Scrushy Settles With SEC To Close HealthSouth Probe

HealthSouth founder Richard M. Scrushy will settle a Securities and Exchange Commission lawsuit for $81 million, closing the book on a federal probe of the former executive's role in a $2.7 billion accounting fraud.

Scrushy, who was HealthSouth's chairman and chief executive, agreed to a $3.5 million fine and is to forfeit $77.5 million in profit to end the suit filed in 2003, according to settlement documents filed yesterday at U.S. District Court in Birmingham, Ala.

The accord resolves much of Scrushy's liability for an accounting fraud that nearly forced the Birmingham chain of rehabilitation hospitals into bankruptcy protection. A federal jury acquitted him in 2005 of charges that he masterminded a plan to inflate profit at HealthSouth.

"The settlement reflects an effort to bring to closure a case than involved lots of pieces," said Christopher R. Conte, an SEC enforcement attorney overseeing the investigation. "There are many and multiple claims that are out there for much of the same money and assets."

Scrushy, 54, ordered other managers to "fix" the numbers and "get them where they need to be," as earnings threatened to fall short of investors' expectations in 1996, the SEC said in its lawsuit. In the next six years, he repeatedly released inflated figures and misled investors on conference calls, the SEC said.

Because the SEC is crediting Scrushy for $71.5 million in payments already made in three investor lawsuits, his actual payment to settle with the agency would not exceed $9.5 million.

The penalties are "are small relative to the hundreds of millions of dollars the SEC was claiming" originally, Scrushy's attorney, David Russell, said in a telephone interview. Still, "it's a lot for him, and it may be too much for him."

Scrushy did not admit or deny wrongdoing under the accord. The SEC granted him a year to pay the first $1.5 million of the fine and two years to pay the rest.

Scrushy still faces as many as 30 years in prison for a June federal conviction for bribing former Alabama governor Don Siegelman. In that case, jurors found Scrushy guilty of paying a $500,000 bribe to Siegelman's campaign to create a state lottery in exchange for a seat on the state's hospital regulatory board.