Former HealthSouth Corp Chief Executive Richard Scrushy was ordered to pay $2.9 billion on Thursday after a judge said he was responsible for a massive accounting fraud that nearly brought down the hospital chain.
Former HealthSouth Chief Executive Richard Scrushy talks
to reporters outside a Birmingham courthouse, May 18, 2005.
(REUTERS / Julie Hunter)
Scrushy, serving a seven-year prison term in a bribery case, was acquitted of criminal charges related to the HealthSouth fraud in 2005. But an Alabama judge ruled on Thursday in favor of investors in a civil lawsuit, finding that Scrushy played a key role in the accounting manipulation.
Scrushy knew of and actively participated in fraud, state court Judge Allwin Horn said in a written ruling.
Last month, Scrushy came to court in leg shackles to testify in the case, which the judge heard without a jury. The former CEO said he had no knowledge of financial problems at HealthSouth, reiterating the argument used at his 2005 criminal trial, where he contended he was duped by subordinates.
His lawyer was not immediately available for comment. The judgment could be appealed to the Alabama Supreme Court.
It is unclear how much of the judgment Scrushy could ultimately have to pay.
John Haley, a lawyer for the shareholder plaintiffs, said Scrushy's net worth was estimated at about $275 million in 2005. Since then, Scrushy has agreed to pay $81 million to settle U.S. Securities and Exchange Commission charges that he directed the HealthSouth fraud, without admitting any wrongdoing.
I think that he is still worth a substantial amount of money, said Haley, of law firm Hare Wynn Newell & Newton in Birmingham.
The shareholders' case was brought on behalf of the company, which said in a statement that it was pleased justice has been served. HealthSouth said it would get about 40 percent of any amounts recovered from the lawsuit.
Although we do not at this time know whether and to what extent the judgment against Mr. Scrushy is collectible, we will pursue collection aggressively and to the full extent permitted by law, HealthSouth said.
Scrushy founded HealthSouth in 1984 and built it into a large rehabilitation medical company. Once known for his lavish lifestyle and his role as a Christian minister and broadcaster, he was accused of directing HealthSouth to overstate revenues by at least $2.6 billion between 1996 and 2002.
He was the first CEO to be tried under the Sarbanes-Oxley Act passed to fight corporate corruption after the Enron and WorldCom scandals. He was cleared of all 85 counts at his criminal trial.
In 2006, Scrushy, along with former Alabama Governor Don Siegelman, was convicted of bribery in connection with a scheme to get a seat on a hospital regulatory board. He is now in a federal prison in Texas, having served about two years of his seven-year sentence.
HealthSouth shares were up 46 cents, or 3.7 percent, at $12.97 in afternoon New York Stock Exchange trading.
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