Former HealthSouth Chief Indicted

HealthSouth Indictment
November 4, 2003
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By Jesus Sanchez, Times Staff Writer


Federal prosecutors today indicted former HealthSouth chief Richard Scrushy on 85 counts ranging from fraud to money laundering and charged him with playing a key role in a scheme that inflated the once high-flying health care company's earnings by $2.5 billion.

Scrushy, whose huge salary and lavish lifestyle have been cited as examples of corporate excess during the 1990's stock market boom, will become the first major chief executive to be charged under new federal rules that makes corporate leaders accountable for false and inaccurate financial statements.

Scrushy, 51, turned himself into federal officials in Birmingham, Ala., where HealthSouth is headquartered, and is scheduled to make his initial court appearance later today, according to the Associated Press. He has previously denied any allegations of wrongdoing, saying he was unaware of the accounting fraud.

More than a dozen other HealthSouth executives have already pleaded guilty as a result of the government's probe into massive accounting irregularities at the firm, which operates a network of about 1,700 outpatient surgical, diagnostic imaging and rehabilitation centers. Since the investigation began, HealthSouth investors have watched their shares plummet in value.

"The magnitude of this alleged fraud is staggering" said U.S. assistant attorney general Christopher Wray in a Washington, D.C. press conference. "Instead of telling the public the truth, Scrushy and his accomplices lied. They cooked Healthsouth's books and filed false financial statements with the SEC to cover up their scheme."

Since Scrushy's compensation was tied to his company's financial performance, the former chief executive officer and chairman reaped a huge windfall by inflating HealthSouth's earnings, prosecutors allege. Between 1996 and 2002, Scrushy earned $267 million in salary, bonuses and stock options.

Charges against Scrushy include conspiracy, securities, mail fraud and money laundering, according to the indictment, which was issued Oct. 29 but unsealed today.

In addition, he allegedly violated the Sarbanes-Oxley Act, passed in the wake of the Enron scandal, which requires chief executives to certify that their company's financial statements are true and accurate.