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Richard Scrushy

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Richard Marin Scrushy
File:Richard Marin Scrushy Mug Shot.jpg
Scrushy at the Shelby County Jail, 2009
Statusin prison
OccupationBusinessman
SpouseLeslie Anne Jones
Criminal chargeBirmingham trial: 36 charges of fraud, false corporate reportings, and making false statements
Montgomery trial: bribery and mail fraud
PenaltyBirmingham trial: acquitted
Montgomery trial: 82 months in federal prison, three years probation, US$267,000 in restitution, a fine of US$150,000, and 500 hours of community service

Richard Marin Scrushy[1] (born August 1952[2] in Selma, Alabama) is an American business man and founder of HealthSouth Corporation, a global health care company based in Birmingham, Alabama.[3]

In 2004, following an investigation by the Federal Bureau of Investigation (FBI), Scrushy had charges brought against him by the U.S. Securities and Exchange Commission (SEC).[4] Scrushy was charged with 36 of the original 85 counts but was acquitted of all charges on June 28, 2005, after a jury trial in Birmingham.[5]

Four months after his acquittal in Birmingham, Scrushy was indicted along with former Alabama Governor Don Siegelman on October 28, 2005, by a federal grand jury in Montgomery, Alabama.[6][7] The indictment included 30 counts of money laundering, extortion, obstruction of justice, racketeering, and bribery.[6][7] Although the new charges were filed a month before the previous trial ended, Scrushy's attorneys accused prosecutors of filing charges as retaliation for Scrushy's acquittal.[7] Scrushy pleaded not guilty to all charges, but was convicted along with Siegelman in June 2006.[6][8]

On May 7, 2009, Scrushy was transferred from the Texas jail where he had been incarcerated and placed in the custody of the Shelby County Jail in Shelby County, Alabama.[9] Scrushy was returned to Alabama in order to testify in a new civil trial in the Jefferson County Circuit Court brought against him by shareholders of HealthSouth who sought damages related to Scrushy's trial and conviction.[10] On June 18, 2009, Judge Allwin E. Horn ruled that Scrushy was responsible for HealthSouth’s fraud, and ordered him to pay $2.87 billion.[11]

Early life and background

Richard M. Scrushy was born in August 1952 in Selma, Alabama.[1] The son of a middle class family, Scrushy's father, Gerald Scrushy, worked as a cash register repairman and his mother, Grace Scrushy, worked as a nurse and respiratory therapist.[1][12] At an early age, Scrushy taught himself to play the piano and guitar and was earning money doing odd jobs by the time he was 12 years old.[1] Scrushy, who then went by his middle name Marin, attended school until he was 17.[12] He dropped out prior to graduating from Parrish High School and married his pregnant girlfriend.[1]

Scrushy soon found himself living in a Selma trailer park and working manual labor jobs to support his family.[1][3][13] After a run-in with a boss, Scrushy quit his job hauling cement and decided to return to school.[3] He earned his GED, and at his mother's advice, began studying respiratory therapy at Wallace State Community College.[14] After a year at Wallace State, Scrushy transferred to Jefferson State Community College and later entered the respiratory therapy program at the University of Alabama at Birmingham (UAB).[12][14] Upon graduating from UAB's program, Scrushy was offered a position teaching at the university, where he was promoted to director during his two and a half year tenure.[12][14] Scrushy divorced his wife, with whom he had two children, and took a position teaching at Wallace State Community College in Dothan, Alabama.[12] While teaching at Wallace State, Scrushy met and married his second wife, Karen Brooks.[12] The two had four children before they divorced in the mid 1990s.[12][15] In 1997, Scrushy married Leslie Ann Jones and together they had an additional three children.[15]

Career and HealthSouth

The former headquarters of HealthSouth Corporation in Birmingham, Alabama

In the late 1970s, following his time teaching at UAB and Wallace State Community College, Scrushy was offered a position with Lifemark Corporation, a Houston, Texas based health care company.[3] Within a few years of being hired at Lifemark, Scrushy was running a 100-million-dollar operation that included the pharmacy, physical rehabilitation, and hospital acquisition divisions.[16] While working for Lifemark, Scrushy moved to St. Louis, Missouri, where he worked as the regional director of the respiratory therapy division.[2] He then moved to Houston where he became the company's chief operating officer.[2]

