Home -> Law Blog Directory -> Legal News Blogs -> JURIST - The Paper Chase

Legal News

: JURIST - The Paper Chase

Former HealthSouth CEO found liable for $2.88 billion

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] Former HealthSouth CEO Richard Scrushy was found liable to the company's shareholders for fraud Thursday by Judge Allwin Horn of Alabama's 10th Judicial District and ordered to pay $2.88 billion. The plaintiffs claimed that Scrushy encouraged others to purposefully inflate company profits 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 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 to pay the judgment and said they plan to appeal. On Wednesday, the US Court of Appeals for the 11th Circuit rejected Scrushy's challenges to a $445 million settlement against HealthSouth. In 2007, the US Securities and Exchange Commission settled its accounting fraud claims against Scrushy for $81 million. In 2005, Scrushy was acquitted 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 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 in exchange for a seat on a state-operated review board that regulates Alabama hospitals.

Full post as published by JURIST - The Paper Chase on June 19, 2009 (boomark / email).