BUSINESS

HealthSouth to pay $100 million to resolve SEC charges

The agreement marks the company's second major settlement in six months.

By Katherine Vogt, AMNews staff. June 27, 2005.

HealthSouth has agreed to pay $100 million to settle a Securities and Exchange Commission lawsuit stemming from the massive accounting fraud at the outpatient services giant.

The Birmingham, Ala.-based company did not admit any wrongdoing under the agreement, which settles a civil lawsuit brought in 2003 after a federal investigation uncovered a scheme by former executives to inflate earnings by nearly $2.7 billion.

Jay Grinney, HealthSouth's president and CEO, said in a prepared statement that the settlement was "both a major milestone in HealthSouth's recovery and a powerful symbol of the progress we have made as a company over the course of the last two years."

As part of the settlement, HealthSouth also agreed to hire consultants on governance, internal controls and accounting; train its officers; and cooperate with ongoing SEC and Justice Dept. investigations.

The settlement comes in the wake of the company's agreement in December 2004 to pay the government $325 million to settle charges that it defrauded Medicare and other federal health programs. The company did not admit wrongdoing.

Since the accounting scandal was revealed in March 2003, at least 18 former HealthSouth executives have pleaded guilty to criminal charges related to the company's accounting. At press time, a U.S. District Court jury in Birmingham was deliberating over charges against HealthSouth founder and former chief executive Richard M. Scrushy related to the scandal. Scrushy had pleaded not guilty.

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