Former HealthSouth founder and chairman Richard Scrushy agreed to pay $81 million to settle fraud charges with the Securities and Exchange Commission stemming from one of the largest accounting restatements in American corporate history.
Under the deal, Scrushy also agreed to a permanent bar from serving as an officer or director of a public company.
Scrushy agreed to pay $3.5 million in civil penalties and $77.5 million in disgorgement, with the disgorgement amount subject to an offset for any amounts paid in judgments or settlements in certain derivative, corporate, and class action lawsuits seeking recovery of the same money as the Commission.
The Commission’s complaint charges Scrushy with directing a $2.6 billion financial fraud at HealthSouth from 1996 through 2002.
The Complaint alleges that, at Scrushy’s direction, HealthSouth overstated its revenue by more than $2.6 billion from the second quarter of 1996 through the third quarter of 2002.
The SEC alleged that the overstatement led directly to quarterly and annual overstatements of net income and retained earnings.
More specifically, the complaint charges that, by the end of 2002, HealthSouth was claiming to have over $1.5 billion in accumulated retained earnings, when in fact the company had operated at a significant loss over its entire corporate history.
Scrushy’s settlement of civil charges comes nearly two years after he was acquitted by a federal jury on all 36 criminal counts against him, including conspiracy and securities fraud. Scrushy was convicted last June of donating $500,000 to Alabama Governor Don Siegelman’s campaign for a state lottery in return for a seat on an Alabama hospital regulatory board. He remains free until his sentencing. He has vowed to appeal.