DocGo provides a variety of healthcare professionals in the United States and the United Kingdom with mobile health and medical transportation services from their mobile facilities. The Company asserts that it will use its proprietary technology platform to “provide its services in collaboration with leading healthcare organisations, via long-term relationships that are intended to drive meaningful revenue, help provide efficient and effective capital allocation, and create low-risk opportunities for significant growth.” This is the company’s stated purpose in this capacity.
DocGo announced in November 2022 that Defendant Anthony Capone (“Capone”) would be taking over as Chief Executive Officer (“CEO”) from Defendant Stan Vashovsky (“Vashovsky”) beginning on January 1, 2023. The defendant, Vashovsky, was quoted in a press release that detailed the leadership transition. In the relevant part of the statement, he stated, “[w]e are very fortunate to have someone with [Defendant Capone’s] skill set and track record to take the reigns as CEO next year, and I have every confidence in the continued growth and success of this company.”
At the beginning of the spring of 2023, some thousands of international migrants arrived in New York City to seek job and/or asylum, among other things. Mayor Eric Adams of New York City (also known as “Mayor Adams”) responded to the situation by announcing a new policy that requires the city to move migrants to areas outside of the five boroughs that make up New York City.
To manage the relocation programme, New York City granted DocGo a contract worth $432 million (the “Relocation Contract”) without soliciting any bids. This contract went into effect at the beginning of May 2023. In order to fulfil the terms of the contract, DocGo was needed to provide migrants with housing as well as a variety of services, such as case management, medical care, food, transportation, accommodation, and round-the-clock security.
According to the allegations in the complaint, defendants made statements that were both materially false and misleading throughout the entirety of the Class Period. These representations concerned the Company’s business, operations, and compliance procedures. Specifically, the defendants made statements that were either false or misleading, and/or they failed to disclose the following information: (i) DocGo’s executive hiring processes were inadequate to fully review and vet the professional and academic backgrounds of job candidates; (ii) the foregoing increased the likelihood of disruptive executive turnover; (iii) contrary to its representations to investors, DocGo had overstated the efficacy of its mobile health and medical transportation services, which were the very services that were contemplated by the Relocation Contract; (iv) all of the aforementioned information, once revealed, was likely to subject DocGo to significant reputational and/or regulatory scrutiny, which would have a negative impact on the Company’s financial position and/or prospects; and (v) as a result, the Company’s public statements were materially false and/or misleading.
DocGo’s efforts to relocate migrants in New York City got off to a “rocky” start, according to an item that was published in the New York Times on July 30, 2023. It was claimed in a story published by the New York Times that asylum-seekers have expressed their dissatisfaction with threats and “broken promises” following the awarding of the Relocation Contract by New York City to DocGo.
In particular, the article pointed out that “[l]ocal authorities have expressed frustration at the lack of coordination between DocGo and agencies that could provide services to the migrants; local security guards hired by DocGo have repeatedly threatened the migrants; and finding steady work has been nearly impossible[.]” There is a close match between the total revenue of around $441 million in 2022 and the contract that DocGo has signed for $432 million.
Following the publication of the article in the New York Times, the stock price of DocGo dropped by $0.53 per share, which is equivalent to 6.29%, and it ended the day on July 31, 2023 at $7.89 per share.
Following that, on August 22, 2023, an article was published in the Albany Times Union that said that the New York Attorney General (“AG”) had initiated an investigation into DocGo and urged the Company to stop restricting the speech or movement of migrants. In particular, the Civil Rights Bureau of the Attorney General addressed a letter to the attorneys of DocGo, in which it detailed the “serious concerns” it had over the possibility that the company had violated state and federal laws in the course of its administration of the Relocation Contract.
On September 6, 2023, New York City Comptroller Brad Lander (also known as “Comptroller Lander”) made the announcement that his office will not be approving the Relocation Contract. Comptroller Lander noted in a letter to Department of Housing & Preservation Development commissioner Adolfo Carrión Jr. that his decision to reject the Relocation Contract was “due to numerous outstanding concerns” including “[i]nsufficient budget detail to justify over $432 million in contract value,” “[i]nconclusive reasoning as to the selection of the vendor and contradictory statements about their fiscal ability to provide contracted services,” “[i]nadequate vendor responsibility determination, contract oversight and subsequent questions about proper service delivery,” and “[i]nadequate information regarding the selection of subcontractors.” Comptroller Lander had raised objections to the Relocation Contract, but Mayor Adams had the power to move forward with the contract regardless of those objections.
