HealthSouth Corp. said Wednesday it will pay $100 million over two years to settle charges brought by the Securities and Exchange Commission when corporate fraud at the medical services chain was exposed in March 2003.
The SEC’s civil action accused both HealthSouth and fired CEO Richard Scrushy of overstating earnings by $1.4 billion since 1999. After further investigation, that number grew to $2.7 billion over seven years, beginning in 1996.
The settlement, which applies only to the Birmingham-based company, is to be paid in five installments over two years beginning in the fourth quarter of 2005.
“This agreement is both a major milestone in HealthSouth’s recovery and a powerful symbol of the progress we have made as a company over the course of the last two years,” HealthSouth President and CEO Jay Grinney said in a statement.
“HealthSouth has successfully put another issue behind us,” Grinney said. “We look forward to refocusing our time and resources on what we do best — serving the needs of our patients.”
Company officials said it had taken provisions for the settlement, and that its payments will not compromise funds it needs to operate. The company operates rehabilitation and diagnostic imaging centers nationwide.
According to the company release, HealthSouth will retain consultants to monitor governance, internal control and accounting practices and policies as part of the settlement. In a separate SEC filing, the company said it will create an Inspector General position.
The company, which brought in a new team led by Grinney for the post-Scrushy effort to avoid bankruptcy, also agreed to provide training and education to appropriate officers and will continue to cooperate with the SEC and Department of Justice in their investigations.
Earlier Wednesday, jurors in the corporate-fraud trial of Scrushy deliberated for a 12th day without reaching a verdict. They are scheduled to resume work Monday.
Scrushy is the first chief executive accused of violating the Sarbanes-Oxley corporate reporting law, passed three years ago after a string of business scandals. He also is accused of conspiracy, fraud, false reporting and money laundering.