To all shareholders, this is a lot like what has happened in Medcom and Card... Medcom defendants have less money to defend themselves, should be an easier case to prove.
Judge orders Scrushy to pay $2.9B to shareholders
AP
BIRMINGHAM, Ala. – A state judge on Thursday ordered former HealthSouth CEO Richard Scrushy to pay nearly $2.9 billion to shareholders who sued over a massive accounting fraud that nearly sent the rehabilitation chain into bankruptcy.
Circuit Judge Allwin E. Horn, who heard the case without a jury, ruled in favor of HealthSouth shareholders who filed a lawsuit claiming Scrushy was involved in years of overstating the company's earnings and assets to make it appear the company was meeting Wall Street forecasts.
Horn wrote in his ruling that Scrushy "knew of and participated in" the faked reports filed with regulators from 1996 to 2002. He said the HealthSouth founder also "consciously and willfully" violated his financial responsibilities as CEO.
Scrushy was acquitted in a federal criminal case over related charges and testified in the state civil case that he knew nothing about any fraud. He is serving a nearly seven-year sentence for a 2006 conviction in a separate state government bribery case.
The Alabama suit accused Scrushy of unethical dealings with the company while it was going broke and complicity in $2.6 billion in fraudulent reports it filed with regulators. The amount shareholders sought included money they claimed he pocketed through sweetheart deals.
The final judgment from Horn totaled $2.88 billion.
While Scrushy is a multimillionaire, it was not immediately clear how he could pay the judgment. Scrushy's lawyers did not immediately return calls.
An attorney for shareholders, John W. Haley, said Scrushy was "a man of substantial means" who earned more than $266 million from the time the fraud began until he left the company in 2002.
"We think he's still a man of substantial means," Haley said Thursday.
Scrushy, who testified publicly for the first time concerning the alleged fraud during the trial last month, denied getting millions from the company in improper deals or having any role in cooking the books.
"I had no knowledge of any financial fraud at HealthSouth," he testified.
While Scrushy was acquitted of criminal charges in federal court in 2005, 15 former HealthSouth executives pleaded guilty and a 16th was convicted. Some testified in the civil case, claiming Scrushy knew that financial reports were faked.
During the lawsuit trial, Haley repeatedly confronted Scrushy over what Haley described as obvious conflicts of interest. Among them was HealthSouth's purchase of 19 acres of land next to Scrushy's suburban Birmingham estate for $1.9 million, then giving him the land three years later. Scrushy said he got the land instead of a bonus one year.
Haley, sounding incredulous, recounted how Scrushy took an $82 investment in a company that purchased property at a discount from HealthSouth and turned it into a personal profit of some $12 million in four years by leasing the property back to the corporation.
"That's the way it works in America," Scrushy said.
Haley also claimed Scrushy received $226 million in compensation over seven years while HealthSouth was losing $1.8 billion, but Scrushy disputed the numbers.
Five former HealthSouth finance chiefs gave testimony implicating Scrushy in a scheme to fraudulently inflate earnings. Scrushy, who hired all five when he ran the company, blamed them and described them as having personal weaknesses.
Scrushy wore a dark business suit in court, but his leg shackles jingled as he arrived for his first day of testimony. He changed back into prison garb when his testimony ended and he was returned to a federal prison in Beaumont, Texas.
AI
