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Frequently Asked Questions and Answers The SEC and Class Actions Settlements with HealthSouth Eligibility for Cash Payments and Other Benefits
Questions About the Claim Form
After You Submit Your Claim Form
Effect of Submitting a Claim Your Legal Representation
Getting More Information
The SEC and Class Actions Settlements with HealthSouth 1. What are the details of the HealthSouth Securities Settlement Funds? The HealthSouth Securities Settlement Funds were created by the settlement of separate cases against HealthSouth Corporation brought by the U.S. Securities and Exchange Commission (SEC) and plaintiffs in class actions in U.S. District Court. The lawsuits claim that HealthSouth and others provided investors with false and misleading financial information that artificially inflated the value of HealthSouth securities. On behalf of the two classes of HealthSouth investors in the class actions, the Court has approved a settlement valued at the time it was reached at approximately $445 million (in cash and securities). Due to subsequent fluctuations in HealthSouth’s stock price, the settlement’s value may increase or decrease by the time it is distributed. A separate $100 million settlement of the SEC case has already been approved by the Court. Notice about the settlement and Claim Forms were mailed on November 1, 2007 to potential claimants. Claim Forms are also available on this website. The deadline to file a claim for payment from the funds was February 28, 2008. On January 11, 2007, the Court approved the class actions settlement. The SEC Plan of Allocation was approved by the Court on April 23, 2007. On February 7, 2008 there was a hearing in the U.S. District Court on the fairness of the proposed method for allocating the class actions settlement funds and the applications for attorneys' fees and expenses in the class action cases. Any objections must have been received and filed by December 15, 2007. On February 11, 2008, the Court approved a proposed Plan of Allocation for distributing the class actions settlement funds and the proposal for award of attorneys' fees. A Court hearing was held on January 29, 2009 for an appeal that was filed by a class member objecting to certain aspects of the class actions settlement and the Plan of Allocation. The 11th U.S. Circuit Court of Appeals ruled on the appeal, rejecting the objections to the settlement. No further appeals have been filed. Preparations to pay valid claims, including confirmation of claimant addresses, are underway and checks will be mailed upon approval of the courts overseeing the cases. Francis E. McGovern is the court appointed Distribution Fund Administrator for the SEC. Rust Consulting is the court appointed third-party Claims Administrator for processing claims, answering questions, and issuing payments and other benefits. Further information is available from the Case Documents and the Background page on this site. Eligibility for Cash Payments and Other Benefits 2. Who is eligible to receive a payment? Investors who sustained net losses on purchases and other acquisitions of HealthSouth securities during the period covered by the settlement, and who filed valid claims by the deadline are eligible to receive a payment. You must have sustained losses on your investments to qualify for a payment. Before the deadline you could file a claim and receive cash from the SEC Settlement if you purchased or otherwise acquired HealthSouth securities (meaning common stocks, bonds or options) on or after August 14, 1996, and held those securities on September 29, 1998, August 27, 2002 and/or March 19, 2003. Claimants could be entitled to receive cash, stocks and warrants from the settlement in the class actions if they are a member of the Court-approved Stockholder Class and/or the Bondholder Class, and did not request exclusion from the settlement. You are a member of the Stockholder Class in the class actions if you purchased or otherwise acquired the stock or options of HealthSouth between April 24, 1997 and March 18, 2003, including HealthSouth securities received in exchange for the stock or options of certain companies that were acquired by HealthSouth, and you did not request exclusion. You are a member of the Bondholder Class in the class actions if you purchased or otherwise acquired HealthSouth bonds, notes or other debt instruments between March 31, 1998 and March 18, 2003, and you did not request exclusion. Claimants may be entitled to receive money or benefits from the SEC Settlement or the class actions, or both. Only one Claim Form was required to file a claim in both settlements. 3. What is the process to apply for a payment from the Settlement Funds? You must have completed a proof of claim form to be eligible for a payment. However, the deadline for submitting a claim was February 28, 2008. To date, late claims have been processed because they have not delayed distribution of the settlement funds. You may still submit a Claim Form with the required documentation to support all transactions. If you do submit a claim now, it will be marked late and it may not be processed if it would delay distribution of the settlement funds. With respect to all late-submitted claims, even if they are otherwise valid, there can be no assurance that they will be accepted. That is a determination that the Courts will make. If you have any questions about the deadline for filing, or correspondence you have received recently from the Claims Administrator, please contact the Claims Administrator by calling 1-888-952-9108 toll-free or by sending an email to mail@HLSSettlement.com. 4. Must I have suffered some type of loss on my investment(s) to receive settlement benefits? Yes. Payments will be based upon losses on HealthSouth securities investments. Your losses on HealthSouth securities transactions will figure into your eligibility for settlement benefits as follows:
