Richard Marin Scrushy, before the fall.
In March 2003, HealthSouth Corporation admitted that it overstated its assets and inflated its profits. Securities fraud cases ensued. In 2006, HealthSouth and its insurers settled for $445 million. The district court okayed the deal, which not only released the settling defendants but also barred ex-CEO Richard Scrushy from calling on them to advance his defense costs and cover the claims against him.
Scrushy appealed the bar order. The Eleventh Circuit upheld it. In re HealthSouth Corp. Securities Litig., No. 010701 (11th Cir. June 17, 2009). The court ruled that policy favoring peace pacts trumped Scrushy's pleas for help in defending himself. It pointed out that the bar order gave him credit for the settlement and thus cut his exposure by at least $445 million. It also concluded that Scrushy's right to recover fees he pays (if he beats the claims against him) made the bar order fair, adequate, and reasonable. He can afford to defend himself, the court noted.
Scrushy lost another appeal to the court in March. The Eleventh Circuit affirmed his conviction, and that of former Alabama governor Don Siegelman, on federal bribery charges.
A jury acquitted Scrushy of criminal securities charges in 2005.
In May of this year, Scrushy testified for three days at the civil securities fraud trial in Birmingham. He said he didn't know nothin' about no stinkin' fraud.
UPDATE: Bloomberg reports that Jefferson County Circuit Judge Allwin E. Horn today found Scrushy liable for civil fraud. His Honor, who heard the case without a jury, awarded $2.876 billion in damages. "Scrushy was the CEO of the fraud", the judge wrote.
