Richard Scrushy was dealt another legal victory--at least for now--when a federal judge threw out the two fraud claims in the Securities and Exchange Commission's civil complaint against the founder and former chief executive officer of HealthSouth Corp.
U.S. District Judge Inge Johnson gave the SEC 15 days to appeal. John Worland, the lead SEC attorney, cited a gag order on the matter and declined to elaborate on the SEC's next move. A spokesman for Scrushy also cited the gag order and declined comment.
The judge didn't dismiss four other counts that Scrushy's lawyers requested removed, but the fraud charges are the most damaging because they carry the harshest penalties, according to Steven Smith, a partner in the law firm Bryan Cave. In the court order, Johnson said she threw out the fraud claims because they didn't specifically link Scrushy to faking HealthSouth's income.
The SEC said it's seeking civil fines and restitution to shareholders from Scrushy, and to have Scrushy barred from being an officer or director of any publicly traded company. Birmingham, Ala.-based HealthSouth has said it intends to hold a shareholder meeting before year-end and shareholders will vote on the board. Scrushy, who has been barred from board meetings, could be officially removed.
HealthSouth settled its SEC lawsuit by agreeing to pay $100 million. Johnson sent the Scrushy case to mediation, scheduled to begin in January 2006, but in court filings both sides said the matter may still go to trial in February 2007.