BIRMINGHAM, ALA---In one of the largest settlements against an individual by the Securities and Exchange Commission, fired HealthSouth Corp. CEO Richard Scrushy agreed to pay $81 million in order to end settle the lawsuit brought against him by the SEC.

Scrushy admitted no wrongdoing but agreed to forfeit $77.5 million that the government said represented his profit from a $2.7 billion fraud at HealthSouth.

The deal permanently bars Scrushy from serving as an officer or director of a public company and permanently enjoins him from committing future violations of the antifraud and other provisions of the federal securities laws.

The SEC's complaint in this action charged Scrushy with directing a $2.6 billion financial fraud at the HealthSouth Corporation during the years 1996 through 2002. Scrushy was one of HealthSouth's founders, and was chairman of its Board of Directors and its chief executive officer during the relevant period of the fraud.

The complaint alleged that at Scrushy's direction, HealthSouth's overstated its revenue by more than $2.6 billion from the second quarter of 1996 through the third quarter of 2002. This overstatement led directly to quarterly and annual overstatements of net income and retained earnings. The commission's complaint charged that, by the end of 2002, HealthSouth was claiming to have over $1.5 billion in accumulated retained earnings, when in fact the Company had operated at a significant loss over its entire corporate history. The HealthSouth fraud resulted in one of the largest accounting restatements in American corporate history.

The final judgment orders Scrushy to pay $81 million comprised of $3.5 million in civil penalties and $77.5 million in disgorgement, with the disgorgement amount subject to an offset for any amounts paid in judgments or settlements in certain derivative, corporate, and class action lawsuits seeking recovery of the same money as the commission.

The judgment permanently prohibits Scrushy from acting as an officer or director of a public company, and Scrushy has consented to refrain from seeking modification or removal of this prohibition for at least five years from the entry of the final judgment. 4-23-07

© 2007 North Country Gazette