Richard Scrushy, founder and former CEO of HealthSouth Corp., Birmingham, Ala., has been indicted on 85 criminal counts in connection with an alleged $2.7 billion accounting fraud at the company, and the government seeks more than $278 million in forfeiture from his personal property. Scrushy, 51, faces a maximum prison sentence of 650 years and more than $36 million in fines, in addition to the forfeiture, if convicted on all counts. He is expected to appear in court later today. The charges include conspiracy to commit fraud; mail, wire and securities fraud; making false statements and false certifications; and money laundering. Prosecutors say Scrushy used criminally derived funds to buy several residences in Alabama; property in Florida, a yacht, diamond jewelry, luxury automobiles, and paintings by Picasso and Renoir, among others. The indictment raises the government's estimate of fraudulent accounting entries at the company to $2.7 billion between 1996 and 2003 from a previous estimate of $2.5 billion.
The indictment was filed Oct. 29 in U.S. District Court in Birmingham but was kept under seal until today. Fifteen current and former HealthSouth officials, including all five former CFOs, have pleaded guilty in the ongoing investigation. Scrushy had not been criminally charged until now, but he was named in a Securities and Exchange Commission civil lawsuit filed in March. In his only public interview since the SEC lawsuit, Scrushy told CBS in October that he was innocent of fraud and unknowingly signed off on financial documents that inflated company profits. In other news, HealthSouth said it received a notice of default from some creditors. In a written statement, interim Chairman Joel Gordon called the default notices "a very public tactic" by the note holders "to try to extract greater value at the expense of other stakeholders." Also, the House Energy and Commerce Committee's investigations subcommittee released a tentative witness list for its hearing tomorrow on HealthSouth's finances. Witnesses include Gordon, former Ernst & Young officials and former a UBS Warburg research analyst, among others. -- by Julie Piotrowski