By Carrie Johnson
Washington Post Staff Writer
Friday, July 22, 2005
Lawyers for HealthSouth Corp. founder Richard M. Scrushy yesterday urged a judge to drop civil charges against him, arguing that the government had presented no "credible" evidence that Scrushy knew about a $2.7 billion accounting fraud.
The Securities and Exchange Commission should not be allowed to pursue fraud allegations against Scrushy because regulators have presented no new information tying him to the earnings inflation scheme, defense lawyers argued.
A Birmingham jury acquitted Scrushy last month of all three dozen criminal counts against him. Federal prosecutors recently said they would not seek to try Scrushy on related charges, leaving the SEC lawsuit as the biggest remaining hurdle for the 52-year-old former health care executive.
The SEC is seeking $786 million in penalties and restitution from Scrushy. The agency also wants to bar him from serving as an officer or director of a publicly traded company.
U.S. District Judge Inge P. Johnson had previously cast doubt on some of the SEC claims in an unusual 11-day hearing in 2003. The same day Scrushy was acquitted on criminal charges, the judge ordered the agency to file papers explaining why she should not dismiss the SEC case.
An agency spokesman declined to comment. Previously, SEC lawyers told the judge that they must meet a far lower burden of proof to win their civil case against Scrushy than was necessary in his criminal case.
Defense lawyers asserted, however, that regulators had improperly colluded with prosecutors and violated Scrushy's rights -- conduct that they said merited dismissal of the civil case.
"The SEC now appears fixated on trying to oppress, humiliate, and punish Richard Scrushy once again," defense lawyer Arthur Leach wrote in court papers filed yesterday.
The judge has yet to rule on whether the civil case against Scrushy should continue.
In a letter posted on his Web site last week, Scrushy once again denied knowledge of the fraud and decried the government's "shock and awe campaign" against him. Defense lawyers have said Scrushy will ask HealthSouth to pay more than $20 million in attorney fees. He also wants to return to the company -- a suggestion that HealthSouth's new management has rejected.