Still working for Lifemark, Scrushy devised a plan for an outpatient diagnostics and rehabilitative health clinic chain.[3] He presented the plan to Lifemark, but the company was unable to act on it due to a company merger that was already underway with American Medical International.[3] Scrushy left Lifemark in 1983 and founded Amcare, Inc within a year.[17] The new company was based in a small office in Little Rock, Arkansas and had initial capital between $50,000-$70,000.[12][18] With the assistance of four partners from Amcare Inc. and a one million dollar investment by Citicorp Venture Capital, Scrushy took the quickly growing company and founded HealthSouth in 1984.[2][14][16] Two years after its founding, HealthSouth became a publicly traded company in 1986.[18] The next year, HealthSouth expanded into two new fields, worker’s compensation and sports medicine, allowing the company to double its earnings and obtain assets close to $100 million.[2] By the early 1990s, the company had expanded even more, with facilities in each of the 50 U.S states and revenues in excess of $181 million.[18]

Over the next decade, HealthSouth’s sports medicine programs received international attention by being linked to star athletes including Bo Jackson, who served as the president of HealthSouth's Sports Medicine Council,[19] Roger Clemens,[20] Jack Nicklaus,[20] Kyle Petty,[21] Michael Jordan,[22] Shaquille O'Neal,[22] and Lúcio Carlos Cajueiro Souza.[22] At its height, HealthSouth employed more than 50,000 physicians, was the "nation's largest provider of outpatient surgery and rehabilitative and diagnostic healthcare services", and had over 2,000 facilities in the United States, Puerto Rico, Australia, and the United Kingdom.[23] HealthSouth facilities worldwide saw more than 120,000 patients daily, and with earnings around $106 million in 1997, Scrushy was the third highest paid CEO in the United States.[23][24]

Although HealthSouth grew tremendously throughout the 1990s, becoming the largest comprehensive rehabilitative services company in the United States,[24] ethical and financial questions began to arise as early as 1989.[18] An internal auditor alleged that he was fired for drawing attention to HealthSouth's financial problems and that he was pressured to meet certain earnings targets.[18] Two years later, in 1991, HealthSouth was accused by Medicare of illegally adding costs to reports for outpatient physical therapy and inpatient rehabilitation admissions at the corporation's Bakersfield Rehabilitation Hospital.[18] In 1998, Medicare changed its funding arrangements in an attempt to reduce exploitation and payments by $100 billion.[25] Scrushy insisted that the change would not effect HealthSouth's bottom line but profits dropped by 93 percent by the end of the year.[25] Around this same time, HealthSouth began facing additional accusations of fraud.[25] An investigation by the insurance company Blue Cross Blue Shield of Alabama determined that HealthSouth had "improperly billed Medicare for therapy by students, interns, athletic trainers, and other unlicensed aides".[25]

Additional lawsuits alleged HealthSouth had committed widespread abuse of Medicare by "billing for services it never provided, delivering poor care, treating patients without a formal plan of care, and using unlicensed therapists".[25] In March 2003, the U.S. Securities and Exchange Commission filed a civil suit against Scrushy and HealthSouth alleging the company had falsified at least $2.7 billion worth of profit between 1996 and 2002.[26] HealthSouth agreed to pay the United States government $325 million on December 30, 2004, in order to "settle allegations that the company defrauded Medicare and other federal healthcare programs".[27]

Birmingham criminal trial

United States of America v. Richard M. Scrushy, a 36 page indictment

On February 6, 2003, the Federal Bureau of Investigation (FBI) announced that it had begun a criminal investigation relating to the "trading of shares of the HealthSouth Corporation" and possible securities law violations.[28] A criminal complaint was filed by the FBI against HealthSouth's Chief Financial Officer Weston Smith and Scrushy had civil charges brought against him by the U.S. Securities and Exchange Commission (SEC).[4] Scrushy became the first CEO to be tried under the Sarbanes-Oxley Act when he was indicted by the United States Department of Justice in United States of American v. Richard M. Scrushy on November 4, 2003.[29][30][31]

