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Out of prison, former HealthSouth CEO Scrushy seeks redemption

Richard Scrushy talks to reporters moments before he enters the Hugo L. Black Federal Courthouse in Birmingham, Alabama, May 18, 2005. REUTE
Richard Scrushy talks to reporters moments before he enters the Hugo L. Black Federal Courthouse in Birmingham, Alabama, May 18, 2005. REUTE

By Jonathan Stempel and Verna Gates

NEW YORK/BIRMINGHAM, Alabama (Reuters) - Freed from federal prison but still owing more than $2 billion to the company he once ran, former HealthSouth Corp Chief Executive Richard Scrushy is trying to make a comeback. Not everyone wishes him success.

Scrushy said he has been talking to entrepreneurs and bankers about business opportunities in healthcare, while at the same time trying to persuade a federal judge that he is fit to serve as an officer or director of a public company.

The 60-year-old has been out of prison for more than a year, following his 2006 bribery conviction for paying $500,000 to former Alabama Governor Don Siegelman's campaign for a state lottery in exchange for a seat on a state hospital regulatory board. He spent about five years in federal custody.

In 2005, he had been acquitted of criminal charges that he orchestrated a $2.6 billion accounting fraud at HealthSouth, a medical rehabilitation company based in Birmingham, Alabama, that he founded in 1984.

Two years later, he resolved civil charges related to HealthSouth, without admitting wrongdoing, in a settlement with the U.S. Securities and Exchange Commission that included an officer and director ban which Scrushy now wants lifted.

An Alabama state judge found Scrushy, who is an ordained minister, liable for fraud in a civil, non-jury trial in 2009 and ordered him to pay HealthSouth $2.88 billion.

HealthSouth said less than $100 million has been repaid. It firmly opposes lifting the SEC ban.

"There are those whose past actions have been so abhorrent, their abuse of power so extreme, the damage inflicted on the innocent so great, that never again should they be put in a position to repeat them," the company said in a July 3 court filing. "Richard Scrushy is one of those individuals."

In phone interviews last week, Scrushy said the 2010 Patient Protection and Affordable Care Act, known as Obamacare, had created a period of opportunity in the healthcare industry.

He declined to discuss specifics, saying he didn't want to divulge competitive strategies.

"I don't know whether I'd want to be a CEO," said Scrushy, who now lives and works in Houston. "But I know there are a lot of young guys and girls out there that I have talked to that I certainly wouldn't mind helping."

But Scrushy said the officer and director ban is holding him back. He said that when he tried to discuss business ideas with a financial firm last year, he was told he could not get financing while the officer and director ban was in place.

So in May, he asked a federal judge in Alabama to lift the ban.

NOT "ONE SHRED"

Scrushy's criminal trial over HealthSouth was considered one of the first big courthouse tests of the 2002 Sarbanes-Oxley corporate reforms passed after the collapse of the energy giant Enron Corp.

Jurors said they found a lack of hard evidence, or any "smoking gun," to tie Scrushy to the alleged scheme to inflate HealthSouth's earnings and assets from 1996 to 2002.

But in imposing the $2.88 billion civil judgment, the presiding judge in that case found that Scrushy was "the CEO of the fraud."

In a court filing last month, the SEC said it "absolutely opposes" lifting the officer and director ban. It said the Alabama judge's findings made the case for a ban even stronger.

Scrushy "is unfit to manage funds raised through the sale of securities to the general public," the SEC said.

Scrushy still forcefully denies having done anything wrong at HealthSouth, and blames subordinates for its troubles.

"I didn't lie. I haven't lied. There isn't one shred of evidence against me," he said. "I will not accept responsibility for the fraud, because I was not in it."

TWO SIDES

Scrushy has his supporters. John Edwards, a longtime friend and former preacher who owns a carpet cleaning company in Moody, Alabama, recalls Scrushy having been "scared to death" as the two prayed just before the prison term began.

"He would tell me 'I swear to God, I didn't do it,' and I believe him," said Edwards. "I did not see the side of him other people saw. He was friendly to me. And I had nothing to give him. I was just a redneck preacher out in the woods."

In contrast, Rev. Herman Henderson, a pastor at the Believer's Temple Church in Birmingham, said Scrushy went back on an agreement to pay him and other African-American pastors to show support at his 2005 trial. Scrushy has denied ever authorizing such payments.

"He should not be allowed back into the business," Henderson said last Wednesday. "God showed him. He got what he deserved."

Before his legal troubles, Scrushy had owned multiple homes, luxury cars, boats and planes, but many were auctioned to help satisfy the civil judgment requiring him to repay HealthSouth.

Scrushy said that "all that I can do, I have done" with regard to satisfying the judgment.

The federal bribery conviction against Scrushy also stands, and on July 15 an appeals court rejected his contentions that juror and judicial bias warranted a new trial. Scrushy said he may appeal that decision.

Known for his charisma, Scrushy said learning "how to do time" in prison was a big change.

"You have to calm down, you have to relax, you have to slow down your life, you have to learn how to be patient. They'll punish 600 men when one guy does something stupid," he said.

While in prison, Scrushy, who is married and has nine children, said he conducted Bible studies and taught business classes to fellow inmates.

"There are certainly a lot of moral things that you obviously learn as you read Scripture and teach Scripture," he said. "In your business dealings you always want to be fair and above board and honest and ethical."

(Reporting by Jonathan Stempel in New York and Verna Gates in Birmingham, Alabama; Editing by Eddie Evans and Claudia Parsons; Desking by Martin Howell)

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