Risk & Compliance

Scrushy Battles to Stay on the Board

''He will seek to be restored to everything that was taken from him by his illegal termination as chairman and CEO,'' says a spokesman for the form...
Stephen TaubJune 29, 2005

One day after his stunning acquittal on charges that he directed a $2.7 billion accounting fraud, former HealthSouth Corp. chief executive officer Richard Scrushy has vowed to fight efforts to boot him from the company’s board of directors.

“He intends to continue as a director of HealthSouth,” Scrushy spokesman Charlie Russell told Bloomberg. “He intends to pursue all of his options with respect to his contract, and he will seek to be restored to everything that was taken from him by his illegal termination as chairman and CEO.”

In a statement issued early Wednesday morning, HealthSouth chairman Bob May said that the company’s board “declared Mr. Scrushy’s contract null and void in March 2003. The new board and new management team remain appalled by the multibillion-dollar fraud that took place under Mr. Scrushy’s management and the environment under which such fraud could occur. Under no circumstances will Mr. Scrushy be offered any position within the company by this management team or by this board of directors.”

HealthSouth spokesman Andy Brimmer also told Bloomberg that Scrushy refused “numerous requests” to resign his seat since he was fired in 2003.

In addition, the wire service noted, Scrushy still faces civil suits by the Securities and Exchange Commission and by shareholders.

Henry Hu, who teaches corporate and securities law at University of Texas Law School, told Bloomberg that ousting Scrushy — even though he was acquitted by a jury — is the right decision. “The board doesn’t have to use the same standard that a jury does,” Hu said. “Why should you necessarily want a person who five CFOs say told them not to stay on the straight and narrow?”

And then there is the practical, free-market reality: Would Scrushy win support if he were included on the ballot?

“No one will vote for him,” Ben Nahum, portfolio manager at David J. Greene & Co., told Bloomberg. “Trust me. He has no support outside of those 12 idiots they found to sit on the jury. The man’s a criminal.”

Coincidentally, HealthSouth is meeting with investors today in New York at a previously scheduled briefing.

Bloomberg also pointed out that Scrushy — who remains the largest shareholder of the health services company — listened to HealthSouth’s December 2 webcast with investors and subsequently fired off a statement criticizing its management. “I was hoping that [chief executive officer] Jay Grinney would talk about marketing strategy instead of cutting costs and changing culture,” the statement reportedly complained. “He said nothing about building revenues and relationships. They’ve already eliminated a number of key people and physicians who are now competing against them. We would not have taken the same route.”

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