The indictment included 85 counts of conspiracy, money laundering, securities fraud, and mail fraud but Scrushy was ultimately charged with just 36 counts.[5][32] In the indictment, Scrushy was accused of using intimidation, threats, and cash payments to coerce top executives into committing fraud.[33] These top executives called themselves "The Family"[34] and referred to their creative accounting as "filling the gap".[33] The group attempted to hide the false earnings by illegally inflating balances of accounts such as fixed assets and estimated insurance reimbursements.[33] Despite multiple chief executives testifying against Scrushy, the prosecutors were unable to produce any material evidence that Scrushy had been involved in the fraudulent accounting.[33]

During the trial, Scrushy defended himself both inside and outside the courtroom.[33] Scrushy was interviewed by Mike Wallace for a 60 Minutes segment called "Cooking The Books",[35] began hosting a morning talk show with his wife called Viewpoint, backed a city-wide 40 day prayer movement referred to as "City, thou art loosed", and joined the predominantly African American Guiding Light Church.[36] These actions were seen as an attempt to sway potential jurors, since 70 percent of Birmingham's population and 11 of the 18 jurors were African American.[37][38] Following more than a month of deliberations, Scrushy was acquitted of all charges on June 28, 2005.[5]

Montgomery criminal trial

On October 26, 2005, four months after his acquittal in Birmingham, Scrushy was indicted by a federal grand jury in Montgomery, Alabama.[7] The indictment included 30 counts of money laundering, extortion, obstruction of justice, racketeering, and bribery of Alabama Governor Don Siegelman.[6][7] Prosecutors claimed that Scrushy had agreed to pay over $500,000 of Siegelman's dept, which he accumulated during a failed attempt to bring a state lottery to Alabama, in exchange for a seat on the Certificates of Need Review Board.[8] The board serves the state by reviewing hospitals and approving their construction.[7][8] Although the new charges were filed a month before the previous trial ended, Scrushy's attorney's accused prosecutors of filing charges as retaliation for Scrushy's acquittal.[7] Scrushy and Siegleman pleaded not guilty to all charges, but they were both convicted following a trial that lasted approximately six weeks.[6][8] Scrushy was convicted of bribery, conspiracy, and mail fraud, while Siegelman was convicted of bribery, conspiracy, mail fraud, and obstruction of justice.[8]

While awaiting sentencing, on March 29, 2007, Scrushy's probation officer filed a report claiming that Scrushy had violated the conditions of his bond by leaving Walt Disney World in Orlando, Florida and traveling to Palm Beach where he boarded a yacht and sailed to Miami.[39] The probation officer suggested that Scrushy should be placed under house arrest and that he be required to wear an electronic monitoring device at all times.[39] United States Magistrate Judge Charles Coody warned Scrushy that he "would not tolerate any future deviations from the requirements the court has placed on" him and ruled that Scrushy must wear a GPS tracking device anytime he travels outside of Alabama.[40][41]

On June 28, 2007, Scrushy was sentenced to six years and ten months in a federal prison, ordered to pay $267,000 in restitution to United Way of Alabama, three years probation, and a fine of $150,000.[42] Scrushy is also expected to personally pay for his time in prison and perform 500 hours of community service.[42][43] Siegelman was sentenced on the same day to seven years and four months in prison, restitution of $181,325 to the state, three years probation, a $50,000 fine, and 500 hours of community service upon his release.[42][43] U.S. District Judge Mark Fuller would later rule, however, that Sieglman would not be required to pay the $181,325 in restitution.[44] The restitution was based on debts accumulated by the State of Alabama during a fraudulent warehouse deal, but Siegelman was acquitted on charges related to the deal.[44] Upon sentencing, Scrushy and Siegelman were taken into custody and transported to a federal prison in Atlanta, Georgia, where they briefly shared a cell.[44][45]

