I spent some time this week poking around on Richard Scrushy's Web site (www.richardmscrushy.com), where the HealthSouth founder recently posted a letter thanking his supporters for standing by him through his corporate fraud trial.
Scrushy, the first corporate chief executive to be tried under the Sarbanes-Oxley Act, was acquitted on all counts last month, though he still faces investor lawsuits and a civil suit from the Securities and Exchange Commission that carries a price tag of $786 million in penalties.
Scrushy was originally indicted on more that 80 counts in connection with a $2.7 billion fraud at the health care company. Those charges were whittled down to three dozen by the time the five-month trial concluded. The jurors who returned the "not guilty" verdict have told the press that the case against Scrushy essentially came down to a "he-said, she-said" battle on the witness stand, with Scrushy facing down a parade of five former finance chiefs. The finance chiefs, all who testified for the government, told stories of being alternately bullied and sweet-talked by Scrushy into doctoring financial statements.
Jurors rejected that testimony and sided with the defense, which argued that Scrushy was duped by corrupt subordinates and never knew about the fraud.
On his Web site, Scrushy has offered corrections to news accounts of his trial, copies of his legal filings, and e-mailed letters of support for more than a year now. In an open letter posted two weeks ago, he wrote:
"Among my detractors are those who contend that I have no remorse. Nothing could be farther from the truth." Later he adds, "I conceived, birthed and nurtured that company for 20 years, and to see it go through this difficult time has been heartbreaking to me."
What Scrushy's camp has been talking about since his acquittal, and what's evident from reading through the entire letter, is that Scrushy wants to make a return to HealthSouth's board of directors, something that the SEC's civil case, if successful, would prevent.
Scrushy was ousted from the company's board in 2003, and rightly so.
Though eager to take responsibility for the two decades he spent building HealthSouth into a national business, Scrushy's refusal to share in the blame for the company's slide is troubling. In his open letter, he talks about HealthSouth as his fourth child, but signs of parental neglect are written all over his legal defense.
Scrushy has maintained that, as the company's chief executive, he didn't notice that HealthSouth's 2000 and 2001 reported revenues of $8.6 billion seemed a little high (restatements have put that figure at $1.5 billion high). And he didn't catch the fishy numbers on the profit side either, when the company originally reported total profits of $481 million for the two years, but actually posted losses of $364 million in 2000 and $191 million in 2001.
Scrushy can talk all he wants about the federal government using a "shock-and-awe" campaign in their investigation to discredit him and his company, and he can pose hypothetical situations where HealthSouth's stock may have never been delisted, and he can point fingers at the methodic corruption that went on in the company's accounting department. The jury sat through his trial and they believed his stories, so I won't judge the veracity of his stories.
But if I held shares in HealthSouth, I wouldn't want a businessman sitting on the board who spent years in the dark about his company's financial performance and who somehow managed to hire a succession of the most morally corrupt financial officers looking for a job.
The courts will continue to weigh Scrushy's financial guilt and debt to HealthSouth's investors, but in the court of a public company's opinion, Scrushy's banishment from the board fits the crime of indifference.
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