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ATLANTA — HealthSouth Corp. has helped lots of lawyers become more prosperous in recent years. The Birmingham, Ala., company expects eventually to pay a total of about $147 million in legal fees for litigation expenses incurred since 2003, according to the company’s annual report, which was filed on Wednesday. In March 2003, federal prosecutors launched a fraud case against the company and its founder and former CEO, Richard Scrushy. Since then, HealthSouth has paid to defend itself in that criminal case, as well as civil cases filed in federal and state courts by the company’s shareholders, bondholders, auditors and employees. Some Atlanta law firms got in on the action, including Alston & Bird; Parker, Hudson, Rainer & Dobbs; and the Atlanta office of Jones Day. Arthur Leach, a solo practitioner in Norcross, represents Scrushy in a pending case. Others on HealthSouth’s accounts-payable list include many law firms that are members of the Am Law 100. HealthSouth’s legal bills are comparable to other U.S. corporations that have found themselves in trouble with federal regulators in recent years, said Ron Peppe, a vice president at the Washington-based Association of Corporate Counsel. “You bring in huge teams of lawyers, not just the guys in the courtroom, but everyone back working in the office, experts going over files,” Peppe said. “The costs mount very quickly.” HealthSouth already has paid some of the $147 million total, Peppe said. It has put the rest in reserve, with the expectation that it will eventually need to pay the full amount. The final total could end up being less, but $147 million is probably a good estimate, he said. “I would guess they tried to be very realistic and be very accurate,” Peppe said. “It’s certainly reasonable to expect that they would pay this much.” The $147 million total does not include salaries paid to HealthSouth’s in-house law department. HealthSouth incurred $31 million in legal expenses in 2003, $47.6 million in 2004 and $68.5 million in 2005. At an average of $49 million per year over the past three years, HealthSouth’s legal bills could be about 1.3 percent of the company’s annual revenue of $3.7 billion. “That’s above average for how much a company typically spends in a year on legal fees,” said James Wilber, a principal at Altman Weil who leads the company’s services to corporate law departments. The median yearly spending on legal bills for companies with at least $1 billion in revenue is $7.1 million, according to a survey conducted by the Association of Corporate Counsel and law firm software company Serengeti Law. HealthSouth’s legal bills aren’t as large as the bills of some other U.S. companies that have recently found themselves in hot water. Enron Corp. paid Houston-based firm Vinson & Elkins about $162 million for legal work spanning five years. Atlanta’s Alston & Bird was paid about $73 million to be Enron’s court-appointed examiner. United Airlines paid the Chicago law firm Kirkland & Ellis about $100 million for leading it through Chapter 11 bankruptcy protection from 2002 to 2005. Wal-Mart Stores Inc. spends about $200 million yearly on legal fees for outside law firms. HealthSouth is not required to provide a breakdown of how much it paid each firm, or amounts that were paid for specific legal cases. The company has not voluntarily disclosed that information, said company spokeswoman Amanda Pullins. Skadden, Arps, Slate, Meagher & Flom of New York is listed in the 10-K filing as HealthSouth’s primary law firm. Alston & Bird partners Gregory Braden and Michael Monnolly had represented individuals named as defendants in litigation filed against HealthSouth in July 2003 alleging mismanagement of the company’s employee stock-purchase plan. They left the case in September 2003. HealthSouth’s lead attorneys in the ERISA case are Skadden, Arps partner Robert Saunders, Leslie Moore of Birmingham and Kile Turner of Norman, Wood, Kendrick & Turner in Birmingham. Leach and Parker, Hudson, Rainer & Dobbs partners J. Marbury Rainer and David Russell represented Scrushy in both the Securities and Exchange Commission’s case against the company and the ERISA case. Richard Deane Jr., a partner in the Atlanta office of Jones Day, had registered to represent Scrushy in the federal probe, but Scrushy removed him several months later. Scrushy was acquitted in June of charges that he orchestrated a massive accounting fraud, in which HealthSouth’s earnings were overstated by at least $2.7 billion. Scrushy’s legal affairs are far from finished, however, as he goes to trial in May on charges that he bribed former Democratic Alabama Gov. Don Siegelman to put him on a state board with oversight of hospital regulations. Scrushy also has sued HealthSouth, claiming the company wrongfully fired him and demanding that it pay his legal bills. HealthSouth operates more than 1,000 rehabilitation centers in the United States, and has about 37,000 employees. The company said on Wednesday that it lost $446 million in 2005, and that revenue fell to $3.21 billion from $3.51 billion because of the costs of settling lawsuits and because of new Medicare rules. Andy Peters is a reporter with The Fulton County Daily Report , a Recorder affiliate based in Atlanta.

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