Richard Scrushy, former CEO and founder of HealthSouth Corp., surrendered to the FBI this morning, directly after being charged in an 85-count federal indictment involving securities fraud and other charges, the U.S. Department of Justice says.
Federal prosecutors are seeking more than $278 million in forfeitures from Scrushy, including several residences, boats, aircraft, a Lamborghini and Rolls Royce, and paintings by Picasso, Chagall and Renoir, according to a Justice Department release today.
Scrushy founded the Birmingham, Ala.-based company, which operates nearly 1,700 outpatient surgery, diagnostic imaging and rehabilitation facilities.
The federal release says Scrushy received $267 million from HealthSouth from 1996 through 2002, including $7.5 million in base salary, more than $53 million in bonuses and $206 million in stock options.
Scrushy is reportedly the first chief executive to be accused of violating the 2002 Sarbanes-Oxley Act, which requires top executives at publicly traded companies to certify the accuracy of financial results.
"These charges show that the government has important new tools to hold executives accountable for corporate fraud, and we won't hesitate to use them where the evidence warrants it," says assistant attorney general Christopher Wray in the release.
In response to the indictment, Donald Watkins, Scrushy's lead attorney, told reporters in Birmingham that his client "will not be pleading guilty in this lifetime."
In the 38-page indictment, Scrushy is accused of overseeing a scheme to deliberately inflate HealthSouth's earnings and assets by more than $2.5 billion over several years.
The charges against Scrushy are based on information secured from 14 former financial aides to Scrushy who have entered guilty pleas and are cooperating with federal authorities, the Justice Department says.
According to the Justice Department, when HealthSouth income failed to meet Wall Street expectations, Scrushy ordered the corporate accounting staff to falsify the company books, which staff called "filling the hole."
The release says Scrushy sought to control HealthSouth employees and board members through "threats, intimidation, electronic and telephonic surveillance, and reading their e-mails."
Scrushy also allegedly offered large compensation packages and other incentives to fellow executives to keep them from disclosing the accounting changes, the Justice Department says. He also made "an offer to take care of a co-conspirator's family if the co-conspirator would take the blame for HealthSouth's financial overstatements."
In other news, interim management at HealthSouth said Monday that some senior bondholders had notified the company that it had defaulted on their debt agreement.