HealthSouth, investors finalize fraud settlement

updated 12:52 p.m. ET Oct. 23, 2006

BIRMINGHAM, Ala. - A final, $445 million settlement between HealthSouth Corp. and investors was announced Wednesday to end class-action lawsuits stemming from a huge fraud at the health services company.

Under the agreement, which goes to a judge for approval, the Birmingham-based company will pay $215 million in cash, stocks and warrants. Insurance companies will pay the remaining $230 million.

"This settlement represents another significant milestone in HealthSouth's recovery and is a powerful symbol of the progress we have made as a company," chief executive Jay Grinney said in a statement.

The final version of the agreement was virtually identical to a preliminary settlement reached in February.

HealthSouth stock was up 4 cents a share to $4.94 in morning trading in the over-the-counter market.

Fifteen former HealthSouth executives pleaded guilty in what prosecutors described as a $2.7 billion fraud, and jurors convicted a 16th. Fired CEO Richard Scrushy was acquitted in the fraud, but he was subsequently convicted in a separate government bribery scheme linked to his years at HealthSouth.

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