Levi & Korsinsky To Lead Stock-Drop Suit Against Prison Biz

By Mike LaSusa
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Law360 (October 1, 2020, 8:05 PM EDT) -- A Florida federal judge has given a green light to Levi & Korsinsky LLP and Roche Cyrulnik Freedman LLP to act as co-lead counsel in a proposed class action alleging investors lost money because private prison company The GEO Group lied about its response to the COVID-19 pandemic.

U.S. District Judge Rodney Smith signed off Wednesday on an unopposed motion to name James Michael DeLoach and Edward Oketola as co-lead plaintiffs, with Levi & Korsinsky and Roche Cyrulnik Freedman heading up the legal team.

"Co-lead counsel shall have authority to speak for the co-lead plaintiffs in matters regarding pretrial and trial procedure and settlement negotiations and shall make all work assignments in such a manner as to facilitate the orderly and efficient prosecution of this litigation and to avoid duplicative or unproductive effort," the judge said, adding that "no settlement negotiations shall be conducted without the approval of co-lead counsel."

Judge Smith also dismissed the operative complaint without prejudice and gave the investors until Nov. 17 to file a new one.

The GEO Group urged the court last month to toss the proposed class action, calling the suit a textbook example of a baseless "strike suit."

Investor Steve Hartel omitted the numerous disclosures that The GEO Group included in its regulatory filings and in public statements when he filed his suit alleging the company hid that COVID-19 had spread in one of its facilities, the company said in a motion to dismiss.

Hartel, a Colorado resident, filed suit in July against the Boca Raton-based company, CEO George C. Zoley and Chief Financial Officer Brian R. Evans on behalf of a proposed class of people who bought GEO Group securities between Feb. 27 and June 16.

Alleging the company misled investors about its response to the pandemic, Hartel cited a June 17 article by The Intercept titled "GEO Group's Blundering Response to the Pandemic Helped Spread Coronavirus in Halfway Houses."

Hartel alleges the article's details caused The GEO Group's stock price to fall by $1.03 per share, or 7.8%, to close at $12.17 on June 17.

The article said there was a COVID-19 outbreak at halfway house Grossman Center in Leavenworth, Kansas, a facility that "was for weeks the hardest hit federal halfway house in the country."

The news outlet quoted a resident as saying the facility had done "absolutely nothing" to mitigate the spread of the virus other than not providing passes for residents to visit family, under orders from the U.S. Bureau of Prisons, according to the complaint.

Hartel claimed this contrasted with The GEO Group's statements in filings with the U.S. Securities and Exchange Commission, statements made during an April 30 earnings call, and a June 1 press release saying the company was taking "comprehensive steps to address and mitigate the risks of COVID-19."

In the motion to dismiss, The GEO Group claimed Hartel "cherry-pick[ed]" statements to make his case, attempting to "capitalize" on the drop in stock prices.

The company said it followed the Centers for Disease Control and Prevention's recommendation when it issued guidance to its facilities on how to prevent the spread of COVID-19.

The theory advanced in the complaint — that The GEO Group misled the public about its response to the pandemic — "is premised on a gross distortion of the impact on the GEO Group's stock price of that one article focused on one facility," the motion said.

The GEO Group owns, leases and manages secure facilities, processing centers and reentry facilities in the U.S., Australia, South Africa and the U.K., with 95,000 beds at 129 facilities.

Counsel for the parties didn't immediately respond on Thursday to requests for comment.

Hartel is represented by Jayne A. Goldstein of Shepherd Finkelman Miller & Shah LLP and James M. LoPiano of Pomerantz LLP.

The GEO Group is represented by Brian P. Miller and Samantha J. Kavanaugh of Akerman LLP.

Zoley and Evans are represented by William K. Hill, George S. LeMieux and Ernest "EJ" A. Cox IV of Gunster Yoakley & Stewart PA.

The case is Hartel v. The Geo Group Inc. et al., case number 9:20-cv-81063, in the U.S. District Court for the Southern District of Florida.

--Additional reporting by Rachel O'Brien. Editing by Philip Shea.

For a reprint of this article, please contact reprints@law360.com.

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