continues its miraculous recovery.
The company, accused of engaging in massive accounting fraud under the leadership of former CEO Richard Scrushy, has now put a major government investigation behind it. It will pay $100 million to settle a civil complaint filed in 2003 by the
Securities and Exchange Commission
"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," said current CEO Jay Grinney. "We look forward to refocusing our time and resources on what we do best -- serving the needs of our patients."
HealthSouth ranks as one of the largest outpatient health care providers in the country. However, the company is also known for a huge accounting scandal that has left its former CEO embroiled in a heated courtroom trial. The jury has spent more than two weeks deliberating the case but has yet to reach a verdict.
HealthSouth said on Wednesday that its settlement with the SEC fails to resolve claims filed against any party except itself. To close its own case, the company will pay the SEC a total of $100 million in a series of five installments over a two-year period beginning in the fourth quarter of 2005. The company says it has already incorporated the settlement into its long-term projections and that the future payments will not compromise its operations.
Still, at least one analyst had anticipated a smaller fine. This spring, Jerry Doctrow of Legg Mason predicted that HealthSouth would wind up paying the SEC between $50 million and $100 million but modeled only the lower amount into his projections.
By now, Doctrow pointed out, HealthSouth has already agreed to pay a $325 million fine to the Justice Department and the Centers for Medicare and Medicaid Services. In addition, he said, the company could wind up facing a $650 million bill -- only half of it covered by insurance -- to settle a lawsuit filed by its own shareholders. Meanwhile, he added, the company has yet to file audited financial statements and, therefore, continues to trade on the Pink Sheets rather than a major exchange.
Thus, Doctrow has portrayed HealthSouth as a high-risk investment and maintained a hold recommendation on the stock despite its amazing rebound from two years ago. The shares, which once traded for mere pennies, jumped 7% to $5.77 on Wednesday
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