No payments will be made on claims under $10. To obtain more detailed information on the Plans of Allocation, please click here. 5. Can I receive benefits from the SEC settlement as well as the Stockholder and Bondholder class actions? Yes, if you submitted a valid, timely Claim Form and provided copies of any required supporting documentation, you will receive benefits from all the settlements for which you qualify, unless you excluded yourself from the class actions settlement. If you submitted a valid, timely exclusion form for the class actions settlement, you are only eligible to participate in the SEC settlement. Either way, only one Claim Form is required to apply for a payment from the HealthSouth Securities Settlement Funds. 6. I inherited (or received as a gift) HealthSouth securities. Am I eligible? Yes. If you obtained HealthSouth securities that were originally purchased or otherwise acquired during the qualifying period by someone else, and you have the authority to act on behalf of these securities, you may qualify for a claim. As outlined in Question #2 (“Who is eligible to receive a payment?”) above, qualifying securities are HealthSouth common stock, bonds, and options. 7. How will the payments in the settlement funds be allocated? Counsel for the Stockholder and Bondholder Classes in the class actions have proposed a Plan of Allocation that must be approved by the Court. That Plan provides that a portion of the Settlement Fund (less Court-awarded attorneys’ fees and costs) will be allocated to the Bondholder Class by multiplying the fund by a percentage equal to: (a) the total dollar value of all eligible Bondholder Class claims divided by the total dollar value of all eligible Bondholder and Stockholder Class claims, plus (b) 500 basis points. The remainder will be allocated to the Stockholder Class, of which (a) $4.45 million will be allocated to claims related solely to claims relating to HealthSouth options, (b) $22.5 million will be allocated solely to claims for the acquisition of HealthSouth stock and/or options in HealthSouth’s mergers with Horizon/CMS, The Company Doctor, or National Surgery Centers (the “merger subclasses”), and (c) the balance will be allocated pro-rata among all claimants who purchased or otherwise acquired HealthSouth stock, including the merger subclasses. Payment amounts to Class Members will be determined based on a formula that considers various factors, including the numbers of shares or bonds purchased, and the timing of the purchases and sales. You can click here to read the entire Plan of Allocation in Appendix I to the Notice. However, please remember that claimants are eligible to receive a payment only if they submitted a valid claim and had a net loss, after all profits from transactions in HealthSouth securities are subtracted from all losses on your HealthSouth transactions. 8. How will the money from the SEC settlement be allocated? The Court has approved a Plan of Allocation for the $100 million to eligible investors in the SEC settlement. If you’re eligible, the amount of your payment will be calculated through a formula that applies a baseline compensation amount to each HealthSouth stock or bond you purchased between August 14, 1996 and March 18, 2003 that you still held on September 29, 1998, August 27, 2002 and/or March 19, 2003. The baseline compensation amounts vary, depending on when you purchased and sold or held the securities. You can click here to review the baseline compensation calculations by reading the SEC settlement Plan of Allocation. However, please remember that the maximum amount you can receive from the SEC settlement is your actual losses on the securities. Your actual loss on securities purchased between August 14, 1996 and March 18, 2003 and held on September 29, 1998, August 27, 2002 and/or March 19, 2003, is the difference between the purchase price and the sale price of that unit. In addition, no payments will be made to investors whose allowed amounts are less than $10.00. 9. I received a determination that my claim is ineligible for payment. If I disagree with my determination, what can I do?Both the SEC case and the consolidated class actions provide for a review of the determination with respect to your claim. If you believe there was an error in determining your claim’s eligibility, please submit your written request for review, including any documentation to support your request, to the Claims Administrator. The address is:
Questions About the Claim Form 10. When was the deadline to submit the Claim Form? The deadline for submitting a claim was February 28, 2008. To date, late claims have been processed because they have not delayed distribution of the settlement funds. You may still submit a Claim Form with the required documentation to support all transactions. If you do submit a claim now, it will be marked late and it may not be processed if it would delay distribution of the settlement funds. With respect to all late-submitted claims, even if they are otherwise valid, there can be no assurance that they will be accepted. That is a determination that the Courts will make. 11. What was required in addition to the Claim Form? Pre-printed Claim Forms did not require documentation, unless you changed information printed on the form. If you did not receive a pre-printed Claim Form, your claim required documentation for the transactions you listed on your Claim Form. Acceptable documentation included:
Each document should have been clearly identified with your name and the account number it pertained to. If you have any questions, please call 1-888-952-9108. 12. Did all co-owners need to sign the form? Yes. All co-owners or their legal representatives should have signed the Claim Form. Payments on qualifying claims will be mailed to the names and address indicated on the Claim Form. Update your address by calling 1-888-952-9108, or by writing to: HealthSouth Securities Settlement
13. Will the information I submitted be kept confidential? Yes. Claim Forms and supporting documentation will be used only to process claims. 14. Why did the Claim Form ask for my email address? The Claims Administrator may need to contact you for further information in order to process your claim. Providing your email address allows the Claims Administrator to contact you promptly and to process your claim and payment more quickly. 15. I purchased or acquired HealthSouth securities, but they were held in my broker’s name. Who should complete the Claim Form? You should. The beneficial owner of the securities should complete the Claim Form. If you purchased the securities but they were registered in your broker’s name, you are the beneficial owner.
