HealthSouth Directors to Resign to Settle Suit

HealthSouth Corp. agreed to remove five directors to settle an investor lawsuit stemming from charges of $2.7 billion in accounting fraud.

The Louisiana Teachers’ Retirement System will drop its demand for an immediate shareholder meeting to remove fired Chief Executive Richard Scrushy and five of his colleagues from the board, said Stuart Grant, the fund’s lawyer. In exchange, five directors will resign in the next eight months, he said.

The accord gives HealthSouth more time to reconstruct at least seven years of accounts that company executives have deemed unreliable.

Scrushy, indicted by a federal grand jury in October on charges of securities fraud, will stay on the board under the settlement. Scrushy has denied wrongdoing, blaming subordinates for the alleged fraud.