Scrushy settles accounting fraud suit for $81 million

BIRMINGHAM, Ala. — Fired HealthSouth Corp. Chief Executive Richard Scrushy 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.

The settlement was approved by a federal judge 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.

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.”

Scrushy had no immediate comment on the settlement, approved by U.S. District Judge Inge Johnson. The lawsuit 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.