Scrushy to pay $81 million to settle SEC charges

/ Source: The Associated Press

Fired HealthSouth Corp. Chief Executive Richard Scrushy has reached an $81 million settlement to end a lawsuit filed by the Securities and Exchange Commission blaming him for a $2.7 billion accounting fraud at the heath care services company.

U.S. District Judge Inge Johnson approved the settlement Monday.

Scrushy acknowledged no wrongdoing but agreed to give up $77.5 million that the government says he gained from the scheme. He agreed to pay another $3.5 million in civil penalties.

Rather than writing a check to the government for the total amount, Scrushy will get credit for $71.5 million he already has paid or forfeited in three other cases linked to HealthSouth. That leaves Scrushy owing a balance of $9.5 million, but the total could be reduced further by other cases.

“It could go down to zero,” Scrushy attorney David Russell said.

Scrushy might not be able to pay anything else because he already has spent more than $30 million on attorney fees, Russell said.

“There’s a serious question on his ability to pay, and that’s built into the papers,” said Russell, of Atlanta.

The settlement gives Scrushy 90 days to submit proof if he claims he is unable to pay. Under the agreement, Scrushy does not have to count the value of his retirement accounts or Birmingham-area estate when computing his worth.

The SEC initially said it was seeking as much as $785 million from Scrushy.

“We’re pleased with the settlement,” John Worland, the lead SEC attorney on the case, said in Washington. “It recognizes that Mr. Scrushy has several lawsuits outstanding that seek similar relief ... but it ensures that Mr. Scrushy will in total pay $81 million to injured investors, and that is one of the largest settlements the SEC has achieved with any individual.”

Experts said it likely was the SEC’s third-largest settlement with an individual, following cases involving two leading figures in the crackdown on white-collar crime in the 1980s: takeover specialist Ivan Boesky, who pleaded guilty to six felonies and paid more than $650 million in penalties, and Michael Milken, the junk bond pioneer who served 22 months in prison and paid a $200 million fine.

The SEC’s lawsuit against Scrushy was set to go to trial June 4, but the court had ordered mediation in hope of reaching a deal.

The agreement ends a lawsuit the SEC filed four years ago when the HealthSouth fraud was first publicly revealed. Since then, 15 former HealthSouth executives pleaded guilty and another was convicted by jurors.

Scrushy was acquitted on all charges in the fraud and has since become a TV preacher in HealthSouth’s hometown of Birmingham. He is awaiting sentencing in federal court in Montgomery in a separate bribery case related to his years at HealthSouth, which he helped found.

Scrushy, convicted along with former Alabama Gov. Don Siegelman, is seeking a new trial in that case.