The U.S. Department of Justice (DOJ) has reached a $325 million settlement with HealthSouth (OTC BB: HLSH) over the health-care provider's $2.6 billion accounting fraud -- with a payment plan. The company will pay $75 million up front, with the balance paid quarterly over the next three years.

HealthSouth is the U.S.'s largest provider of outpatient surgery, diagnostic imaging, and rehabilitative services, operating facilities nationwide and abroad. Its balance sheet, as you might expect, is not a thing of beauty. There is $3.2 billion in debt -- and now there are quarterly DOJ payments to boot.

Don't look to the new CEO for flowery pictures of the future. He expects a three- to four-year turnaround and admits that company controls are weak.

Investors, though, liked the settlement news and sent the stock up 5% in early trading.

This company, even with a market capitalization of 58% of annual sales, is no value play. Healthy hospital giant HCA (NYSE:HCA) trades at 84% of sales (16 times trailing earnings), generated $1.7 billion in 12 months' trailing free cash flow (boy, what a trail that is), and is expected to grow earnings by 17.7% next fiscal year. Even small Triad Hospitals (NYSE:TRI) trades at 66% of annual sales.

Everything isn't settled on the legal front either. There is still an $8 billion class action lawsuit, which also targets Citigroup (NYSE:C) and others, charging that investors were misled. (Given that 17 HealthSouth executives have been charged in the accounting fraud -- and 10 sentenced -- this might be easy to prove.)

Investors buying the stock now are probably thinking Tyco (NYSE:TYC), another company involved in a hold-your-nose scandal but whose stock is up 35% this year because the company throws off plenty of free cash flow. Think again. It will be the first quarter of 2005 before HealthSouth restates its results for 2000 through 2003. The 2004 results will come two quarters after that. As the CEO is telling investors, there is a long way to go.

Let's put it another way: Buyer beware.

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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.