HealthSouth settles suit for $445M
Class-action deal gives money and stock to investors who said they were harmed by firm's accounting.
February 23, 2006: 10:20 AM EST
NEW YORK (Reuters) - HealthSouth Corp., a provider of rehabilitation services, said Thursday it has agreed to settle federal class-action lawsuits over its accounting and financial reporting for at least $445 million.
Birmingham, Ala.-based HealthSouth said it is not admitting wrongdoing in the settlement, which also covers some former executives and directors.
The terms call for investors to receive $230 million in cash from HealthSouth's insurance carriers, and $215 million in common stock and warrants. The latter includes about 25.1 million common shares and 11-year warrants to buy 40.8 million shares at $8.28 each.
Investors would also receive 25 percent of net recoveries from judgments that HealthSouth obtains against former Chief Executive Richard Scrushy, former auditor Ernst & Young and former lead investment bank UBS.
The settlement is subject to completion of final documentation and court approval.
"This proposed settlement represents a major milestone in HealthSouth's recovery," Chief Executive Jay Grinney said in a statement.
Calls to lawyers for plaintiffs in the class-action cases were not immediately returned.
HealthSouth previously settled charges over its financial reporting with the Securities and Exchange Commission and Department of Justice.
The settlement with investors "will put the bulk of the legal issues relating to pre-March 2003 periods behind us," General Counsel Gregory Doody said in a statement.
An Alabama jury acquitted Scrushy last year of charges that he engineered a $2.7 billion accounting fraud. Scrushy still faces civil charges.
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