is there justice out there? Healthsouth

[Miklos Vasarhelyi <miklosv@andromeda.rutgers.edu>]

July 6, 2005

S.E.C. Set to Press Civil Case Against Scrushy

By THE
ASSOCIATED PRESS 

WASHINGTON, July 5 (AP) - The Securities and Exchange Commission is
preparing to press its civil fraud case seeking nearly $800 million from
Richard M. Scrushy, the founder of HealthSouth, despite his acquittal on
criminal charges that he orchestrated a $2.7 billion accounting fraud at
the company.

The S.E.C.'s case has been suspended for two years because it was deemed
to be in conflict with the Justice Department's criminal prosecution of
HealthSouth. 

Last week, a jury acquitted Mr. Scrushy on 36 criminal counts of false
reporting, conspiracy, fraud and money laundering. After the verdict,
Judge Inge Johnson of United States District Court who is presiding over
the civil case, ordered the S.E.C. to show cause why it should not be
dismissed.

S.E.C. lawyers said they planned to file court papers against Mr. Scrushy
on Thursday, in a civil case with a lower burden of proof for the
government. "We will pursue our case," an agency spokesman,
John Nester, said.

The S.E.C. is seeking $785 million in civil fines and restitution to
shareholders plus interest from Mr. Scrushy. The agency also wants to
have Mr. Scrushy barred from serving as an officer or director of any
publicly traded company.

Mr. Scrushy's lawyers have said that he wishes to return as an executive
to HealthSouth, where he continues to sit on the board. The company's new
managers have made it clear that he would not be accepted. Some legal
specialists say it is difficult to imagine any company wanting Mr.
Scrushy on the payroll, because at the least he failed to detect a large
fraud at the company he led.

The S.E.C. is accusing Mr. Scrushy of accounting fraud and making a false
declaration to the agency by signing the company's inaccurate financial
statements as its chief executive.

A lawyer for Mr. Scrushy, Arthur Leach, did not return a telephone call
seeking comment.

Miklos A. Vasarhelyi
KPMG Professor of AIS
Rutgers University
Director Rutgers Accounting Research Center
315 Ackerson Hall
180 University Avenue
Newark, NJ 07102
(973) 353 5002
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