Milberg Weiss Announces The Filing Of A Class Action Suit on Behalf of Purchasers of the Securities of Healthsouth Corporation

Business Wire, August 28, 2002

Business Editors & Legal Writers

NEW YORK--(BUSINESS WIRE)--Aug. 28, 2002

The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on August 28, 2002, on behalf of purchasers of the securities of Healthsouth Corporation ("Healthsouth" or the "Company") (NYSE: HRC) between January 14, 2002 and August 27, 2002 inclusive (the "Class Period').

A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/cases/healthsouth

The action, numbered 02-AR-2105-S, is pending in the United States District Court for the Northern District of Alabama, located at the Hugo L. Black U. S. Courthouse, 1729 Fifth Avenue, North Birmingham, Alabama, against defendants Healthsouth, Richard M. Scrushy (CEO, Chairman), Weston L. Smith (CFO, Executive VP), William Owens (Chief Operating Officer) and George Strong (director). The Honorable Judge William M. Acker Jr. is the Judge presiding over the action.

The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between January 14, 2002 and August 27, 2002. According to the complaint, throughout the Class Period, Healthsouth issued press releases and filed reports with the SEC announcing impressive revenue and earnings growth and repeatedly assuring the market that the Company was well on its way to meeting its financial targets for the year 2002 and that its fundamentals were strong. According to the complaint, these and other statements were materially false and misleading because they failed to disclose that the Centers for Medicare and Medicaid Services ("CMS") had issued directives reclassifying certain categories of reimbursements, which would have a materially negative impact on Healthsouth's business. The Complaint further alleges that defendants failed to disclose these facts, which had been known to them for many months, in order to allow defendants Scrushy and Strong to sell (collectively) millions of shares of the Company's stock at artificially inflated prices and so that the Company could commence a $998 million note exchange/offer on more favorable terms than if the truth regarding the CMS directives and their impact on the Company was known publicly. The note exchange/offering was commenced on August 27, 2002 -- one-day before the Company disclosed the negative developments for the first time. According to the complaint, on August 27, 2002, Healthsouth shocked the market by issuing a press release announcing that CMS directives issued on July 1, 2002 concerning reimbursements may result in a $175 million shortfall in EBITDA from previously issued financial guidance for 2002 and that it could not provide further guidance for 2002 and 2003 because of uncertainties posed by the directives. In addition, the Company announced that it would spin-off its surgery-center division as part of a massive restructuring undertaken to deal with the developments and that defendant Scrushy would be replaced as CEO by defendant Owens. In response to this disclosure, Healthsouth stock plummeted by over 43% to close at $6.71 per share in a single day on extremely high trading volume.

If you bought the securities of Healthsouth between January 14, 2002 and August 27, 2002 you may, no later than October 28, 2002, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Milberg Weiss Bershad Hynes & Lerach LLP, or other counsel of your choice, to serve as your counsel in this action.

Milberg Weiss Bershad Hynes & Lerach LLP (http://www.milberg.com) is a 190-lawyer firm with offices in New York City, San Diego, San Francisco, Los Angeles, Boca Raton, Philadelphia and Seattle, and is active in major litigations pending in federal and state courts throughout the United States. Milberg Weiss has taken a leading role in many important actions on behalf of defrauded investors, consumers, and others, and has been responsible for more than $20 billion in aggregate recoveries. Please contact the Milberg Weiss website for more information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following attorneys:

Steven G. Schulman or Samuel H. Rudman
One Pennsylvania Plaza, 49th fl.
New York, NY, 10119-0165
Phone number: (800) 320-5081
--or--
Kenneth J. Vianale
5355 Town Center Road, Suite 900
Boca Raton, FL  33486
Phone number:  (561) 361-5000

Email: healthsouthcase@milbergNY.com
Website: http://www.milberg.com