UBS, Ernst & Young agree to pay $250M to settle investor claims over HealthSouth fraud

UBS, accountant settle HealthSouth cases for $250M

BIRMINGHAM, Ala. — Swiss bank UBS AG and accounting giant Ernst & Young agreed to pay $250 million to settle claims over the financial fraud that nearly wrecked HealthSouth Corp., the Alabama-based rehabilitation chain.

UBS insurers will pay $117 million to HealthSouth shareholders and another $100 million to bondholders, while Ernst & Young agreed to pay $33.5 million to bondholders, according to federal court filings Thursday.

Ernst & Young last year agreed to a $109 million settlement with HealthSouth stockholders.

Both companies denied any wrongdoing and said they were settling because of the continued expense of fighting lawsuits in federal court.

An investigation of HealthSouth revealed a long-running scheme to overstate earnings by more than $2.5 billion.

Fifteen one-time HealthSouth executives pleaded guilty and another was convicted on fraud charges in the scheme. Longtime CEO Richard Scrushy was acquitted on criminal charges in the fraud, but in a civil suit Scrushy was ordered to pay shareholders $2.7 billion. He is serving a federal prison sentence for his conviction in a separate government corruption case.