Appeal

Following the trial and conviction, Scrushy, Siegelman, and the prosecutors all indicated they would appeal.[46][47] Scrushy and Seigelman vowed to appeal their convictions and sentences, while the prosecution announced its desire to appeal a judge's decision to remove charges of perjury from Scrushy's indictment.[47] The prosecutors quickly dropped their appeal, and United States Attorney Alice Martin indicated they had reconsidered.[47]

Awaiting appeal, Scrushy was briefly transported to a transfer site for inmates in Oklahoma City, Oklahoma before being sent to his permanent location at a low security federal prison in Beaumont, Texas.[45] Scrushy filed a request with the 11th U.S. Circuit Court of Appeals, asking to be released on appeal bond.[48] The 11th US Circuit Court of Appeals rejected Scrushy's request to be released on bond, citing an earlier ruling written by U.S. District Judge Mark Fuller.[49] The ruling was issued while Scrushy was on bond awaiting sentencing, and deemed him a flight risk.[49] Scrushy again filed for release in February and May 2008 but both requests were denied.[50][51]

In March 2009, a panel comprised of three judges from the 11th U.S. Circuit Court upheld all charges against Scrushy and dismissed two of the seven charges against Siegelman.[52] A further appeal for a full court review of the case was also denied by the 11th U.S. Circuit Court of Appeals on May 15, 2009.[52] The next step in the appeals process is the Supreme Court of the United States.[52]

Birmingham civil trial

Scrushy was returned to Alabama on May 7, 2009, in order to testify in a new civil trial in a Birmingham court.[9] Held at the Shelby County Jail in Columbiana, Alabama, Scrushy is being sued by former HealthSouth investors who are seeking money that was lost due to the fraud Scrushy was convicted of in 2005.[53] While opposing counsel claims that Scrushy was a "hands-on manager who treated the company as a personal piggy bank," Scrushy continues to assign blame to his subordinates and maintains that he has done nothing wrong.[53] Closing arguments were heard in the trial on May 27, 2009.[54]On June 18, 2009, Judge Horn ordered Scrushy to pay $2.87 billion in damages.[55] Judge Horn stated, "Scrushy knew of and actively participated in the fraud" and referred to Scrushy as the "CEO of the fraud".[11] Scrushy is expected to appeal the judgment.[56]

