HealthSouth Settles Fraud Case

HealthSouth Corp. agreed to pay $3 million and serve three years on probation in a deal with the government that spares the company an indictment over the $2.7-billion accounting fraud that almost triggered its collapse.

U.S. Atty. Alice Martin, who prosecuted 17 HealthSouth executives for their alleged roles in the fraud, including company founder Richard Scrushy, announced terms of the non-prosecution agreement Thursday. Scrushy was acquitted of fraud charges last year after a trial in Birmingham, Ala., where the company is based.

HealthSouth, which acknowledged the fraud as part of the accord, said Wednesday that the government imposed no fine or any other conditions on the company. HealthSouth spokesman Andy Brimmer said Thursday the company doesn’t consider the $3-million payment to the government a fine.

The agreement “acknowledges the comprehensive corporate governance and compliance reform which has and is transpiring at HealthSouth, and its continued commitment to cooperate with the Department of Justice through self-disclosure,” Martin said. “Prosecution would likely have pushed this company into bankruptcy.”

The company settled a fraud case with the U.S. Securities and Exchange Commission last year for $100 million and another case with investors in March for $445 million.

The $3-million payment called for in the agreement will go to the U.S. Postal Inspection Service’s Consumer Fraud Fund.

The company admitted wrongdoing, acknowledging that the Justice Department “has developed evidence during its investigation that HealthSouth, through some of its employees, has violated federal criminal law.”

The company said it “accepts responsibility for the conduct of its employees giving rise to any violation in connection with the unlawful practices. HealthSouth does not endorse, ratify or condone criminal conduct.”

Shares of HealthSouth declined 9 cents to $4.41. They have fallen 8.2% this year.