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Healthsouth Employees
Sue Former CEO
The lawsuit claims that Scrushy and former chief financial officer William Owens and Senior Vice President Brandon Hale breached their legal duties by knowingly overstating HealthSouth's financial statements, said Steve Berman, managing partner at the law firm of Hagens Berman
The Securities and Exchange Commission accused the company and Scrushy of accounting fraud on March 19 and eight employees or executives, including Owens, have entered guilty pleas to fraud charges since then.
That fraud rendered the stock an inappropriate investment for a retirement plan such as HealthSouth's employee stock plan , said the law firm, which is co-lead counsel to recover losses from Enron employees' retirement funds.
HealthSouth and Scrushy's attorney were not immediately available for comment.
The proposed class action suit was filed in U.S. District Court in Birmingham, Alabama, by HealthSouth employees and plan participants Laurie Hunter, Luke Hunter, Nelda Fields, Phillip Colley, and Samuel H. Jackson, Jr. The suit seeks to represent all HealthSouth employees who participated in the employee stock ownership plan (ESOP (News - Websites)) from January 1, 1999 to the present.
According to the complaint, the plan trustees fell short of their duty when they failed to move ESOP holdings to less risky, more appropriate investments, all while failing to disclose that the stock was an imprudent investment.
The suit asks the court to restore to the plan the losses suffered from the breaches of fiduciary duty, the law firm said.
Separately, lawyers that filed a shareholder suit against HealthSouth are seeking to expand the class period to February 28, 1998 through March 19, 2003, according to documents from Alabama law firm, Whatley Drake LLC. The original shareholder suit, which was filed after the company gave an earnings warning August 27, had a proposed class period from January 1, 2002 through August 27, 2002.