Ernst & Young US (E&Y) has
settled a $109 million securities class action with investors of
US-based health care company HealthSouth.

The action was led by the New Mexico State
Investment Council and the Educational Retirement Board of New
Mexico.

Investors alleged the defendants manipulated
their accounting in various ways over several years. This caused
HealthSouth’s financial statements to be materially false and
misleading, causing investors to overpay for HealthSouth securities
and suffer hundreds of millions of dollars of damages.

The action alleged E&Y knew that
HealthSouth’s financial statements were materially overstated and
failed to conduct audits in compliance with Generally Accepted
Auditing Standards.

E&Y said the settlement allowed it to
resolve the litigation brought by the shareholders of
HealthSouth.