class is certified, you are not considered represented by an attorney. You may retain the Firm, or other attorneys, as your counsel in the action, or you may also choose to do nothing and be an absent class member.
The Firm also encourages anyone, including former employees, unitholders and others, with non-public information regarding the Company’s Class Period conduct to contact the Firm about helping in the investigation or taking advantage of the SEC Whistleblower Program. Under the SEC Whistleblower program, whistleblowers who provide original information may receive an award of up to 30% of any successful recovery made by the SEC.
About the Firm:
The Law Office of Jeffrey M. Haber is dedicated to representing corporations, small businesses, partnerships and individuals involved in a broad range of complex business and commercial litigation matters and violations of the securities laws. Mr. Haber combines the sophistication and counsel of a large national law firm with the economy, flexibility, commitment and personal attention of a small firm.
Jeffrey M. Haber, Esq.
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New York, NY 10017
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