Now that he’s not going to prison, HealthSouth’s former chief executive Richard Scrushy wants his job back.
“His contention is that he was illegally fired from his job as CEO and chairman,” Scrushy’s spokesman Charlie Russell, of Denver-based CA Russell Partners, said Thursday. “He is seeking restoration of his position, back pay and benefits.”
On June 28, Scrushy was acquitted of 36 criminal charges. He stood accused of overseeing a $2.7 billion accounting fraud at the Birmingham, Ala.-based health-services company that he founded in 1984.
Prosecutors failed to prove their case, even as 15 top executives, including five former chief financial officers, pleaded guilty. Scrushy’s defense: He didn’t know those guys were cheating.
After a grueling 10-month trial, Scrushy has left the country on a much-needed vacation with his family. When he gets back, he’s going to begin lobbying HealthSouth’s top institutional shareholders for his job back, Russell said.
HealthSouth is one of the nation’s largest providers of outpatient surgery, diagnostic imaging and rehabilitative services. In Colorado, it employs 550 people at 35 locations. Fat chance Scrushy will ever run this empire again, HealthSouth’s new managers say.
HealthSouth last month agreed to pay $100 million to settle civil fraud charges from the Securities and Exchange Commission. Earlier this year, it reached a $325 million settlement with the Justice Department for Medicare billings.
“It is very important to me that you understand this: Under no circumstance will Richard Scrushy be returning to this company,” said HealthSouth CEO Jay Grinney in a June 28 letter to employees. “The current board and management team is appalled by the multibillion-dollar fraud that took place.”
Grinney says this. Unfortunately, Scrushy never fully left the company. He remains on HealthSouth’s board and refuses to resign. HealthSouth can’t vote him out unless it holds an annual shareholder meeting. And it can’t hold an annual meeting until it has audited books.
Thanks to the multibillion-dollar fraud on Scrushy’s watch, HealthSouth may not have audited books until next year.
So HealthSouth – despite its valiant efforts to recover – is stuck with Scrushy on its board. But they created a special committee to meet without him.
HealthSouth’s security guards have been instructed to prevent Scrushy from entering its properties, HealthSouth spokesman Andy Brimmer said.
Not that Scrushy has tried.
Scrushy still retains multimillion-dollar gains made amid HealthSouth’s accounting fraud. He faces more than 60 shareholder lawsuits and an $800 million fraud lawsuit from the SEC. The SEC suit, filed in March 2003, was halted during the criminal proceedings. On Thursday, the SEC asked a federal judge not to dismiss the case, saying it can produce substantial evidence of civil fraud, which is easier to prove than criminal fraud.
Russell said Scrushy cannot be fired unless he is convicted of a felony and has exhausted all appeals, under his employment contract. Even if the SEC succeeds, Scrushy will not have been convicted of a felony. So Scrushy, who has referred to HealthSouth as his fourth child, wants his baby back.
Scrushy’s lead attorney, Donald Watkins, recently told The Wall Street Journal: “If I was Mr. Grinney, I would keep a moving van close to my house because he’s never been in a fight with us.”
HealthSouth investors aren’t clamoring for Scrushy’s return. Leon Cooperman, whose Omega Advisors owns 2 percent of HealthSouth, has said he’s against it. So have analysts.
“We think that it would be futile for Scrushy to sue for wrongful termination,” said Legg Mason analysts Jerry Doctrow and Robert Hawkins in a June 29 report. The SEC suit, they said, would tie him up “for the foreseeable future.”
There’s an old saying that it’s difficult for the founder of a company to let go when the time comes.
“He may not be letting go, but we’ve moved on,” Brimmer said. “Scrushy is the past, and the company is focused on the future.”
Whatever happens next, it’s bound to be ex-Scrushy-ating.
Al Lewis’ column appears Sunday, Tuesday and Friday. Respond to Al at denverpostbloghouse.com/lewis, 303-820-1967, or alewis@denverpost.com.
