Court orders ex-CEO Scrushy to repay HealthSouth for bonuses

The ruling is related to payments received during the company's accounting scandal. Scrushy is weighing whether to keep fighting.

By Katherine Vogt — Posted Sept. 18, 2006

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Ousted HealthSouth Corp. founder Richard M. Scrushy has been ordered to repay the rehabilitation chain nearly $50 million in bonuses he received while at the helm of the company.

The Alabama Supreme Court on Aug. 25 upheld a lower court's ruling that Scrushy must return $47.8 million, plus interest, in bonuses he received between 1997 and 2002, because the bonuses were tied to the company's earnings, which had been artificially inflated in a massive accounting fraud.

It was not immediately clear if Scrushy would try to appeal the ruling further. His attorney, Art Leach, said they were evaluating their options.

Scrushy was criminally charged with orchestrating the accounting scheme, which authorities have said overstated earnings by as much as $2.7 billion over several years. But he was acquitted after a lengthy jury trial last year. Sixteen other former HealthSouth executives were convicted of criminal charges in the plot.

HealthSouth last year, without admitting wrongdoing, paid $100 million in fines to the Securities and Exchange Commission to settle an investigation into the matter. Scrushy was fired as CEO and removed as chair once the scandal came to light.

After a shareholder filed a lawsuit on behalf of the company and others to reclaim the bonus money, Scrushy had argued that he played no part in the criminal wrongdoing at the company, and therefore shouldn't have to forfeit his compensation.

But in its ruling cited by the Alabama Supreme Court, the lower court held that "Scrushy was unjustly enriched by these payments to the detriment of HealthSouth and to allow Scrushy to retain the benefit of these payments would be unconscionable."

Using nearly the exact same language, HealthSouth applauded the latest ruling in a written statement and said it was working to continue its "unprecedented recovery" from the fraud that occurred during Scrushy's tenure.

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