Because of this news, the stock price of DocGo dropped by $0.61 per share, which is equivalent to 7.47%, and it ended the day on September 6, 2023 at $7.55 per share.
On the next day, September 14, 2023, an article was published in the Albany Times Union stating that Defendant Capone had fabricated certain aspects of his professional biography, specifically those that were related to his educational background. DocGo made the announcement that Capone had resigned from his position as CEO in a filing with the Securities and Exchange Commission on the next day, September 15, 2023.
At the end of the trading day on September 15, 2023, the stock price of DocGo dropped by $0.76 per share, which is equivalent to 11.76%, to reach $5.70 per share.
Finally, on September 18, 2023, Comptroller Lander made the announcement that his office would be beginning a real-time audit of the activities and invoices that DocGo had incurred in conjunction with the Relocation Contract. To be more specific, Comptroller Lander is quoted as saying that his office has “serious concerns about the selection of this vendor and its performance of contract duties.”
Because of this news, the stock price of DocGo dropped by $0.41 per share, which is equivalent to 7.19%, and it ended the day on September 18, 2023, at $5.29 per share.
Pomerantz LLP is widely recognised as one of the most prestigious law companies in the fields of corporate, securities, and antitrust class litigation. The firm has offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv. Pomerantz was a pioneer in the field of securities class actions. He was the founder of the firm that bears his name, Abraham L. Pomerantz, who is also regarded as the dean of the class action bar.
In the present day, more than 85 years after he established the practice, Pomerantz continues to fight for the rights of those who have been victimised by securities fraud, breaches of fiduciary duty, and corporate malfeasance.
Investor backlash in New York has intensified in recent years due to a series of high-profile corporate misconduct cases, CEO scandals, and controversial government contracts, particularly those involving migrant services. These events have not only led to significant financial repercussions but have also prompted regulatory reforms aimed at enhancing transparency and accountability.
Investor Backlash and Corporate Misconduct
Investor confidence is highly sensitive to corporate governance and executive behavior. Studies indicate that revelations of executive misconduct can lead to substantial declines in company valuations. For instance, firms associated with CEO-related sexual misconduct have experienced average losses of $2.23 billion in market value, totaling approximately $42.42 billion across affected companies.
A notable example is DocGo Inc., a mobile health services provider. In 2023, DocGo faced scrutiny after its CEO, Anthony Capone, resigned following revelations of falsified academic credentials. This incident, coupled with operational challenges related to a $432 million no-bid contract for migrant services, led to a significant drop in the company’s stock price.
Government Contracts and Migrant Services
New York City’s response to the migrant crisis has involved substantial financial commitments, with expenditures surpassing $5 billion for services including housing, security, and food. Projections suggest these costs could double by 2025.
The awarding of large, no-bid contracts to companies like DocGo and its successor, Garner Environmental Services, has raised concerns about fiscal oversight. For example, Garner’s contract is valued at approximately $457 million, exceeding DocGo’s previous contract, and has been criticized for inflated rates and lack of competitive bidding.
Audits have revealed that some vendors charged hourly rates significantly higher than standard rates for similar services, leading to questions about the efficient use of taxpayer funds.
Measures to Enhance Transparency and Accountability
In response to these challenges, several measures have been implemented:
- Enhanced Oversight: City Comptroller Brad Lander has initiated audits of emergency contracts and has revoked the city’s ability to award similar no-bid deals for migrant services.
- Regulatory Reforms: Efforts are underway to improve the vetting processes for executive hires and to enforce stricter compliance with disclosure requirements.
- Public Accountability: Increased media scrutiny and public awareness have pressured companies and government agencies to prioritize ethical practices and transparency.
These developments underscore the critical importance of robust corporate governance and transparent public contracting processes. As New York continues to address these issues, the emphasis remains on protecting investor interests and ensuring the responsible use of public funds.
