Settlements Reached in HealthSouth Litigation

April 26, 2010 ( – Settlements have been worked out for investor lawsuits over a fraud that decimated hospital owner HealthSouth, including a claim by bondholders led by an Alabama pension fund.

A Reuters news report said accounting firm Ernst & Young will pay bondholders $33 million while insurers connected with Swiss bank UBS will pay $117 million to HealthSouth shareholders and an additional $100 million to bond holders.  Ernst & Young separately agreed to a $109 million HealthSouth shareholder settlement last year.

David Bronner, chief executive of the Retirement Systems of Alabama, the lead bondholder plaintiff, in a statement called the bondholder settlements “substantial” and “a great result.”

The litigation stemmed from an estimated $2.7-billion accounting fraud at HealthSouth, a Birmingham-based operator of rehabilitation hospitals and surgical centers.Fifteen former HealthSouth executives have pleaded guilty over a scheme to artificially inflate earnings and the company’s share price (see District Court Gives Nod to $445M HealthSouth Settlement).

The case is In re: HealthSouth Corp Securities Litigation, U.S. District Court, Northern District of Alabama, No. 03-1500.