GEO Group Sued Over Private Prison Coronavirus Prep, Stock Drop

The GEO Group Inc. allegedly misled investors about the actions it was taking to prevent the coronavirus from infecting residents at a halfway house it operated in Kansas, a suit filed in Florida federal district court said.

The for-profit prison company touted its Covid-19 response procedures without disclosing that its actions at the Kansas facility were “woefully ineffective” and subjected residents to “significant health risks,” the would-be class complaint filed Tuesday in the U.S. District Court for the Southern District of Florida said.

Although GEO Group repeatedly told investors starting in April that it had implemented quarantine, social distancing, and face mask use, a June 17 article from The Intercept reported details indicating otherwise, the complaint said. The article described a “significant” Covid-19 outbreak at the Kansas halfway house, which “continued to keep its residents in overcrowded conditions without enforcing personal protective measures even as” diagnoses increased, the investors said.

GEO Group allegedly kept residents who tested positive in the same areas as other residents and placed residents in the halfway house even after they’d been instructed to quarantine. The company’s share price fell 7.8% after the article came out, the complaint said.

Causes of Action: Exchange Act §10(b)—Using a manipulative or deceptive device or contrivance for a securities transaction in violation of SEC rules (15 U.S.C. §78j); SEC Rule 10b-5—Employing a device, scheme, or artifice to defraud, making untrue statements or omitting facts, or engaging in any act, practice, or course of business which operates as a fraud or deceit (17 C.F.R. §240.10b-5).

Relief: Damages with interest; attorneys’ fees; court costs.

Potential Class Size: Hundreds or thousands who acquired GEO Group securities between Feb. 27 and June 16.

Response: GEO Group didn’t immediately respond to a July 8 request for comment.

Attorneys: Shepherd Finkelman Miller & Shah LLP represents the investors.

The case is Hartel v. The GEO Group Inc., S.D. Fla., No. 20-cv-81063, complaint filed 7/7/20.