The State of Michigan is seeking lead plaintiff status in a federal class-action lawsuit against HealthSouth Corp. its former executives and outside auditors, and investment bankers, on behalf of the $48 billion Michigan Retirement Systems, confirmed Terry Stanton, spokesman for the Lansing fund. The system wants to recoup $33 million in losses it claims were incurred because HealthSouth overstated its income. Former lead plaintiff Orbitex Management Inc. withdrew from the federal court case in northern Alabama in November, confirmed a court official. U.S. District Court Judge Karon O. Bowdre will hold a hearing Friday. Mr. Stanton said the pension system would be receptive to settlement options to recapture the assets.
The suit alleges that HealthSouth between 1997 and 2003 implemented a scheme to falsify its financial statements to meet or exceed Wall Street's expectations. Richard M. Scrushy, HealthSouth's founder and then CEO, has been accused of directing accounting subordinates to "fix" any shortfall in revenue and income through the use of false accounting entries.
Susan Stillings, HealthSouth spokeswoman, declined to comment on the litigation, citing company policy.