Bronner: Make RSA Lead HealthSouth Plaintiff

April 22, 2003 ( - The Retirement Systems of Alabama (RSA), already a key player in the financial reorganization of US Airways, is now seeking a central role in efforts to recoup lost millions from the scandal-ridden HealthSouth Corporation.

According to a news release, the RSA, the state’s public pension fund, will ask a federal judge in Birmingham, Alabama to be appointed lead plaintiff in a lawsuit against HealthSouth in order to represent the buyers of more than $3 billion in the company’s bonds. RSA put its own HealthSouth-related investment losses at more than $18 million.

The Birmingham-based HealthSouth was slapped with charges March 19 by the US Securities and Exchange Commission (SEC), alleging that the firm and Richard Scrushy, former chairman and chief executive officer, overstated earnings by at least $1.4 billion since 1999. According to the RSA, the HealthSouth overstatement actually topped $2.4 billion – wiping out HealthSouth’s corporate profits for the last five years.

“While it is regrettable that frauds like the one at HealthSouth have become commonplace, it is particularly egregious that such a fraud has been perpetuated on, among other investors, Alabama’s teachers, public employees, and retirees by an Alabama company that was so widely supported by the citizens of our state,” said David Bronner, RSA chief executive officer, in the statement. Bronner called on institutional investors to fight to regain losses suffered by defrauded investors. “It is essential to restore integrity and sound corporate governance to our capital markets through regulation, prosecution of criminal and SEC proceedings and, where appropriate, civil actions by institutional investors, such as RSA, on behalf of defrauded investors,” Bronner said.

RSA was also a key player in the recent US Airways turnaround. The RSA invested $240 million in equity and $500 million in debt and will hold the lead investor position with a 36.6% stake and receive eight seats on a newly reconstituted 15-member Board of Directors. It will receive 19.7 million shares, as well as the entire issue of new preferred shares. That will give the RSA 72% voting control, due to the combination of common and preferred holdings. (See    US Airways Reaches Tentative Agreements with Unions, RSA ).