The founder and former head of HealthSouth Corp. will face federal charges stemming from what prosecutors say was massive fraud aimed at propping up the medical care company’s stock price.
The grand jury indictment against former CEO and chairman Richard Scrushy was to be unsealed Tuesday in Birmingham, Ala., said a federal official who spoke Monday on condition of anonymity. The official declined to reveal the exact nature of the charges.
The Justice Department scheduled a news conference Tuesday morning in Washington to discuss what was described in a news release as “significant developments in a corporate fraud matter.” Among those scheduled to attend were Alice Martin, U.S. attorney for the Northern District of Alabama.
Fifteen former HealthSouth employees, including all five chief financial officers, already have 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.
Three of Scrushy’s lawyers, Johnathan Rose, Tom Sjoblom and Richard Dean left a meeting at the U.S. attorney’s office in Birmingham at about 8 p.m. Monday, refusing to answer reporters’ questions about whether Scrushy had been indicted or whether he would surrender to authorities.
Scrushy’s attorneys have said previously they expected him to be indicted.
A federal court official in Birmingham, speaking on condition of anonymity, said a grand jury heard evidence last week from witnesses, including some of the former HealthSouth executives who have pleaded guilty.
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.