See also

Notes

  1. ^ a b c d e f Matulich 2008: 337
  2. ^ a b c d e "Richard Scrusy Biography". A&E Television Networks. Retrieved 2009-05-19.
  3. ^ a b c d e f Matulich 2008: 338
  4. ^ a b Romero, Simon (2003-03-21). "The Rise and Fall of Richard Scrushy, Entrepreneur". New York Times. Retrieved 2009-05-19.
  5. ^ a b c Farrell, Greg (2005-06-28). "Scrushy acquitted of all 36 charges". USA Today. Retrieved 2009-05-19.
  6. ^ a b c d e Whitmire, Kyle (2005-10-29). "Scrushy Pleads Not Guilty to Bribery and Mail Fraud". New York Times. Retrieved 2009-05-19.
  7. ^ a b c d e f g Freudenheim, Milt (2005-10-27). "Scrushy Is Indicted on Charges of Bribery". New York Times. Retrieved 2009-05-19.
  8. ^ a b c d e Whitmire, Kyle (2006-06-30). "Ex-Governor and Executive Convicted of Bribery". New York Times. Retrieved 2009-05-19.
  9. ^ a b Averette, Justin (2009-05-08). "Scrushy back in Shelby County Jail". Shelby County Reporter. Retrieved 2009-05-21.
  10. ^ Bauerlein, Valerie (2009-05-20). "Scrushy to Face Shareholders". Wall Street Journal. Retrieved 2009-05-21.
  11. ^ a b Davidson, Laurence Viele (2009-06-18). "HealthSouth's Scrushy Liable in $2.88 Billion Fraud (Update 3)". Bloomberg. Retrieved 2009-06-18. {{cite web}}: Cite uses deprecated parameter |authors= (help)
  12. ^ a b c d e f g h "The Insatiable King Richard He started as a nobody. He became a hotshot CEO. He tried to be a country star. Then it all came crashing down. The bizarre rise and fall of HealthSouth's Richard Scrushy". Fortune Magazine. 2003-07-07. Retrieved 2009-05-19. {{cite web}}: Cite uses deprecated parameter |authors= (help)
  13. ^ Jennings 2006: 214
  14. ^ a b c d "A Biographical Sketch: Richard Scrushy and HealthSouth". RichardMScrushy.com. Retrieved 2009-05-19.
  15. ^ a b Guyon, Janet (2006-05-18). "Richard Scrushy's Chief Believer". Washington Post. Retrieved 2009-05-30.
  16. ^ a b Burke, Monte (2001-01-21). "Back To Life". Forbes. Retrieved 2009-05-19.
  17. ^ Mackay, Steven (2003-04-25). "HealthSouth's first CFO charged; hospitals may be sold". Birmingham Business Journal. Retrieved 2009-05-31.
  18. ^ a b c d e f Matulich 2008: 316
  19. ^ Flatter, Ron. "Bo knows stardom and disappointment". ESPN.com. Retrieved 2009-05-19.
  20. ^ a b Freudenheim, Milt (2005-01-27). "Vital Signs Return to HealthSouth". New York Times. Retrieved 2009-05-19.
  21. ^ "Satisfied Darrell Waltrip willing to gamble on Monte Carlo's stability". Atlanta Journal-Constitution. 1995-01-29. {{cite news}}: |access-date= requires |url= (help)
  22. ^ a b c Jennings 2006: 31
  23. ^ a b "WebMD, Healtheon and HealthSouth to Co-Market and Connect". HLTH Corporation. 1999-09-14. Retrieved 2009-05-19.
  24. ^ a b Matulich 2008: 317
  25. ^ a b c d e Matulich 2008: 318
  26. ^ Matulich 2008: 320
  27. ^ "HealthSouth to pay United States $325 million to resolve Medicare fraud allegations". United States Department of Justice. 2004-12-30. Retrieved 2009-05-20.
  28. ^ Freudenheim, Milt (2003-02-07). "F.B.I. Is Investigating HealthSouth Trades". New York Times. Retrieved 2009-05-19.
  29. ^ Freudenheim, Milt (2003-11-05). "Former HealthSouth Chief Indicted by U.S." The New York Times. Retrieved 2009-05-19.
  30. ^ Tarantino 2006: 111
  31. ^ "HealthSouth Founder and Former CEO Richard Scrushy Charged in $2.7 billiion Accounting and Fraud Conspiracy". US Department of Justice. 2003-11-04. Retrieved 2009-05-22.
  32. ^ Johnson, Carrie (2003-11-05). "HealthSouth Founder Is Charged With Fraud". Washington Post. Retrieved 2009-05-19.
  33. ^ a b c d e Markham 2005: 361
  34. ^ Matulich 2008: 349
  35. ^ Leung, Rebecca (2005-05-22). "Cooking The Books". CBS. Retrieved 2009-05-21.
  36. ^ Farrell, Greg (2004-10-26). "Former HealthSouth CEO Scrushy turns televangelist". USA Today. Retrieved 2009-05-21.
  37. ^ Romero, Simon (2005-02-17). "Will the Real Richard Scrushy Please Step Forward; Race, Religion and the HealthSouth Founder's Trial". New York Times. Retrieved 2009-05-21.
  38. ^ Markham 2005: 362
  39. ^ a b "Scrushy May End Up Under Home Confinement". WSFA12 News. 2007-03-29. Retrieved 2009-05-23.
  40. ^ Johnson, Bob (2007-04-10). "Scrushy remains free on bond". USA Today. Retrieved 2009-05-23.
  41. ^ Whitmire, Kyle (2007-04-15). "OPENERS: SUITS; Did Anyone Ask About a Yacht?". New York Times. Retrieved 2009-05-23.
  42. ^ a b c Sims (2007-06-28). "Siegelman, Scrushy taken into custody". Birmingham News. Retrieved 2009-05-22.
  43. ^ a b Johnson, Bob (2008-06-28). "Siegelman, Scrushy Get Prison Terms". Fox News. Retrieved 2009-05-22.
  44. ^ a b c Johnson, Bob (2007-07-10). "Siegelman not ordered to pay agency". Tuscaloosa News. Retrieved 2009-05-23.
  45. ^ a b "Scrushy moved out to Oklahoma City site". The Oklahoman. 2007-07-18. Retrieved 2009-05-22.
  46. ^ Johnson, Bob (2007-06-29). "Siegelman, Scrushy to appeal sentences". USA Today. Retrieved 2009-05-22.
  47. ^ a b c "U.S. Drops Scrushy Appeal". Los Angeles Times. 2005-07-14. Retrieved 2009-05-22.
  48. ^ Johnson, Bob (2007-10-04-). "Judge denies former Ala. gov's release". Boston Globe. Retrieved 2009-05-22. {{cite web}}: Check date values in: |date= (help)
  49. ^ a b Johnson, Bob (2008-05-10). "Scrushy Makes Another Prison Release Request". Opelika-Auburn News. Retrieved 2009-05-22.
  50. ^ "Scrushy Offers To Post Most Assets For Prison Release On Appeal". NBC13 News. 2008-02-16. Retrieved 2009-05-22.
  51. ^ Chandler, Kim (2008-05-10). "Richard Scrushy asks federal court for the third time to free him from prison while he appeals conviction". Birmingham News. Retrieved 2009-05-22.
  52. ^ a b c Chandler, Kim (2009-05-15). "U.S. appeals court won't hear Siegelman, Scrushy cases". Birmingham News. Retrieved 2009-05-22.
  53. ^ a b Esterl, Bill (2009-05-08). "Scrushy Again Blames Underlings for Fraud". Wall Street Journal. Retrieved 2009-07-07.
  54. ^ Hubard, Russell (2009-05-27). "Fate of Richard Scrushy's personal fortune now in the hands of Jefferson County Circuit Judge Allwin Horn". Birmingham News. Retrieved 2009-05-30.
  55. ^ Hubard, Russell (2009-06-18). "Judge: Richard Scrushy is responsible for HealthSouth fraud". Birmingham News. Retrieved 2009-05-30.
  56. ^ Baurlein, Valerie (2009-06-18). "Scrushy Found Liable in HealthSouth Shareholder Suit". Wall Street Journal. Retrieved 2009-06-18.

