HealthSouth Corp. founder and former CEO Richard Scrushy is entitled to access all of his personal assets -- estimated at $150 million -- during the federal government's ongoing investigation of the rehabilitation chain, a U.S. District Court judge in Birmingham, Ala., ruled. The Securities and Exchange Commission alleges that HealthSouth overstated earnings by up to $2.5 billion since 1997 and has named Scrushy and HealthSouth in a civil complaint. Criminal charges have been filed against 11 individuals but not against Scrushy. In a 64-page ruling, District Court Judge Inge Johnson was harshly critical of the government's effort to freeze Scrushy's assets without filing criminal charges. According to the Associated Press, Johnson wrote: The government "undoubtedly manipulated simultaneous criminal and civil proceedings" to its advantage, and "to date, the SEC has failed to establish, as opposed to allege, that defendant Scrushy was involved in the fraud."
Fulfilling a request by U.S. Attorney Alice Martin, whose Birmingham office is leading the criminal investigation, Johnson halted the continuation of the SEC's civil suit until potential criminal charges against Scrushy are resolved. In an interview with Modern Healthcare's Daily Dose, Martin denied manipulation on the SEC's part and said she was pleased with the ruling to suspend civil proceedings. SEC attorney Bill Hicks, the lead federal prosecutor in the case, said the government has not made a decision on whether to appeal Johnson's decision. "We're disappointed in the ruling and are reviewing it and considering the next steps," he said. Scrushy had sought access to about $70 million of his assets. According to the AP, the SEC estimates his total assets at $150 million. In other HealthSouth news, the company named PricewaterhouseCoopers as its new independent auditor to replace Ernst & Young, which was relieved of its accounting duties last month. -- by Julie Piotrowski