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Ousted Chief of HealthSouth Resists Questions on His Assets

Apr 10, 2003 | Bloomberg News

The founder of HealthSouth, Richard M. Scrushy, making his first public appearance since federal regulators accused him of inflating earnings by $1.4 billion, refused in court today to answer questions about his assets.

Mr. Scrushy, who had been ousted as HealthSouth's chief executive, invoked his right against self-incrimination at least 30 times during a hearing before Judge Inge P. Johnson in Federal District Court here. She is considering whether to extend a freeze on Mr. Scrushy's assets that she imposed after the Securities and Exchange Commission sued him and HealthSouth, the largest operator of rehabilitation hospitals in the nation, on March 19, accusing them of fraud.

The judge had limited Mr. Scrushy to $15,000 in living expenses for a two-week period that ended today. Mr. Scrushy, 50, has asked for the right to spend $70 million, including $10 million in living expenses, $20 million in lawyers' fees and $33 million for taxes, court papers showed.

William Hicks, a lawyer for the S.E.C., said at the hearing, "It's kind of absurd to file a motion for $10 million in living expenses and not say what they're for."

Mr. Scrushy, who the regulatory agency has accused in a civil complaint of insider trading, refused to answer questions about his sale of $175 million in HealthSouth stock. (He has not been charged with a crime.) Mr. Scrushy also would not provide information about the number of boats, cars or planes he owns.

Mr. Hicks asked Mr. Scrushy if he owned 40 cars. Mr. Scrushy has 3 estates and 11 private businesses that develop real estate, own his boats and planes, and invest his money, according to Alabama property records and the S.E.C. The two-week freeze order permitted him to spend $300,000 on those 11 businesses.

When the judge ordered Mr. Scrushy to answer whether documents refreshed his memory of the stock sales, he said, "I can't recall exactly." Mr. Hicks showed other documents to Mr. Scrushy, who responded, "I can't speak to the accuracy of this."

Eight former employees have pleaded guilty to accounting fraud, implicating Mr. Scrushy in a conspiracy to inflate earnings since 1997. A ninth employee, a former chief financial officer, Michael D. Martin, has agreed to plead guilty to conspiracy. Mr. Scrushy has denied wrongdoing.

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