HealthSouth settles with UBS, gets $100 mln

LOS ANGELES Thu Oct 23, 2008 9:03pm EDT

LOS ANGELES Oct 23 (Reuters) - HealthSouth Corp (HLS.N) on Thursday said UBS AG (UBSN.VX) would pay the provider of rehabilitative services $100 million in cash to settle investor claims that the investment bank knew about HealthSouth's multibillion dollar accounting fraud.

The derivative shareholder lawsuit against UBS was brought by HealthSouth investors on behalf of the company. It claimed that as its investment bank, UBS was aware of HealthSouth's accounting fraud.

In addition to the cash, HealthSouth will receive a release of all claims by UBS, including a judgment in favor of UBS which is currently on appeal before the U.S. Court of Appeals for the Second Circuit.

A UBS spokeswoman declined to comment on the settlement.

In 2006, HealthSouth agreed to pay at least $445 million to settle class-action lawsuits over its accounting and financial reporting. As part of that settlement, HealthSouth investors are entitled to receive 25 percent of net recoveries from judgments against UBS, the company's former lead investment bank, HealthSouth former Chief Executive Richard Scrushy, and former auditor Ernst & Young.

The rest of the proceeds will be used to pay down long-term debt, the Birmingham, Alabama company said. (Reporting by Nichola Groom; Editing by Bernard Orr)

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