HealthSouth Corp. has asked a federal court to release some of the frozen assets of founder and former Chairman and CEO Richard Scrushy in light of Delaware judge's order for Scrushy to repay a $25 million loan.
Meanwhile, Scrushy, who is under indictment for fraud related to the overstatement of HealthSouth earnings and assets, reportedly plans to challenge the constitutionality of the Sarbanes-Oxley Act, a 2002 law that makes CEOs and CFOs of publicly traded companies personally responsible for the accuracy of corporate financial reports.
In a motion filed Friday in the U.S. District Court for the Northern District of Alabama in Birmingham, HealthSouth asks to intervene in the criminal proceedings against Scrushy so it can collect $25.9 million in principal and interest the company says Scrushy owes on a personal loan made in August 2002.
Scrushy's assets were frozen following the 85-count indictment against him, but the Vice Chancellor Leo Strine of the Delaware Chancery Court on Nov. 24 ordered Scrushy to repay the loan in cash, with interest. Birmingham-based HealthSouth is incorporated in Delaware.
"We asked the federal court to set aside enough of his assets to pay back what Strine had ordered," HealthSouth spokesperson Andy Brimmer says. HealthSouth, the largest operator of ambulatory surgery and outpatient rehabilitation centers in America, estimates the current value of the loan at $25.9 million.
Scrushy reportedly will fight the indictment and related asset freeze by seeking to overturn the Sarbanes-Oxley law, which forms the basis for some of the criminal charges against him. The Associated Press reported Tuesday that Scrushy's legal team advised U.S. District Judge Michael Putnam of this strategy.
U.S. Attorney Alice Martin, who is prosecuting the case, has said that this is the first application of Sarbanes-Oxley in a corporate fraud case.
Neither of Scrushy's two lead defense attorneys was available for comment.