Court Watch - Wednesday, July 1, 2009 12:29 - 0 Comments

Richard Scrushy is held to be responsible for Health South fraud

A Jefferson County judge ordered Richard Scrushy to pay HealthSouth Corp. $2.87 billion, finding Scrushy responsible for the company’s fraud. The ruling by Jefferson County Circuit Judge Allwin Horn marks the first time HealthSouth founder Scrushy has been found responsible for the $2.6 billion in faked profits and assets that almost plunged the company into bankruptcy once the subterfuge was detected in 2003.

In the suit, shareholders of Birmingham-based HealthSouth were seeking $2.6 billion plus interest from Scrushy, saying he fabricated profits to boost the stock price and trigger bonuses for himself. The trial was before the judge without a jury. The shareholders sued on behalf of the company, with all proceeds less legal fees to be paid to the corporation.

During the trial, Scrushy denied under oath that he knew anything about the fraud. He tried to prove that he was flim-flammed by devious subordinate executives who carried out the fraud behind his back. Five former chief financial officers pleaded guilty in 2003 and 2004 to federal criminal charges related to the $2.6 billion fraud that ran from 1996 through 2002. All of them said Scrushy was in on the fraud, and that thousands of small but fictitious entries were made to HealthSouth’s financial records to artificially boost profit.

Source: Birmingham News