References

  • Matulich, Serge; Currie, David (2008). "Richard Scrushy: The Rise and fall of the King of Health Care". Handbook of Frauds, Scams, and Swindles: Failures of Ethics in Leadership (Illustrated ed.). CRC Press. pp. 315–351. ISBN 9781420072853. OCLC 214285931. Retrieved 2009-05-19. {{cite book}}: Unknown parameter |month= ignored (help)
  • Jennings, Marianne (2006). "Innovation Like No Other". The Seven Signs of Ethical Collapse (annotated ed.). New York: St. Martin's Press. pp. 214–216. ISBN 0312354304. OCLC 63297926. {{cite book}}: |access-date= requires |url= (help); Unknown parameter |month= ignored (help)
  • Tarantino, Anthony (2006). "Civil and Criminal Penalties for Noncompliance". Manager's Guide to Compliance (illustrated ed.). Hoboken: John Wiley and Sons. p. 111. ISBN 0471792578. OCLC 62421142. {{cite book}}: |access-date= requires |url= (help); Unknown parameter |month= ignored (help)
  • Markham, Jerry (2005). "Full Disclosure Fails". A Financial History of Modern U.S. Corporate Scandals: From Enron to Reform (illustrated ed.). Armonk, N.Y: M.E. Sharpe. pp. 360–364. ISBN 0765615835. OCLC 58536658. {{cite book}}: |access-date= requires |url= (help); Unknown parameter |month= ignored (help)
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