After You Submit Your Claim Form 16. Will I be notified if my Claim Form is rejected? If your claim is ineligible to receive a payment, you will be notified in writing. An explanation will be provided and you will be allowed to request that your claim be reconsidered. 17. How much will I receive if my claim is accepted? We won’t know how much you will be paid until all claims are filed and processed because we expect the total losses claimed will be more than the Settlement Funds, which means your payment will be pro-rated. If you are eligible, you will receive two payments, one from the SEC Settlement and one from the class actions. Your payments will be calculated based on the Court-approved Plans of Allocation. You may review these documents on this website by clicking on the links to Plans of Allocation. Any eligible losses less than $10.00 will not be paid. 18. When will I receive my payment? Preparations to pay valid claims, including confirmation of claimant addresses, are underway and checks will be mailed upon approval of the courts overseeing the cases. 19. Will I have to pay taxes on my payment? Whether any payment you receive is taxable will depend on your own individual tax circumstances. The Claims Administrator cannot give you any tax or other legal advice concerning this. If you have tax questions, you should contact a local tax preparer or advisor. 20. What if my address changes after I submitted my Claim Form? Be sure the Claims Administrator has your current contact information, including your current address, to ensure that you receive any payment to which you are entitled. Update your address by calling 1-888-952-9108, or by writing to:
21. What do I need to do to request a review of the determination that my claim is ineligible for payment? You have 20 days from the date on the letter you received to submit a detailed written statement of the basis of your challenge of the Claims Administrator’s determination. Any supporting documentation must be marked with the claim number that appears on the letter. Your request for review may be submitted by letter to the Claims Administrator: HealthSouth Securities Settlement, 201 S. Lyndale Avenue, Suite S-3, P.O. Box 1906, Faribault, MN 55021 or faxed to 1-866-591-7219. Your request for review must also include claim number and claimant identification; claimant representative or agent information, if applicable; and a certification that the information provided in the request is true and correct. Effect of Submitting a Claim 22. Did I give up any legal rights by submitting a Claim Form? No. The deadline to exclude yourself from the Stockholder and Bondholder class actions has already passed; unless you already excluded yourself, you will be bound by the terms of the class actions settlement regardless of whether you filed a claim or not. If you did exclude yourself, then you were ineligible to file a claim for the class actions settlement, but you were still eligible to file a claim from the SEC Settlement by filling out and submitting a Claim Form before the deadline. The SEC Settlement is not a class action and does not affect your right to sue HealthSouth at a later date, nor any other of your legal rights. Please contact the Claims Administrator at 1-888-952-9108 if you have further questions about your legal rights. 23. What if I did not submit a Claim Form? Your participation in the HealthSouth Settlement is voluntary. You will still be bound by the terms of the class actions settlement, including the release of claims against HealthSouth, if you did not previously exclude yourself.
Your Legal Representation 24. Do I have a lawyer in the HealthSouth Settlements? The Court has appointed attorneys to represent the Stockholder and Bondholder Classes (“Lead Plaintiffs’ Counsel”); lawyers for the SEC represent the government and the public in the SEC Settlement. You do not have to pay anything for representation in either case. 25. How will the attorneys be paid? Attorneys in the class actions settlement, both for the Stockholder Class and the Bondholder Class, have been working on these claims since as early as 1998 (in the stockholder lawsuit). When the Court held its hearing on February 7, 2008 to approve the Plan of Allocation for the class actions, the attorneys requested and were awarded fees and reimbursement of expenses, to be paid out of the class actions settlement fund. No attorneys’ fees will be taken out of the $100 million SEC Settlement fund. 26. When and where was the hearing held? The hearing on the proposed Plan of Allocation and attorneys’ fees in the class actions was held on February 7, 2008, at 1:30 p.m., at:
27. What if I disagreed with the proposed Plan of Allocation or the request for attorneys’ fees in the class actions? The deadline to have filed objections was December 15, 2007. The Court considered the filed objections at the hearing on February 7, 2008. 28. How do I object to the Plans of Allocation or the request for attorneys’ fees? The deadline to have filed an objection was December 15, 2007.
Getting More Information 29. I still have questions. Whom may I contact? If you have additional questions, you may:
In addition, you may read the documents filed with the Court in the class actions and SEC case during business hours at the Office of the Clerk of Court, 140 Hugo L. Black United States Courthouse, 1729 Fifth Avenue North, Birmingham, Alabama. If you have questions about the Plans of Allocation, you may write to lead counsel for the Bondholder or Stockholder Classes at the addresses provided in the Notice.
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