UBS AG agreed to pay $217 million to HealthSouth Corp. shareholders and bondholders to settle litigation they brought after an accounting fraud was discovered at the health-care services provider.
The shareholders will receive $117 million and the bondholders $100 million.
In addition, Ernst & Young, HealthSouth’s accounting firm, agreed to pay the bondholders $33.5 million. It settled with the shareholders last year for $109 million.
The litigation stems from a $2.7 billion fraud at HealthSouth that led to guilty pleas from 15 executives, including five former finance chiefs. The fraud unraveled in March 2003 when federal agents raided the offices of HealthSouth. The discovery caused a drop in the company’s share price that wiped out almost $6 billion in market value.
“We believe these substantial settlements reflect a great result for bond purchasers who were damaged as a result of the massive fraud at HealthSouth,” David Bronner, CEO of the Retirement Systems of Alabama, Montgomery, the lead bondholder plaintiff, said in an e-mailed statement. The systems had $24.9 billion in assets as of Sept. 30.
In settling, both Zurich-based UBS, HealthSouth’s investment bank, and New York-based Ernst & Young denied wrongdoing. U.S. District Judge Karon Bowdre in Birmingham, Ala., must approve the agreements.
Kris Kagel, a spokesman for UBS, and Charles Perkins, a spokesman for Ernst & Young, didn’t immediately return calls for comment.