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Ex-HealthSouth CEO Indicted in Fraud Case

Nov 4, 2003 | AP

Former HealthSouth Corp. head Richard Scrushy has been indicted on 85 counts in a massive federal fraud case that already has seen 15 former executives of the rehabilition services giant plead guilty.

The indictment, dated Oct. 29 and released Tuesday at the federal courthouse, accuses Scrushy of a range of criminal violations including securities fraud and false certification of corporate statements.

Scrushy attorney Donald Watkins said the HealthSouth co-founder and former chief executive officer will plead innocent. Watkins said Scrushy was being processed by federal marshals in Birmingham on the charges.

He declined to comment on the indictment. "There's a whole group of lawyers studying it," Watkins said.

Fifteen former HealthSouth employees, including all five chief financial officers, have already pleaded guilty to criminal fraud charges since the Justice Department investigation began in March.

The government contends that Scrushy and HealthSouth inflated company earnings by at least $2.5 billion to make it appear the company was meeting expectations of Wall Street analysts. Scrushy has blamed the fraud on others in the company.

The federal grand jury indictment, which includes counts of mail and wire fraud and money laundering, seeks criminal forfeiture of Scrushy's assets. The amount being sought was not immediately known.

Three of Scrushy's lawyers Johnathan Rose, Tom Sjoblom and Richard Dean left a meeting at the U.S. attorney's office in Birmingham on Monday evening but withheld any comment at that time.

A federal court official in Birmingham, speaking on condition of anonymity, said the grand jury heard evidence last week from witnesses, including some of the former HealthSouth executives who have pleaded guilty.

HealthSouth, founded by Scrushy in 1984, is the largest U.S. provider of outpatient surgery, diagnostic imaging and rehabilitation services. The company has some 50,000 employees and about 1,700 sites in all 50 states and overseas.

At a recent congressional hearing, several current and former HealthSouth employees said Scrushy knew about efforts to massage company accounts to meet earnings forecasts. Scrushy invoked his Fifth Amendment's protection against self-incrimination when he testified in October before the same House committee.

HealthSouth and Scrushy already have been charged with fraud in a civil lawsuit by the Securities and Exchange Commission.

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