Shares of WageWorks tumble after it says board to examine claim it withheld info from auditors

  • The board's audit committee had previously looked into the company's accounting practices, financial control and financial statements for 2016 and 2017, including a review of the accounting for a government contract.
  • In a regulatory filing, the San Mateo, California-based company said its board had formed a special committee to investigate earlier findings by its audit committee and the accusations it had withheld information from its auditor.
  • Top management was replaced this year after the company discovered the issues and its preliminary review indicated it will have to adjust its financial results for 2016.
144.6 WageWorks administers tax-advantaged programs for employee benefits such as health and dependent care flexible spending accounts (FSAs), health savings accounts (HSAs), and commuter benefits, such as transit and parking programs.
Photo: wageworks.com
144.6 WageWorks administers tax-advantaged programs for employee benefits such as health and dependent care flexible spending accounts (FSAs), health savings accounts (HSAs), and commuter benefits, such as transit and parking programs.

WageWorks shares fell 17 percent Thursday after the company disclosed that it it would reopen an investigation into whether it withheld information from its auditor.

In a regulatory filing Wednesday, WageWorks said a special panel of its board would take another look at an earlier probe by its audit committee.

Already the company, which handles employee benefit programs like health savings plans and commuter programs for other companies, had been under scrutiny for financial irregularities. Its top management was replaced this year after the company discovered issues and its preliminary review indicated it will have to adjust its financial results for 2016 and possibly 2017.

The filing also said the San Mateo, California-based firm is cooperating with an investigation by the Securities and Exchange Commission after WageWorks voluntarily notified the agency.

KPMG, its outside auditor, had raised the issues with John Larson, WageWorks' lead outside director, about information being withheld in 2016 and 2017, the filing said.

A special committee made up of directors Thomas Bevilacqua and Jerome Gramaglia and recently named Executive Chairman Stuart Harvey will "review the procedures scope and findings of the audit committee's investigation," the filing said.

The audit committee had previously looked into the company's accounting practices, financial control and financial statements for 2016 and 2017, including the review of the accounting for a government contract. This review looked at whether there was an open flow of information and "appropriate tone at the top," the filing said. The investigation concluded in May with the finding that "no illegal acts occurred."

But KMPG raised issues about lack of communication relating to allegations made by "former management's counsel" after the audit committee's review concluded that information was withheld from auditors, the filing said.

The filing doesn't identify the former manager.

WageWorks has seen a management overhaul in the last few months, however. Former CEO Joseph Jackson left that post in April and resigned as executive chairman last week. Harvey was named on Wednesday to succeed him as executive chairman.

Edgar Montes was named CEO in April to succeed Jackson. At the same time, Colm Callan resigned as chief financial officer and Kimberly Wilford resigned as general counsel.

A WageWorks spokeswoman didn't immediately respond to a CNBC request for comment.