Health care company HealthSouth Corp. said that it will pay $445 million to settle investor lawsuits brought in the wake of a $2.7 billion earnings overstatement that nearly destroyed the company.
HealthSouth and its liability insurers reached the agreement after months of court-ordered mediation. The proposed deal, which is subject to court approval, doesn't resolve claims against HealthSouth's former auditor Ernst & Young, former banker UBS Securities, or company founder Richard Scrushy.
In a statement, HealthSouth said that unidentified insurers would pay $230 million of the settlement in cash, and the company would pay the remaining $215 million in stock and warrants. The proposal includes no admission of wrongdoing.
It's another step forward for HealthSouth, which met with lenders on Feb. 9 to borrow $3.85 billion to repay loans and bonds. The company's six-year fraud was revealed in 2003 and the company paid $100 million in June to settle a Securities and Exchange Commission lawsuit.Fifteen executives pleaded guilty and another was convicted at trial. While Scrushy was acquitted in June of any wrongdoing, he will face unrelated criminal bribery charges at a trial set to begin in May.
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