Indiana, Pa.-based Northstar Health Services has agreed to pay about $6.5 million to settle shareholder lawsuits against the company.
The proposed settlement was announced last month after a U.S. District Court hearing in Pittsburgh. Final judicial approval of the settlement is scheduled for Nov. 7.
Eight shareholder lawsuits against the company originally sought $20 million in damages. Shareholders sued last year after the rehabilitation provider faced the resignation of the its outside auditors over questions concerning Northstar's financial practices; the ousting of its founding president and chief executive officer, Mark DeSimone; and the suspension of the company's stock from NASDAQ trading (March 10, p. 38).
Most of the company's share of the proposed settlement will be covered by its director and officer liability insurance, with other parties and their insurers funding the balance.
For the six months ended June 30, Northstar reported a net loss of $4.9 million, or 84 cents per share, compared with a net loss of $4.7 million, or 76 cents per share, in the year-ago period.
Northstar provides physical rehabilitation, mobile diagnostic testing and contracted long-term-care services in Ohio, Pennsylvania and West Virginia.
While settling the suit, the company has been struggling to rebuild its management team. Thomas W. Zaucha replaced DeSimone and was himself later ousted and sued by Northstar's board. Zaucha won a proxy fight to regain control of the company in May.
Northstar also said it has appointed three new executives to its management team. Frank J. Spramelli, 51, will join the company in September as chief administrative officer after serving as vice president for development at Three Rivers Health Plan, a Pittsburgh HMO. Lisa S. Guarino, 38, will become chief financial officer. She served as CFO of Northstar from November 1995 to September 1996 before leaving to act as a financial consultant for the company. And Michael J. Fournier, 32, was named president of Northstar's long-term-care subsidiary, Keystone Rehabilitation Management. He was most recently a director of one of the company's outpatient facilities.
