HealthSouth scandal: More Problems for Scrushy - Business in United States of America

HealthSouth scandal

HealthSouth scandal: The Rise of HealthSouth

HealthSouth scandal: Signs of Trouble

As HealthSouth began to revive, Scrushy’s problems were just beginning. In October, 2003, he was indicted on eighty-five counts, including charges that he falsified accounts at HealthSouth, leading to a $2.7 billion fraud of investors, by reporting fictitious profits. Federal officials charged Scrushy with duping investors into believing that the company met earnings targets to boost the company stock price (which would benefit Scrushy, who owned large amounts of HealthSouth stock) and to support his extravagant lifestyle, which included ownership of a Lamborghini, a 92-foot yacht, a 360-acre farm in Alabama, seven corporate jets, and paintings by Picasso and Renoir. 

At the trial (January 25-June 29, 2005), former HealthSouth executives testified that Scrushy had ordered the accounting manipulations. However, these officials had pleaded guilty and agreed to testify against Scrushy to have their sentences reduced; therefore, the possibility existed that they were lying to help themselves. The prosecutors could not produce independent evidence that tied Scrushy to the fraud. After the prosecution made its case, Judge Karen Bowdre dismissed forty-nine of the eighty-five charges against Scrushy. The jury acquitted Scrushy of all remaining counts against him. 

Scrushy, however, faced further court action. In 2006, he was convicted of bribery, conspiracy, and mail fraud for his part in a bribery scheme involving Alabama governor Don Siegelman. He was sentenced in 2007 to eighty-two months in federal prison and three years of probation, and ordered to pay a $150,000 fine, $267,000 in restitution, and the costs of his incarceration.

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