Accounting & Tax

Scrushy Civil Charges Proceed, for Now

Securities and Exchange Commission has until September 7 to refile its case.
Stephen TaubAugust 19, 2005

U.S. District Judge Inge Johnson has turned down Richard Scrushy’s attempt to have civil charges against him dismissed, according to press reports.

In November 2003, a civil case brought by the Securities and Exchange Commission was put on hold when federal prosecutors pursued criminal charges against Scrushy — the co-founder, former chairman, and former chief executive officer of HealthSouth Corp. — stemming from the company’s $2.7 billion accounting fraud.

In June of this year, Scrushy was found not guilty on all counts, and the SEC requested permission to continue its case. The regulator pointed out at the time that in a civil trial, the prosecution’s required standard of proof is “by a preponderance of the evidence,” noted Reuters. Scrushy’s acquittal “establishes only that criminal prosecutors were unable to prove all of the necessary factual elements of the alleged crime beyond a reasonable doubt,” wrote SEC attorney John D. Worland Jr., according to the Associated Press.

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In a closed-door meeting, Judge Johnson rejected an attempt by Scrushy’s attorneys to throw out the regulator’s suit, according to Bloomberg, and ordered the commission to refile its civil lawsuit by September 7. Each side will have one or more opportunities to reply; the judge also set a new scheduling conference for December 1, according to The Birmingham News.

The SEC civil lawsuit seeks $785 million in fines and restitution plus interest.