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SEC settles Scrushy accounting fraud case for $81M

[JURIST] The US Securities and Exchange Commission has settled accounting fraud charges [press release] against HealthSouth [corporate website] founder and former CEO Richard Scrushy [defense website; JURIST news archive] under an agreement announced Monday "that permanently bars Scrushy from serving as an officer or director of a public company, permanently enjoins Scrushy from committing future violations of the antifraud and other provisions of the federal securities laws, and requires Scrushy to pay $81 million in disgorgement and civil penalties." According to the SEC's press release:

The Commission's complaint in this action charges Scrushy with directing a $2.6 billion financial fraud at the HealthSouth Corporation during the years 1996 through 2002....

The Complaint alleges that, at Scrushy's direction, HealthSouth's overstated its revenue by more than $2.6 billion from the second quarter of 1996 through the third quarter of 2002. This overstatement led directly to quarterly and annual overstatements of net income and retained earnings. The Commission's complaint charges that, by the end of 2002, HealthSouth was claiming to have over $1.5 billion in accumulated retained earnings, when in fact the Company had operated at a significant loss over its entire corporate history. The HealthSouth fraud resulted in one of the largest accounting restatements in American corporate history.
Scrushy was acquitted in 2005 [JURIST report] on criminal charges of wire and mail fraud, money laundering, conspiracy, and violations of the Sarbanes-Oxley Act for his role in overstating HealthSouth's earnings.

He was, however, convicted [JURIST report] last year on federal bribery and fraud charges for paying campaign debts of former Alabama Governor Don Siegelman [official profile] in exchange for a seat on a state-operated review board that regulates Alabama hospitals. Siegelman was also convicted in that case and both could face up to 30 years in prison. Bloomberg has more.

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