Date: 10/23/2008 9:56 PM
BIRMINGHAM, Ala. (AP) _ HealthSouth Corp. said Thursday it reached agreement with UBS AG settling litigation filed by shareholders who claimed the Swiss investment bank was aware of a $2.7 billion fraudulent accounting scheme involving more than a dozen HealthSouth executives.
Under the settlement, HealthSouth will receive $100 million in cash and be released of all claims by UBS, including a judgment in favor of UBS currently on appeal before the U.S. Court of Appeals for the Second Circuit.
HealthSouth shareholders and bondholders alleged in a civil lawsuit that former HealthSouth Chief Executive Richard Scrushy, UBS and accountant Ernst & Young aided the fraud at HealthSouth from 1996 through 2002.
HealthSouth said the settlement announced Thursday relates only to UBS and does not affect the claims against Scrushy, other defendants, or Ernst & Young.
UBS representatives attended several HealthSouth board meetings during the time of the accounting fraud and UBS managed stock and bond offerings for HealthSouth during that period.
UBS has denied any knowledge that fraudulent activity was taking place. Stockholders who initiated the lawsuits in 2003 and 2004 claimed UBS and accountant firm Ernst & Young knew the company’s income was being overstated.
The case was brought by HealthSouth and derivative stockholders, or shareholders suing on behalf of the company.
HealthSouth said in its statement Thursday that under the agreement it will pay reasonable fees of the derivative plaintiffs’ attorneys, to be approved by the court.
HealthSouth will also pay 25 percent of the net proceeds to plaintiffs in the federal securities litigation. The balance will be used by HealthSouth to reduce long-term debt.
“This settlement represents another milestone in HealthSouth’s recovery of damages sustained by the company under prior management,” said John Whittington, HealthSouth’s executive vice president, general counsel and corporate secretary.
Copyright 2008 The Associated Press.