Risk Management

Judge Drops Two Charges Against Scrushy

Vague SEC filing ''contains argument, speculations, hypotheticals, and perhaps an outline of closing statements, none of which are appropriate in a...
Stephen TaubDecember 1, 2005

An Alabama judge has dismissed two civil fraud charges brought by the Securities and Exchange Commission against Richard Scrushy, the founder, former chairman, and former chief executive officer of HealthSouth Corp.

In June, of course, Scrushy was found not guilty of criminal charges related to the company’s $2.7 billion accounting scandal; that same month, HealthSouth agreed to pay $100 million over two years to settle SEC civil charges. Scrushy later was indicted in a bribery scheme involving former Alabama Gov. Don Siegelman; the ex-CEO contends that those new charges are in retaliation for his acquittal, according to the Associated Press.

U.S. District Judge Inge Johnson dismissed the fraud charges against Scrushy because they were too vague. According to the AP, Johnson wrote in his ruling that the SEC filing “contains argument, speculations, hypotheticals, and perhaps an outline of closing statements, none of which are appropriate in a complaint.”

He gave the SEC 15 days to resubmit the fraud charges. Johnson let stand five other civil charges against Scrushy, including aiding and abetting in false financial reporting, false record keeping, and failing to maintain proper internal controls, the AP reported.

The wire service noted that lawyers for Scrushy and the government are scheduled on January 18 to begin mediation talks that could lead to a settlement. According to Reuters, which cited a report filed by prosecutors and defense attorneys, a civil trial wouldn’t be held until February 2007.