SEC Files Insider Trading Charges Against Former HealthSouth Chief

Richard Scrushy, former head of HealthSouth Corp., joins his two former chief financial officers, William Owens and Weston Smith, in facing insider trading charges, initiated by the Securities and Exchange Commission (SEC). Scrushy’s legal problems might not end there as eight of his former employees who have admitted to fraud and conspiracy could point the finger at Scrushy, fueling an ongoing Department of Justice criminal investigation.

SEC enforcement attorney Bill Hicks filed the civil suit Thursday in Birmingham, Alabama, federal court, alleging that Scrushy profited from a plot to falsely inflate company profits. The SEC suit claims Scrushy made more than $170 million since 1991 by selling 13,823,000 shares of HealthSouth stock, "while in possession of material, non-public information concerning the inaccuracies of HRC's financial statements."

The SEC’s civil suit seeks up to $743 million from Scrushy, which includes paying back profits earned fraudulently, as well as civil penalties and interest. Defendants in insider trading cases may have to return profits or losses they avoided through insider knowledge, and can have to pay a civil penalty up three times that amount plus interest. Scrushy was not available for comment on the SEC’s suit and he has reportedly decided to retain new counsel, releasing his former attorneys Mark White and William Clark from the case.

Scrushy was removed from his post as chief executive of HealthSouth, the country’s leading operator of outpatient surgery centers and physical therapy clinics. The SEC had already filed charges against Scrushy and the company claiming that he had inflated earnings by $1.4 billion since 1999 and overreported the value of other assets by $800 million. This number stretched to more than $1 billion when five additional HealthSouth employees pled guilty last week to criminal fraud and conspiracy charges, admitting to participating in the overreporting of earnings by some $2.5 billion. The new suit amends the first filing.

You may like these other stories...

By Jason Bramwell The board of trustees of the Financial Accounting Foundation (FAF) finalized a new policy on November 19 that provides the Governmental Accounting Standards Board (GASB) with direction on what...
By Jason Bramwell The Governmental Accounting Standards Board (GASB) is now offering a free online toolkit designed to assist preparers and auditors of state and local government pension plans with implementing new...
By Steven Brenner With the news that the Financial Accounting Standards Board (FASB) – in conjunction with the International Accounting Standards Board (IASB) – intends to formally move...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.