American Service Group may have made false and misleading statements regarding its financial status causing investors to pay artificially high prices for its stock.

This is a securities fraud class action lawsuit against American Service Group.

The securities fraud class action lawsuit alleges that American Service failed to disclose the following:

(i) that American Service was not charging its customers in accordance with applicable contracts;

(ii) that American Service failed to properly credit customers with discounts, rebates or price savings resulting from purchases from alternative sources;

(iii) that American Service failed to provide customers with proper credit for the return of pharmaceutical products;

(iv) that American Service inappropriately established and used reserves during various periods over the last five years to more closely match SPP reported earnings to its budgeted results; and

(v) that as a result of the foregoing, the values of American Service's net income, retained earnings and reserves were materially overstated at all relevant times.

The class action complaint further alleges that after the markets closed, on March 15, 2006, American Service announced that as a result of the findings of an internal investigation, it would restate earnings for the years ended December 31, 2001 through December 31, 2004 and for the first six months of 2005 and issue refunds of $3.6 million, plus interest, to customers for instances in which it failed to credit them with discounts, rebates or price savings to which they were entitled.

On this news, the price of ASG fell $5.65, or almost 29%, to close at $13.95 per share.