Accounting & Tax

HealthSouth to Pay $100M in Settlement

The payment may be applied toward the "fair fund" provision of the Sarbanes-Oxley Act to compensate investors who lost money on the company's stock...
Stephen TaubJune 9, 2005

HealthSouth Corp. has agreed to pay $100 million over two years to settle Securities and Exchange Commission civil charges stemming from its accounting scandal, according to the company.

The payment may be applied toward the “fair fund” provision of the Sarbanes-Oxley Act to compensate investors who lost money on the company’s stock after fraud was discovered in 2003. The SEC originally alleged that HealthSouth overstated earnings by $1.4 billion from 1999 to 2002 to meet Wall Street projections and boost its share price; that figure eventually grew to $2.7 billion.

The settlement is “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,” said president and chief executive officer Jay Grinney, in a statement.

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As part of the settlement, HealthSouth — which admitted no wrongdoing — also agreed to retain the services of consultants in the areas of governance, internal controls, and accounting to review policies and practices implemented under the new management team; provide training and education to appropriate officers; and continue to cooperate with the SEC and Department of Justice in their respective, ongoing investigations.

In late December, HealthSouth agreed to pay $325 million to settle charges it defrauded Medicare and other federal healthcare programs, according to the Department of Justice.

Meanwhile, jurors Wednesday ended an abbreviated fourth week of deliberations in the trial of former chief executive officer Richard Scrushy, who faces 36 charges in connection with the company’s accounting scandal.