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Friday, June 19, 2009

Former HealthSouth CEO found liable for $2.88 billion
Matt Glenn at 6:53 AM ET

[JURIST] Former HealthSouth [corporate website] CEO Richard Scrushy [defense website; JURIST news archive] was found liable [opinion; order, PDF] to the company's shareholders for fraud Thursday by Judge Allwin Horn of Alabama's 10th Judicial District [official website] and ordered to pay $2.88 billion. The plaintiffs claimed that Scrushy encouraged others to purposefully inflate company profits [JURIST report] in order to qualify himself and other executives for bonuses, directed company contracts towards other companies he owned, traded the company's stock based on insider information, and misused other company resources for his own benefit. HealthSouth released a statement [press release] approving of the verdict and promising to vigorously attempt to collect the money Scrushy owes the company. Scrushy's lawyers claim Scrushy lacks the money [WSJ report] to pay the judgment and said they plan to appeal [WBRC report].

On Wednesday, the US Court of Appeals for the 11th Circuit [official website] rejected [JURIST report] Scrushy's challenges to a $445 million settlement against HealthSouth. In 2007, the US Securities and Exchange Commission [official website] settled its accounting fraud claims [JURIST report] against Scrushy for $81 million. In 2005, Scrushy was acquitted [JURIST report] of criminal charges of wire and mail fraud, money laundering, conspiracy, and violations of the Sarbanes-Oxley Act. In 2003, HealthSouth conceded that its prior financial statements had overstated its income and assets by a substantial amount. Several class action suits were subsequently filed by investors against the company and its officers for alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The actions were consolidated and, in 2006, the $445 million settlement was reached. Last month, the Eleventh Circuit denied Scrushy's petition [JURIST report] for an en banc rehearing of his conviction for unrelated federal bribery and corruption charges for paying campaign debts of former Alabama governor Don Siegelman [official profile] in exchange for a seat on a state-operated review board that regulates Alabama hospitals.

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