sec whistleblower attorneys
SEC Whistleblower Program
Clients & Results
News & Insights
HealthSouth was not a typical securities fraud litigation.
Sure, the mechanics of the company’s fraud—manipulating financial statements with false revenue and income, understating write-offs, capitalizing normal expense, among others—were typical of many of the criminal schemes of the time. But two other factors rendered HealthSouth unique. First, its scope. The company admitted that its earnings during the class period were overstated by a staggering $2.8 billion. Second, in this far-reaching fraud, the healthcare giant squarely shared blame with the company’s auditor, Ernst & Young, and its primary investment bank, UBS.
In 2003, Labaton Sucharow became co-lead counsel to a class of shareholders who were damaged by the HealthSouth fraud and pursued claims on behalf of the class in Alabama federal court. The Firm’s first victory on behalf of its clients came in 2007, when counsel secured a $445 million settlement, one of the largest in history. In June 2009, the plaintiffs subsequently settled with Ernst & Young for $109 million, one of the 10 largest settlements with an auditor. And finally, in July 2010, the Court approved the final stage in the litigation process; a $117 million settlement with the remaining UBS defendants.
In addition to the claims brought by the stockholders, separate lead counsel represented the bondholders in a coordinated action against HealthSouth and others. The total aggregate recoveries obtained for the stockholders and bondholders was $804.5 million.
Labaton Sucharow’s work in HealthSouth demonstrates that investors have a strong legal recourse against both companies who commit fraud and the auditors who abet that misbehavior.