Richard Scrushy's long-running tenure on Alabama's Certificate of Need Review Board allegedly was achieved by bribing the state's former governor, according to a federal criminal indictment unsealed last week.
The U.S. attorney's office in Montgomery, Ala., charged the founder and fired chief of HealthSouth Corp. with bribing former Gov. Don Siegelman for a position on the board. Louis Franklin Sr., acting U.S. attorney for the middle district of Alabama, and state Attorney General Troy King unveiled the indictment at a news conference Oct. 26.
"We hope to send a clear message that the integrity of Alabama's government is not for sale," Franklin said in a news release.
Scrushy's longtime role on the CON board was not the norm, according to an overseer of Alabama's CON board. Board members are usually changed when a new governor takes over, but that wasn't the case with Scrushy, who served under four, said James Sanders, deputy director of the Alabama State Health Planning and Development Agency, which administers the CON board. "He's got the record" for most appointments, Sanders said.
It's not unusual to have healthcare executives on the board, which is made up of representatives from three providers along with three consumers and three at-large members. According to Sanders, who has worked at the agency since 1978, Scrushy served on the board from about 1993 to about 2001 and was appointed by two Democrats-James Folsom and Siegelman-and two Republicans-Guy Hunt and Fob James.
Sanders couldn't recall a HealthSouth CON application being denied during that period and neither could Noel Falls, the founder of CON consulting firm Falls Marketing Group, who said he represented clients that battled HealthSouth over CON applications.
In 2001, the Alabama Legislature convened in a special session and approved a CON exemption for HealthSouth's so-called digital hospital, which is still unfinished. HealthSouth is now trying to sell the facility because it doesn't want to be in the acute-care business. Rivals contested the exemption in lawsuits but were unsuccessful.
The indictment charges Scrushy with a total of eight counts of bribery and wire and mail fraud. The maximum penalty for the fraud counts is 20 years imprisonment and a $250,000 fine, and the maximum penalty for bribery is 10 years and a $250,000 fine.
An indictment charging Scrushy was filed in May but kept under seal until last week. It said Scrushy arranged for another HealthSouth employee to be appointed to the board. Sanders confirmed that former HealthSouth Vice President Thomas Carman served on the CON board.
Carman pleaded guilty to making false statements to federal authorities in a separate case that involved HealthSouth making a bribe to ensure a contract with a Saudi Arabia hospital.
In a statement, Scrushy's legal team said Scrushy was innocent and that the government indicted him because he refused to testify against Siegelman. Scrushy pleaded not guilty Oct. 28. The latest indictment was the result of a joint federal and state investigation begun in 2001 into alleged improprieties in Siegelman's administration.
The 30-count indictment filed also named Siegelman; his former chief of staff, Paul Hamrick; and former state Transportation Director Gary Roberts. In June, a jury acquitted Scrushy of orchestrating a scheme to inflate HealthSouth's income by some $2.6 billion. The charges were based on the Sarbanes-Oxley Act of 2002; Scrushy was accused of having knowledge of such a fraud.
The U.S. attorney in Birmingham, Ala., HealthSouth's home base, prosecuted that case and a separate case that charged Siegelman with rigging Medicaid contracts. Those charges were dismissed about a year ago.