Corporate Counsel Daily, Veradigm fraud suit will proceed on restated financials, control failures, (Aug 19, 2026)

By Rodney F. Tonkovic, J.D.

Fraud claims stemming from restated financials were plausible, but allegations against an outside auditor were dismissed.

A district court concluded that an investor adequately alleged that Veradigm Inc. misrepresented the state of its internal controls and accounting. The complaint alleged that the healthcare technology company misled the market about the effectiveness of its internal controls and the accuracy of its financial reporting before restating nearly three years of financial results. The court concluded that the company and two former CEOs knowingly made misrepresentations, and the case will proceed as to them. Claims against Veradigm's auditor and a former CFO were dismissed for lack of scienter (Erwin v. Veradigm Inc., No. 1:23-cv-16205 (N.D. Ill. Aug. 18, 2026)).

Veradigm. Veradigm Inc., a Chicago-based healthcare technology company, reported strong growth in bookings, revenue, profits, and gross margins in its 2021 annual and quarterly reports and through the first three quarters of 2022. The company's SEC filings included SOX certifications stating that its disclosure controls and internal controls over financial reporting were effective and incorporated clean audit opinions from Grant Thornton LLP.

In early 2023, however, Veradigm announced a delay in filing its 2022 Form 10-K after identifying internal control failures leading to misstated revenue. Over the next two years, the company conducted multiple internal investigations, leading to the departures of its CEO and CFO. During the period, Veradigm's stock lost nearly 62 percent of its value from its class-period high.

The filing was released in 2025, accompanied by restated financials for 2020, 2021, and the first three quarters of 2022. The restatement disclosed material weaknesses in internal controls over financial reporting and acknowledged accounting practices that, in some instances, were not consistent with GAAP and company policies.

Misstatements. The plaintiff alleged that Veradigm, the executive defendants, and Grant Thornton materially misrepresented the state of Veradigm's internal controls and accounting. Specifically, the complaint alleged that Veradigm and its executives repeatedly and falsely represented during the class period that the company maintained effective disclosure controls, complied with generally accepted accounting principles, and accurately reported financial results.

Veradigm did not contest that the statements were material and misleading, arguing instead that the challenged statements were nonactionable opinions. The court rejected this as a "stretch" of the definition of "opinion." Veradigm contended that it had presented management's conclusions about, for example, its internal controls, but the court said that any reasonable investor would read the statements and conclude that the controls were effective and that Veradigm had complied with GAAP. Since the restatements provided clear evidence of the earlier statements' falsity, the court said that the plaintiff had established its claim here.

Scienter. The court then found that two individual defendants who had served as CEO during the relevant period acted with scienter, and so, by extension, did Veradigm. In this case, the two officers were directly responsible for Veradigm's internal controls and had signed SOX certifications to that effect. Plus, the fact that it took three internal investigations and two years to create a remediation plan and to restate the financials was circumstantial evidence contributing to an overall finding of scienter, and the court agreed that it would be hard to believe that the CEOs were ignorant of the problems identified in the restatement. The inference was bolstered further by the officers' bonuses, stock compensation, and their forced resignations.

A third executive officer, who had served as CFO, however, joined management later in the class period and did not participate in designing the internal controls. Since the remaining evidence of scienter was far weaker for this individual, she was dismissed as a defendant.

Auditor dismissed. The court also dismissed claims against Grant Thornton for lack of scienter. While investors identified circumstantial evidence of "red flags" and other flaws, the court said the allegations suggested at most negligence.

The case is No. 1:23-cv-16205.

Judge: Coleman, S.

Attorneys: John M. Erwin, pro se. Benjamin M. Lee (King & Spalding LLP) for Veradigm Inc. Jordan Kazlow (McDermott Will & Schulte) for Paul M. Black. James L. Kopecky (Kopecky Schumacher Rosenburg LLC) for Richard J. Poulton.

Companies: Veradigm Inc.

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