Joe Songer/Birmingham News
Leslie Scrushy, left, meets with Jim Parkman and others on the defense team for her husband, on the trial's opening day in the courtroom of Jefferson County Circuit Judge Allwin Horn.
The fate of Richard Scrushy's personal fortune is now in the hands of Jefferson County Circuit Judge Allwin Horn, after both sides finished post-trial summaries Tuesday.
In closing arguments during the civil trial, lawyers for HealthSouth Corp. said the judge should rule the former chief executive orchestrated the fraud or else acted with conscious disregard for his professional responsibilities during an accounting fraud that no one disputes.
Lawyers for Scrushy in their closing statements countered that he was duped by junior executives who pleaded guilty to criminal charges and are pinning the fraud on him.Horn will decide the case alone, as a jury was dispensed with by consent of the parties.
HealthSouth shareholders are suing Scrushy in Jefferson County Circuit Court, saying he owes them $2.6 billion in compensatory damages for his role in the fraud, which ran from 1996 through 2002 and almost sank the Birmingham-based company.
The former CEO, a 56-year-old who grew up in Selma and is now imprisoned for bribery, earned $226 million from the company during the fraud period. The current state of his wealth wasn't addressed during the 11-day trial.
"Mr. Scrushy presided over the biggest shipwreck in American corporate history," said David Hymer, a shareholder lawyer. "Mr. Scrushy should be held accountable for the full amount, even if it is beyond his ability to pay."
Five former chief financial officers pleaded guilty to criminal fraud charges after an FBI raid of the U.S. 280 headquarters in 2003. It later emerged that $2.7 billion of phony profits and assets were created to fool investors. HealthSouth, founded by Scrushy in the 1980s, was once Alabama's largest publicly traded company, with $4 billion in revenue and 52,000 employees.
"Mr. Scrushy was a marketing guy," said one of his lawyers, Jim Parkman. "It is easy to pick on Mr. Scrushy, to make general accusations about him. But we put him up because we wanted you, Your Honor, to see him face-to-face against the best they got."
Scrushy, sent to Alabama from federal prison in Texas for the trial, testified for three days. He said he knew nothing about "any financial fraud at HealthSouth." He was sent back to Texas Friday, where he is about two years into a seven-year sentence for bribing former Alabama Gov. Don Siegelman for a post on a board that authorizes new hospitals.
Horn told attorneys for both sides to file their post-trial briefs, documents which again summarize the respective arguments, by June 8. After that, he can rule at his leisure, and find Scrushy not liable, or he can award compensatory damages in the amount he deems fitting.
Any damages would be paid to HealthSouth, as the case is a derivative suit, meaning shareholders sued on behalf of the company, not themselves. Individual shareholders are suing Scrushy in a class-action suit in U.S. District Court in Birmingham that has not yet gone to trial.
HealthSouth, which once operated 2,300 physical therapy clinics nationwide, paid dearly for the fraud. Shares fell more than 90 percent in 2003 to sink below a dime. Bankruptcy loomed after creditors who were owed $3.5 billion learned more than $300 million in cash reserves had been faked.
Thousands of workers were let go and entire divisions sold during the recovery. The company has since reformatted, has no ties to Scrushy and is now the country's largest operator of therapy clinics for the seriously ill and injured, with about 100.
HealthSouth shareholders have two ways to win their case. They can prove Scrushy knew about the fraud. They can also prove he acted with conscious disregard for his responsibilities as CEO. Shareholder lawyer Hymer said Tuesday Scrushy is guilty of one or the other, based on his testimony from last week.
Hymer cited Scrushy's answers to his own lawyers, when he said he would have caught the fraud he said he was ignorant of if only he had seen monthly financial reports about HealthSouth's condition. Why, Hymer said Tuesday, did he not move heaven and earth to get his hands on such crucial information?
"The fraud at HealthSouth was no accident," Hymer said.
Finding Scrushy acted with conscious disregard for his professional obligations would void the former CEOs employment contract that was in force during the fraud period. That would potentially save HealthSouth $120 million, because Scrushy has filed a suit in Jefferson County Circuit for that amount.
He says his employment contract stipulates he is owed that much in retirement benefits. The employment contract would be thrown out if it is found he breached his contract, ending the lawsuit over the retirement benefits.
Join the conversation below or wright to Hubbard at rhubbard@bhamnews.com
If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement and agree that your clicks, interactions, and personal information may be collected, recorded, and/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.
RetroSearch is an open source project built by @garambo | Open a GitHub Issue
Search and Browse the WWW like it's 1997 | Search results from DuckDuckGo
HTML:
3.2
| Encoding:
UTF-8
| Version:
0.7.4